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Buying a new home is getting more expensive. Mortgage rates are above 7% for the first time in well over a year, according to the mortgage giant Freddie Mac. NPR's Stephan Bisaha looked into what that means for would-be homebuyers.
STEPHAN BISAHA, BYLINE: Imagine you're getting a 30-year fixed-rate mortgage on a $400,000 home, standard down payment. To understand what a 7% mortgage rate would mean for your monthly bill, we got National Association of Realtors economist Jessica Lautz on the line to help us make three comparisons. No. 1, buying the home at this week's rate versus last week's, which was a bit lower.
JESSICA LAUTZ: I don't think that the 7% number is magic when it comes to dollars because it's actually a difference of a whopping $17.
BISAHA: That's 17 more dollars each month. Still, Lautz says a 7% rate does have a psychological effect.
LAUTZ: That's going to turn homebuyers away.
BISAHA: One of the big reasons rates are rising this year is the U.S. war with Iran. That's created a lot of volatility in the bond market, which affects the cost of borrowing, including for a home. Mortgage rates are up more than a full percentage point since the war started in February. So comparison No. 2, today's rates for the same home compared to right before the war.
LAUTZ: OK, so that's a difference of $221.
BISAHA: Two hundred twenty-one more dollars each month.
LAUTZ: So that - I mean, I think that's going to be make or break for some consumers.
BISAHA: And many people are looking even further back. They bought or refinanced a home during the pandemic. Rates were super low, like under 3.5% in the early 2020s. Nobody wants to give those mortgage rates up. Lautz says that's why she's now seeing the lowest level of home sales since 1995.
LAUTZ: Homeowners are staying put. They do not want to make a housing trade if they have to finance a home at double the mortgage interest rate than they currently are in.
BISAHA: So last comparison, how does a COVID-era mortgage payment match up with today?
LAUTZ: Oh, my gosh. Yeah, so that's a difference of nearly $700 a month.
BISAHA: No wonder so many people can't afford to move.
Stephan Bisaha, NPR News.
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