According to LendingTree [1], mortgage rates rose dramatically in 2022 (mainly due to increases of the nominal interest rate by the Federal Reserve), as the average rate on a standard 30-year, fixed-rate mortgage doubling between the start and end of 2022.
Rates have not grown as much in 2023, but they have still gone up, and are now hovering between 6% to 7%.
It is basic math that when interest rates go up, so do monthly payments, so LendingTree used internal data to put a dollar amount on how rising rates could affect the cost of a standard mortgage.
Specifically, LendingTree calculated the difference between average monthly mortgage payments on 30-year, fixed-rate loans in each state based on what those payments would be with the average APRs in April 2022 and April 2023.
Research revealed that these rising rates could potentially cost new borrowers hundreds, to thousands, to tens of thousands of dollars over the lifetime of the note.
Key findings of this report, as highlighted by LendingTree include:
- 30-year, fixed-rate mortgage APRs increased by an average of 1.85 percentage points across all 50 states between April 2022 and April 2023. In April 2023, the average APR across the 50 states was 7.18%, up from 5.33% in April 2022.
- Nationwide, rising APRs caused calculated mortgage payments to increase by an average of $121.09 a month. To put that figure into perspective, that monthly increase amounts to an average of $1,453.10 in extra costs each year and an average of $43,593.12 in additional costs over the lifetime of a 30-year loan. While these extra costs are substantial, keep in mind that those with fixed-rate loans won’t see the amount they spend on their mortgage rise. Instead, higher APRs will typically impact new mortgage borrowers and those with variable-rate loans.
- Calculated mortgage payments increased the least in North Dakota, Iowa and Wisconsin. Owing to relatively low loan amounts, monthly payments increased by $64.93, $77.06 and $79.24, respectively. Though these increases are less than the national average, they average $26,547.60 in extra costs over the 30-year lifetime of a mortgage.
- Hawaii, New York and California saw mortgage payments increase the most. These high-cost states saw monthly increases of $256.47, $194.02, and $185.79, respectively. Over 30 years, these extra monthly costs average $76,353.60.
With the June meeting of the Federal Reserve’s Federal Open Market Committee right around the corner, there’s much less reason for mortgage rates to start rapidly climbing as seen in 2022. This is somewhat good news for buyers, as it means they may not need to deal with constantly rising rates that threaten to price them out of the market if they don’t buy immediately.
Click here [2] to view the report in its entirety, including which states saw the largest and smallest rises in mortgage rates.