Fewer Americans are refinancing mortgages. Is inflation to blame?

Featured

Written by:

By the Numbers

According to the New York Fed, mortgage refinancing hit its peak during the second quarter of 2021, amid a several-year-long boom. Historically low interest rates incentivized many borrowers to rewrite loans to save on their monthly payment, while some pulled equity out of their homes.

As the Federal Reserve hiked rates in recent months, thereby tightening its monetary policy, mortgage refinancing activity slowed. Originations of refi loans were down 15% during the first three months of 2021 compared to the previous quarter. Year-over-year, they were down 40%. When refinancing activity hit its peak, the average rate for a 30-year fixed mortgage was around 3%. Now, it’s closer to 5.25%.

The Broader Impact

______________________

SPONSORED: Find a Qualified Financial Advisor

1. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

2. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals get started now.

______________________

 

 

 

Last fall, as concern over rising inflation was mounting, the central bank began to verbally indicate its intention to embrace a more hawkish policy in an attempt to cool off the economy. The drop-off in refinancing activity is a noteworthy example of how the Fed can impact things by hiking rates.

Broadly speaking, interest rates determine the cost of money, which translates to the cost of borrowing, including mortgages. Most homeowners choose to refinance because it typically lowers their monthly payment, meaning they have more money to spend on other things. This adds liquidity to the economy. The Fed has effectively raised the cost of borrowing, which could make refinancing less attractive to some, and translate to less spending money in people’s pockets and slower economic activity.

Approach to Mortgage Rates

Mortgage brokers note a data point worth watching is the yield on the 10-Year US Treasury, which has been fluctuating recently. Mortgage rates often follow trends in the bond market, and the 10-Year is considered an important benchmark.

Another economic indicator that may affect mortgage rates is the global price of oil. The cost of energy prominently factors into inflation, which is what’s driving the Fed to increase rates in the first place. Energy markets have been highly volatile lately, similar to what’s going on with bonds. Still, the expectation is mortgage rates will continue to rise for the foreseeable future. For example, some experts suggest locking in a rate now, even if you don’t plan to close on the purchase of a home for another two months. Predicting mortgage rates is difficult just like every other aspect of the market, but there are ways to stay informed.


Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.


This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

More from MediaFeed:

States where mortgage rates are rising most

States where mortgage rates are rising most

Since the start of the year, mortgage rates have risen dramatically. The record-low rates of 2021 are gone, with rates above 5% becoming standard.

While a lower rate can make paying off a mortgage more affordable, it can be difficult to picture how much a higher rate can impact payments for new buyers. With that in mind, we used data collected from LendingTree users to put a dollar amount on how rising rates can affect the cost of a mortgage.

Specifically, we calculated the difference between average monthly mortgage payments on 30-year, fixed-rate loans in each state based on average APRs in January and April 2022.

We found rising APRs could potentially cost new borrowers across the U.S. hundreds of dollars a month — or more than $100,000 over the lifetime of the loans.

Lordn / iStock

  • 30-year, fixed-rate mortgage APRs have increased by an average of 1.46 percentage points across all 50 states since January. In January, the average APR across the 50 states was 3.79%. In April, it was 5.25%.
  • Nationwide, rising APRs are causing new mortgage payments to increase by an average of $258.57 a month. To put that figure into perspective, that monthly increase amounts to an average of $3,102.82 in extra costs each year and an average of $93,084.60 in extra costs over the lifetime of a 30-year loan.

GaudiLab / istockphoto

  • Average mortgage amount (2022): $241,517
  • Average APR (January 2022): 3.94%
  • Average APR (April 2022): 5.33%
  • Monthly payment with January APR: $1,145.37
  • Monthly payment with April APR: $1,344.91
  • Difference between payments with January APR and April APR: $199.55
  • Extra amount paid each year: $2,394.57
  • Extra amount paid over 30-year lifetime of mortgage: $71,837.24

dypics

  • Average mortgage amount (2022): $207,300
  • Average APR (January 2022): 3.86%
  • Average APR (April 2022): 5.47%
  • Monthly payment with January APR: $972.81
  • Monthly payment with April APR: $1,173.63
  • Difference between payments with January APR and April APR: $200.81
  • Extra amount paid each year: $2,409.75
  • Extra amount paid over 30-year lifetime of mortgage: $72,292.44

