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How Do Rising Mortgage Rates Impact Monthly Payments?
June 26, 2013 10:24 AM
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Inspired by Peter Tchir's commentary on mortgage rates and consumer spending in today's
Fixed Income Report
(subscription required), for todyay's Chart of the Day feature, we put together two charts (two charts! bonus!) showing the impact of rising interest rates on mortgage payments.
We took a hypothetical $250,000 loan, and calculated the average monthly payment using BankRate.com's 30-year fixed rate national average.
It's obvious to everyone that as rates go up, the average monthly payment goes up, but we wanted to quantify the specific impact for readers.
As you can see in our first chart, in a few short months, now that rates are back up to 2011 levels, the average monthly payment on such a loan has gone up by nearly $200, or about 16%.
Over the life of the loan, that equals an extra $72,000 worth of payments!
In our second chart, we provide a graphical illustration of the relationship between interest rates and monthly payments on the same hypothetical $250,000, 30-year loan. At 4.5%, the monthly payment is $1,267. But at 5.5%, that number shoots up to $1,419 -- an increase of $152, or 12%.
For many consumers, especially those with stagnant wages, an extra $150-200/month does make a difference.
No positions in stocks mentioned.
HOW DO RISING MORTGAGE RATES IMPACT MONTHLY PAYMENTS
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