higher mortgage rates

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Here's How Much Higher Mortgage Rates Will Raise Your Monthly Payments

By , Associate Editor, Money Morning -

Where will higher mortgage rates raise monthly mortgage payments most?

These three charts from the real estate site Zillow.com depict how higher mortgage rates will affect monthly mortgage payments in different markets throughout the United States.

The charts are based on the percentage of income homeowners spend on their monthly payments, with a pre-housing bubble baseline of 20% of median household income.

The first chart shows how much more expensive than historical norms monthly payments will become in six of the priciest metropolitan areas when mortgage rates climb to 5%, assuming homes appreciate in line with Zillow projections.

Monthly payments in the San Jose metro area will increase the most (22% over the baseline) followed by Los Angeles (19%), San Diego (14%), San Francisco (11%), Portland, OR (7%) and Denver (1%).

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How Higher Mortgage Rates Will Dent Housing's Recovery

By , Associate Editor, Money Morning -

How much do higher mortgage rates reduce home sales?

That, of course, depends on how much rates rise and whom you ask. But there's no doubt higher mortgage rates hurt sales, experts say.

Interest rates have been climbing since May. Rates on 30-year, fixed-rate mortgages averaged 4.37% for the week ending July 18, Freddie Mac's weekly survey of conforming mortgage rates said. That's up more than a percentage point from early May.

And existing home sales fell 1.2% in June, to a seasonally adjusted annual rate of 5.08 million, from 5.14 million in May (but still 15.2% higher than in June 2012), the National Association of Realtors said Monday.

Lawrence Yun, the NAR's chief economist, told Money Morning he expects interest rates to hit 5% to 5.5% within a year. And while he foresees existing home sales rising as much as 10% for 2013, he predicts only a single-digit percentage increase next year primarily because of higher mortgage rates.

"There's no risk of any reversal of this housing recovery; it's just slowing the pace of this housing recovery," Yun said.

He said robust demand and affordable prices would lessen the impact of the higher mortgage rates in much of the country, but pricier markets in New York, parts of California and Hawaii would be hit harder by the higher mortgage rates.

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