DepositPhotos.com

  • Average mortgage amount (2022): $224,562
  • Average APR (January 2022): 3.91%
  • Average APR (April 2022): 5.41%
  • Monthly payment with January APR: $1,060.20
  • Monthly payment with April APR: $1,262.48
  • Difference between payments with January APR and April APR: $202.28
  • Extra amount paid each year: $2,427.35
  • Extra amount paid over 30-year lifetime of mortgage: $72,820.49

Thomas Kelley

  • Average mortgage amount (2022): $229,615
  • Average APR (January 2022): 3.99%
  • Average APR (April 2022): 5.46%
  • Monthly payment with January APR: $1,094.85
  • Monthly payment with April APR: $1,297.46
  • Difference between payments with January APR and April APR: $202.61
  • Extra amount paid each year: $2,431.31
  • Extra amount paid over 30-year lifetime of mortgage: $72,939.41

eyecrave

  • Average mortgage amount (2022): $240,729
  • Average APR (January 2022): 3.89%
  • Average APR (April 2022): 5.34%
  • Monthly payment with January APR: $1,134.58
  • Monthly payment with April APR: $1,342.39
  • Difference between payments with January APR and April APR: $207.81
  • Extra amount paid each year: $2,493.75
  • Extra amount paid over 30-year lifetime of mortgage: $74,812.57

FierceAbin

  • Average mortgage amount (2022): $233,618
  • Average APR (January 2022): 3.84%
  • Average APR (April 2022): 5.34%
  • Monthly payment with January APR: $1,094.46
  • Monthly payment with April APR: $1,302.44
  • Difference between payments with January APR and April APR: $207.98
  • Extra amount paid each year: $2,495.81
  • Extra amount paid over 30-year lifetime of mortgage: $74,874.24

JoeChristensen

  • Average mortgage amount (2022): $246,672
  • Average APR (January 2022): 3.81%
  • Average APR (April 2022): 5.25%
  • Monthly payment with January APR: $1,150.64
  • Monthly payment with April APR: $1,361.51
  • Difference between payments with January APR and April APR: $210.87
  • Extra amount paid each year: $2,530.48
  • Extra amount paid over 30-year lifetime of mortgage: $75,914.27

Rdlamkin

  • Average mortgage amount (2022): $244,039
  • Average APR (January 2022): 3.87%
  • Average APR (April 2022): 5.32%
  • Monthly payment with January APR: $1,146.85
  • Monthly payment with April APR: $1,358.25
  • Difference between payments with January APR and April APR: $211.41
  • Extra amount paid each year: $2,536.87
  • Extra amount paid over 30-year lifetime of mortgage: $76,106.02

haveseen

  • Average mortgage amount (2022): $235,123
  • Average APR (January 2022): 3.88%
  • Average APR (April 2022): 5.39%
  • Monthly payment with January APR: $1,106.18
  • Monthly payment with April APR: $1,318.74
  • Difference between payments with January APR and April APR: $212.57
  • Extra amount paid each year: $2,550.80
  • Extra amount paid over 30-year lifetime of mortgage: $76,524.00

stevegeer

  • Average mortgage amount (2022): $236,701
  • Average APR (January 2022): 3.90%
  • Average APR (April 2022): 5.42%
  • Monthly payment with January APR: $1,116.79
  • Monthly payment with April APR: $1,331.47
  • Difference between payments with January APR and April APR: $214.67
  • Extra amount paid each year: $2,576.09
  • Extra amount paid over 30-year lifetime of mortgage: $77,282.68

f11photo

  • Average mortgage amount (2022): $237,849
  • Average APR (January 2022): 3.84%
  • Average APR (April 2022): 5.36%
  • Monthly payment with January APR: $1,113.23
  • Monthly payment with April APR: $1,329.12
  • Difference between payments with January APR and April APR: $215.89
  • Extra amount paid each year: $2,590.72
  • Extra amount paid over 30-year lifetime of mortgage: $77,721.61

