Mortgage rates are currently at their highest point in over two decades, resulting in significant additional costs for prospective home buyers. As of October 5th, the average interest rate for a 30-year fixed mortgage stands at 7.5 percent, according to Freddie Mac. This is a substantial increase from the average rate of around 3 percent in December 2021.
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Below, you can visualize how this surge affects the monthly cost of a typical mortgage. If you already have a mortgage, input your current interest rate to determine how much more expensive it would be if you were to sign today.
The Increased Cost of a Mortgage at 7.5% Interest
Monthly payments towards principal and interest
at 3% interest$0
at 7.5% interest$0
Monthly differenceDifference$0
Note: Calculations are based on a fixed 30-year mortgage. Mortgage insurance, closing costs, HOA fees, property taxes, and other expenses are not included in the calculations.
Although the principal amount borrowed remains the same, the increase in interest payments can be staggering. Over the course of a 30-year mortgage, the additional interest can amount to hundreds of thousands of dollars.
Total payments over a 30-year mortgage
After making a 20% down payment on a $450K house
$360K
principal
$360K
principal
The figure of 7.5 percent represents the average 30-year rate, but the actual rate a home buyer secures depends on various factors, including income, debt, credit history, and the size of the down payment.
To combat inflation, the Federal Reserve has been increasing interest rates. This further amplifies the already high cost of purchasing a home in a market where property values surged during the pandemic.
Illustration by Alyssa Fowers.
