“For years, falling interest rates have been a boon to the U.S. housing market, keeping monthly mortgage payments low for first-time and move-up buyers alike, even as home values rose,” says Erin Lantz, vice president of Mortgages for Zillow Group. “As rates rise this year, first-time buyers and those looking to buy in expensive markets where affordability is already an issue will feel the pinch of higher rates on their budget.”
Homebuyers overall in the majority of the top 35 metropolitan areas would have minimal added expense if their mortgage rate were to rise from 4 percent to 4.25 percent—in fact, a 4.25 percent rate on a median-valued home ($195,300) would tack on about $23 to a monthly mortgage payment. Comparing an even higher increase in specific areas:
“For most borrowers, there is quite a bit of head room for rates to rise before home-buying becomes unaffordable,” Lantz says.
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