DepositPhotos.com

  • Average mortgage amount (2022): $242,175
  • Average APR (January 2022): 3.91%
  • Average APR (April 2022): 5.40%
  • Monthly payment with January APR: $1,144.20
  • Monthly payment with April APR: $1,360.39
  • Difference between payments with January APR and April APR: $216.19
  • Extra amount paid each year: $2,594.33
  • Extra amount paid over 30-year lifetime of mortgage: $77,829.79

James Deitsch

  • Average mortgage amount (2022): $264,716
  • Average APR (January 2022): 3.91%
  • Average APR (April 2022): 5.29%
  • Monthly payment with January APR: $1,250.17
  • Monthly payment with April APR: $1,468.73
  • Difference between payments with January APR and April APR: $218.56
  • Extra amount paid each year: $2,622.68
  • Extra amount paid over 30-year lifetime of mortgage: $78,680.27

SeanPavonePhoto

  • Average mortgage amount (2022): $261,988
  • Average APR (January 2022): 3.84%
  • Average APR (April 2022): 5.30%
  • Monthly payment with January APR: $1,226.36
  • Monthly payment with April APR: $1,454.96
  • Difference between payments with January APR and April APR: $228.60
  • Extra amount paid each year: $2,743.18
  • Extra amount paid over 30-year lifetime of mortgage: $82,295.27

Michael Pham

  • Average mortgage amount (2022): $275,815
  • Average APR (January 2022): 3.96%
  • Average APR (April 2022): 5.35%
  • Monthly payment with January APR: $1,310.17
  • Monthly payment with April APR: $1,540.15
  • Difference between payments with January APR and April APR: $229.98
  • Extra amount paid each year: $2,759.77
  • Extra amount paid over 30-year lifetime of mortgage: $82,793.18

Swarmcatcher

  • Average mortgage amount (2022): $284,989
  • Average APR (January 2022): 3.85%
  • Average APR (April 2022): 5.22%
  • Monthly payment with January APR: $1,336.08
  • Monthly payment with April APR: $1,569.06
  • Difference between payments with January APR and April APR: $232.98
  • Extra amount paid each year: $2,795.78
  • Extra amount paid over 30-year lifetime of mortgage: $83,873.37

AnujSahaiPhotography

  • Average mortgage amount (2022): $256,150
  • Average APR (January 2022): 3.85%
  • Average APR (April 2022): 5.39%
  • Monthly payment with January APR: $1,200.69
  • Monthly payment with April APR: $1,436.51
  • Difference between payments with January APR and April APR: $235.82
  • Extra amount paid each year: $2,829.85
  • Extra amount paid over 30-year lifetime of mortgage: $84,895.41

DenisTangneyJr

  • Average mortgage amount (2022): $259,503
  • Average APR (January 2022): 3.74%
  • Average APR (April 2022): 5.29%
  • Monthly payment with January APR: $1,201.01
  • Monthly payment with April APR: $1,439.73
  • Difference between payments with January APR and April APR: $238.72
  • Extra amount paid each year: $2,864.63
  • Extra amount paid over 30-year lifetime of mortgage: $85,938.78

marekuliasz

  • Average mortgage amount (2022): $257,718
  • Average APR (January 2022): 3.74%
  • Average APR (April 2022): 5.30%
  • Monthly payment with January APR: $1,191.50
  • Monthly payment with April APR: $1,431.27
  • Difference between payments with January APR and April APR: $239.77
  • Extra amount paid each year: $2,877.24
  • Extra amount paid over 30-year lifetime of mortgage: $86,317.29

sequential5

  • Average mortgage amount (2022): $257,301
  • Average APR (January 2022): 3.53%
  • Average APR (April 2022): 5.12%
  • Monthly payment with January APR: $1,159.84
  • Monthly payment with April APR: $1,400.81
  • Difference between payments with January APR and April APR: $240.97
  • Extra amount paid each year: $2,891.61
  • Extra amount paid over 30-year lifetime of mortgage: $86,748.31

