Inflation is the highest it’s been in 40 years. Here’s why

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50 is the New 25

Earlier this month, the Federal Open Market Committee (FOMC) announced a 50-basis point increase in the Fed Funds Rate to a new target range of 0.75-1.0%. This was the first 50 basis point hike since 2000, and — although widely anticipated by markets — is only the first of likely multiple larger hikes in an effort to control inflation.

 

The Fed’s “preferred” inflation measure is personal consumption expenditures (PCE) excluding food and energy, which currently sits at 5.2%. Despite being lower than the often talked about Consumer Price Index level of 8.5%, PCE is still markedly above the Fed’s 2% inflation target.

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Given that inflation levels haven’t been this high in 40 years, the Fed is rightfully taking a more aggressive stance than in years past when rate hikes were typically 25 basis points. However, the bigger risk that remains is whether it’s still too little too late.

 

Related: Active vs. passive investing

Re-Entry is Different from Rescue

Coming into the pandemic in March 2020, in order to prevent further financial market meltdown, the Fed cut its policy rate by 50 bps on March 3 and another 100 bps on Mar 16 — both as emergency moves outside of the Fed’s regular meeting schedule.

 

If we can cut so quickly, why can’t we hike as quickly and get it over with? Because the idea is that it’s safer to take a more gradual approach and gauge the impact along the way than to be too aggressive and need to reverse course later (a la December 2018).

 

Here’s what “gradual” looks like to the market after May’s meeting:

Census Path of Rate Hikes

The expectation is for three more 50bp hikes by the September meeting, with the Fed Funds Rate reaching an upper bound of 3% by the end of the year. The Fed continues to say that they will act as necessary to control inflation, but perhaps the biggest takeaway from Jerome Powell’s comments was that they were not considering a 75bp hike in future meetings.

 

The immediate reaction in markets was positive. More confirmation that gradual is easier to digest.

Strong Enough to Stay on Plan

At the end of the day, nothing has really changed. Inflation is still high, and the labor market remains tighter than a tightrope. The Fed is still on its plan of tightening until they find a neutral rate that ideally helps temper these hot inflation readings and brings demand and supply back into balance.

 

The economy is strong enough, for now, to withstand the beginning of tightening. The market has fallen enough, for now, to account for higher rates. Make no mistake: we are still in the hard part, and a graceful landing is not certain. I am hopeful, however, that getting two more hikes behind us can be the beginning of a better second half.

 

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

 

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 Adviser
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.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Young is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Her ADV 2B is available at www.sofi.com/legal/adv.

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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: Photodjo / iStock.

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