Rex_Wholster

  • Average mortgage amount (2022): $283,885
  • Average APR (January 2022): 3.77%
  • Average APR (April 2022): 5.22%
  • Monthly payment with January APR: $1,318.18
  • Monthly payment with April APR: $1,562.45
  • Difference between payments with January APR and April APR: $244.27
  • Extra amount paid each year: $2,931.27
  • Extra amount paid over 30-year lifetime of mortgage: $87,938.13

JoeChristensen

  • Average mortgage amount (2022): $260,309
  • Average APR (January 2022): 3.87%
  • Average APR (April 2022): 5.44%
  • Monthly payment with January APR: $1,223.50
  • Monthly payment with April APR: $1,467.85
  • Difference between payments with January APR and April APR: $244.35
  • Extra amount paid each year: $2,932.22
  • Extra amount paid over 30-year lifetime of mortgage: $87,966.60

Davel5957

  • Average mortgage amount (2022): $273,634
  • Average APR (January 2022): 3.80%
  • Average APR (April 2022): 5.31%
  • Monthly payment with January APR: $1,274.68
  • Monthly payment with April APR: $1,520.68
  • Difference between payments with January APR and April APR: $246.00
  • Extra amount paid each year: $2,951.99
  • Extra amount paid over 30-year lifetime of mortgage: $88,559.58

AppalachianViews

  • Average mortgage amount (2022): $299,992
  • Average APR (January 2022): 3.84%
  • Average APR (April 2022): 5.24%
  • Monthly payment with January APR: $1,405.51
  • Monthly payment with April APR: $1,655.09
  • Difference between payments with January APR and April APR: $249.59
  • Extra amount paid each year: $2,995.05
  • Extra amount paid over 30-year lifetime of mortgage: $89,851.64

SeanPavonePhoto

  • Average mortgage amount (2022): $306,217
  • Average APR (January 2022): 3.80%
  • Average APR (April 2022): 5.21%
  • Monthly payment with January APR: $1,426.83
  • Monthly payment with April APR: $1,682.42
  • Difference between payments with January APR and April APR: $255.58
  • Extra amount paid each year: $3,067.02
  • Extra amount paid over 30-year lifetime of mortgage: $92,010.59

DenisTangneyJr

  • Average mortgage amount (2022): $298,441
  • Average APR (January 2022): 3.78%
  • Average APR (April 2022): 5.23%
  • Monthly payment with January APR: $1,387.37
  • Monthly payment with April APR: $1,645.22
  • Difference between payments with January APR and April APR: $257.86
  • Extra amount paid each year: $3,094.28
  • Extra amount paid over 30-year lifetime of mortgage: $92,828.39

ibsky

  • Average mortgage amount (2022): $314,565
  • Average APR (January 2022): 3.73%
  • Average APR (April 2022): 5.13%
  • Monthly payment with January APR: $1,452.91
  • Monthly payment with April APR: $1,714.08
  • Difference between payments with January APR and April APR: $261.17
  • Extra amount paid each year: $3,134.00
  • Extra amount paid over 30-year lifetime of mortgage: $94,019.88

traveler1116

  • Average mortgage amount (2022): $304,239
  • Average APR (January 2022): 3.76%
  • Average APR (April 2022): 5.21%
  • Monthly payment with January APR: $1,411.39
  • Monthly payment with April APR: $1,672.63
  • Difference between payments with January APR and April APR: $261.24
  • Extra amount paid each year: $3,134.91
  • Extra amount paid over 30-year lifetime of mortgage: $94,047.19

” Darwin Brandis”

  • Average mortgage amount (2022): $310,590
  • Average APR (January 2022): 3.69%
  • Average APR (April 2022): 5.12%
  • Monthly payment with January APR: $1,427.08
  • Monthly payment with April APR: $1,689.62
  • Difference between payments with January APR and April APR: $262.54
  • Extra amount paid each year: $3,150.46
  • Extra amount paid over 30-year lifetime of mortgage: $94,513.95

danlogan

  • Average mortgage amount (2022): $266,045
  • Average APR (January 2022): 3.73%
  • Average APR (April 2022): 5.39%
  • Monthly payment with January APR: $1,229.37
  • Monthly payment with April APR: $1,492.25
  • Difference between payments with January APR and April APR: $262.88
  • Extra amount paid each year: $3,154.54
  • Extra amount paid over 30-year lifetime of mortgage: $94,636.23

DenisTangneyJr

  • Average mortgage amount (2022): $316,939
  • Average APR (January 2022): 3.82%
  • Average APR (April 2022): 5.22%
  • Monthly payment with January APR: $1,480.12
  • Monthly payment with April APR: $1,743.61
  • Difference between payments with January APR and April APR: $263.49
  • Extra amount paid each year: $3,161.87
  • Extra amount paid over 30-year lifetime of mortgage: $94,856.24

DenisTangneyJr

  • Average mortgage amount (2022): $278,694
  • Average APR (January 2022): 3.78%
  • Average APR (April 2022): 5.38%
  • Monthly payment with January APR: $1,295.89
  • Monthly payment with April APR: $1,561.64
  • Difference between payments with January APR and April APR: $265.75
  • Extra amount paid each year: $3,189.02
  • Extra amount paid over 30-year lifetime of mortgage: $95,670.50

DepositPhotos.com

  • Average mortgage amount (2022): $303,884
  • Average APR (January 2022): 3.76%
  • Average APR (April 2022): 5.25%
  • Monthly payment with January APR: $1,409.84
  • Monthly payment with April APR: $1,677.61
  • Difference between payments with January APR and April APR: $267.77
  • Extra amount paid each year: $3,213.24
  • Extra amount paid over 30-year lifetime of mortgage: $96,397.07

Elisa.rolle

  • Average mortgage amount (2022): $317,575
  • Average APR (January 2022): 3.58%
  • Average APR (April 2022): 5.05%
  • Monthly payment with January APR: $1,439.61
  • Monthly payment with April APR: $1,715.15
  • Difference between payments with January APR and April APR: $275.53
  • Extra amount paid each year: $3,306.40
  • Extra amount paid over 30-year lifetime of mortgage: $99,191.94

Chilkoot

  • Average mortgage amount (2022): $339,422
  • Average APR (January 2022): 3.85%
  • Average APR (April 2022): 5.23%
  • Monthly payment with January APR: $1,591.87
  • Monthly payment with April APR: $1,870.03
  • Difference between payments with January APR and April APR: $278.15
  • Extra amount paid each year: $3,337.84
  • Extra amount paid over 30-year lifetime of mortgage: $100,135.07

AlizadaStudios

  • Average mortgage amount (2022): $313,336
  • Average APR (January 2022): 3.60%
  • Average APR (April 2022): 5.11%
  • Monthly payment with January APR: $1,425.22
  • Monthly payment with April APR: $1,704.10
  • Difference between payments with January APR and April APR: $278.88
  • Extra amount paid each year: $3,346.52
  • Extra amount paid over 30-year lifetime of mortgage: $100,395.73

YinYang

  • Average mortgage amount (2022): $342,355
  • Average APR (January 2022): 3.77%
  • Average APR (April 2022): 5.15%
  • Monthly payment with January APR: $1,589.21
  • Monthly payment with April APR: $1,869.97
  • Difference between payments with January APR and April APR: $280.76
  • Extra amount paid each year: $3,369.18
  • Extra amount paid over 30-year lifetime of mortgage: $101,075.36

James_Lane

  • Average mortgage amount (2022): $320,533
  • Average APR (January 2022): 3.69%
  • Average APR (April 2022): 5.18%
  • Monthly payment with January APR: $1,474.23
  • Monthly payment with April APR: $1,755.43
  • Difference between payments with January APR and April APR: $281.20
  • Extra amount paid each year: $3,374.37
  • Extra amount paid over 30-year lifetime of mortgage: $101,231.17

mdgmorris

  • Average mortgage amount (2022): $333,636
  • Average APR (January 2022): 3.91%
  • Average APR (April 2022): 5.32%
  • Monthly payment with January APR: $1,575.85
  • Monthly payment with April APR: $1,857.51
  • Difference between payments with January APR and April APR: $281.66
  • Extra amount paid each year: $3,379.97
  • Extra amount paid over 30-year lifetime of mortgage: $101,399.08

wanderluster

  • Average mortgage amount (2022): $319,046
  • Average APR (January 2022): 3.76%
  • Average APR (April 2022): 5.26%
  • Monthly payment with January APR: $1,479.65
  • Monthly payment with April APR: $1,763.58
  • Difference between payments with January APR and April APR: $283.93
  • Extra amount paid each year: $3,407.17
  • Extra amount paid over 30-year lifetime of mortgage: $102,215.17

knowlesgallery

  • Average mortgage amount (2022): $352,105
  • Average APR (January 2022): 3.81%
  • Average APR (April 2022): 5.18%
  • Monthly payment with January APR: $1,643.45
  • Monthly payment with April APR: $1,928.11
  • Difference between payments with January APR and April APR: $284.66
  • Extra amount paid each year: $3,415.93
  • Extra amount paid over 30-year lifetime of mortgage: $102,477.90

DenisTangneyJr

  • Average mortgage amount (2022): $427,901
  • Average APR (January 2022): 3.73%
  • Average APR (April 2022): 4.88%
  • Monthly payment with January APR: $1,975.84
  • Monthly payment with April APR: $2,265.36
  • Difference between payments with January APR and April APR: $289.51
  • Extra amount paid each year: $3,474.17
  • Extra amount paid over 30-year lifetime of mortgage: $104,225.19

Art Wager

  • Average mortgage amount (2022): $343,115
  • Average APR (January 2022): 3.76%
  • Average APR (April 2022): 5.20%
  • Monthly payment with January APR: $1,591.31
  • Monthly payment with April APR: $1,883.59
  • Difference between payments with January APR and April APR: $292.28
  • Extra amount paid each year: $3,507.37
  • Extra amount paid over 30-year lifetime of mortgage: $105,221.22

HaizhanZheng

  • Average mortgage amount (2022): $351,169
  • Average APR (January 2022): 3.68%
  • Average APR (April 2022): 5.17%
  • Monthly payment with January APR: $1,612.77
  • Monthly payment with April APR: $1,921.58
  • Difference between payments with January APR and April APR: $308.81
  • Extra amount paid each year: $3,705.72
  • Extra amount paid over 30-year lifetime of mortgage: $111,171.46

Boogich

  • Average mortgage amount (2022): $369,811
  • Average APR (January 2022): 3.68%
  • Average APR (April 2022): 5.16%
  • Monthly payment with January APR: $1,697.64
  • Monthly payment with April APR: $2,022.64
  • Difference between payments with January APR and April APR: $325.00
  • Extra amount paid each year: $3,900.02
  • Extra amount paid over 30-year lifetime of mortgage: $117,000.56

” 4kodiak”

  • Average mortgage amount (2022): $379,914
  • Average APR (January 2022): 3.62%
  • Average APR (April 2022): 5.08%
  • Monthly payment with January APR: $1,732.05
  • Monthly payment with April APR: $2,057.13
  • Difference between payments with January APR and April APR: $325.08
  • Extra amount paid each year: $3,900.98
  • Extra amount paid over 30-year lifetime of mortgage: $117,029.28

aimintang

  • Average mortgage amount (2022): $382,571
  • Average APR (January 2022): 3.72%
  • Average APR (April 2022): 5.18%
  • Monthly payment with January APR: $1,764.78
  • Monthly payment with April APR: $2,095.80
  • Difference between payments with January APR and April APR: $331.01
  • Extra amount paid each year: $3,972.17
  • Extra amount paid over 30-year lifetime of mortgage: $119,164.99

Jacob Boomsma / istockphoto

  • Average mortgage amount (2022): $407,532
  • Average APR (January 2022): 3.69%
  • Average APR (April 2022): 5.10%
  • Monthly payment with January APR: $1,874.46
  • Monthly payment with April APR: $2,211.69
  • Difference between payments with January APR and April APR: $337.23
  • Extra amount paid each year: $4,046.80
  • Extra amount paid over 30-year lifetime of mortgage: $121,404.15

Rolf_52

  • Average mortgage amount (2022): $447,400
  • Average APR (January 2022): 3.76%
  • Average APR (April 2022): 5.11%
  • Monthly payment with January APR: $2,075.37
  • Monthly payment with April APR: $2,432.76
  • Difference between payments with January APR and April APR: $357.38
  • Extra amount paid each year: $4,288.62
  • Extra amount paid over 30-year lifetime of mortgage: $128,658.52

4nadia

  • Average mortgage amount (2022): $493,578
  • Average APR (January 2022): 3.70%
  • Average APR (April 2022): 5.09%
  • Monthly payment with January APR: $2,271.05
  • Monthly payment with April APR: $2,677.83
  • Difference between payments with January APR and April APR: $406.78
  • Extra amount paid each year: $4,881.36
  • Extra amount paid over 30-year lifetime of mortgage: $146,440.82

mlauffen

Though mortgage APRs have already significantly increased since the start of the year, they may rise even further by 2023. This is especially true given that the Federal Reserve is poised to raise the Fed funds rate multiple times this year, which will likely put even more upward pressure on mortgage rates.

While rising rates won’t hurt most borrowers who currently have a fixed-rate mortgage and aren’t planning on selling, they could impact those who haven’t yet bought a home. For example, if APRs were to rise by another 50 basis points by year’s end, monthly mortgage payments across the country would increase by an average of $93.99, even if loan amounts stayed the same. This extra cost could make it even more difficult for some would-be homebuyers to navigate what will probably remain a pricey housing market.

Of course, there’s no guarantee that rates will rise that high by the time 2023 arrives. And even if they did, it wouldn’t necessarily be all bad news. After all, higher rates should result in less demand from homebuyers, which could, if nothing else, mean that those who decide to buy won’t be as likely to deal with hassles like incredibly tough home price negotiations and extremely limited housing inventory.

Regardless of what the future holds, it’s clear that rising rates have already made buying a home more expensive. Fortunately, that doesn’t mean homebuying is an impossible feat, and with proper planning, purchasing a house could still be a great option for many people.

fizkes / iStock

Though rates are quickly rising, there are still a few ways for borrowers to potentially get a lower APR on their mortgage. Here are three tips on how to do just that:

  1. Shop around for a mortgage before buying. Because different lenders will often offer different rates to the same borrowers, homebuyers can potentially secure a lower rate by shopping around for a mortgage before buying a house. In some instances, a borrower may be able to receive a rate that is dozens of basis points lower than what the first lender they saw offered them. This lower rate could result in tens of thousands of dollars in savings over the lifetime of a loan.
  2. Work on your credit. Because it’s used to gauge how likely a person is to repay their debt, a credit score is an important factor that lenders consider when determining what rate to offer a prospective homebuyer. Because of this, borrowers should work on making their credit score as good as possible before they apply for a mortgage. Not only can a higher score help a homebuyer get a lower rate, but it can also help them get approved for a loan in the first place.
  3. Consider a mortgage with a shorter term. Shorter-term loans often come with lower rates than their long-term counterparts. For example, borrowers with excellent credit can typically expect to receive a rate on a 15-year, fixed-rate mortgage that’s more than 50 basis points lower than what they can expect to receive on a 30-year, fixed mortgage. Though a shorter loan term will typically result in higher monthly payments, it will nonetheless result in less interest paid over the lifetime of a loan. This can be worth it for those who have extra cash and don’t mind a steeper housing payment.

DepositPhotos.com

Data in this study was generated from more than 570,000 users who received an offer for a 30-year, fixed-rate mortgage on the LendingTree platform from Jan. 1, 2022, through April 22, 2022.

To calculate monthly mortgage payments, LendingTree used the average mortgage amounts offered to users in each state in 2022 (through April 22), the average APRs offered to users in each state in January 2022 and the average APRs offered to users in each state in April 2022 (through the 22nd).

Monthly payment differences were found by subtracting a calculated monthly payment with an average APR for January from a calculated monthly payment with an average APR for April. To determine how much this difference would add up to yearly, the monthly difference was multiplied by 12. This yearly difference was then multiplied by 30 to determine how much more expensive a mortgage would be over its lifetime.

This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.

monkeybusinessimages/istockphoto

Deposit Photos

Featured Image Credit: DepositPhotos.com.

AlertMe