Mortgage rates are back over 7%. Here’s how much that adds to mortgage payments.

The 30-year fixed-rate mortgage rose from 6.95% on Monday to 7.01% on Tuesday afternoon, according to Mortgage News Daily. The 30-year rate was last above 7% in March, according to historical data.

(Other groups like the Mortgage Bankers Association and Freddie Mac, which also release weekly surveys of where rates are, had yet to release their reports as of Tuesday afternoon.)

“We’ll probably need a few weeks of data to know if this is a blip or a trend,” Jacob Channel, senior economist at LendingTree, told MarketWatch.

Rates have been volatile in recent weeks, he added. “Even if they don’t stay above 7%, the fact that they’re in that 6% to 7% range [is] tough for home buyers, because home prices have remained high for most parts of the country,” Channel explained.

“The reasons for higher rates are not crystal-clear — they could reflect bond-market jitters about the unresolved debt-ceiling deadline approaching as soon as next week, or perhaps a growing concern that the Fed will opt to keep raising rates in its fight against inflation,” Jeff Tucker, senior economist at Zillow
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told MarketWatch.

“Whatever the source, these higher rates are a difficult pill for buyers to swallow, and they give homeowners all the more reason to sit tight and avoid listing their homes,” he added.

Many Americans feel despondent about the housing market. The number of people who think it’s a good time to buy a home recently hit a 45-year low.

Higher rates have added an average of $121 to monthly mortgage payments since last year

Higher mortgage rates, of course, translate directly into a higher cost of homeownership. 

To be clear, most homeowners who have an existing 30-year fixed-rate mortgage won’t see an increase in their interest costs because they’ve locked in a fixed rate for the term of the loan.

But for new buyers who are in the process of securing a mortgage, owning a home is becoming more expensive: Between April 2022 and April 2023, the 30-year mortgage rate increased by an average of 1.85 percentage points across all 50 states, LendingTree said in a separate report.

That’s pushed monthly mortgage payments up nationwide by an average of $121 per month, according to LendingTree. That means the typical household is paying around $1,452 more per year in mortgage payments.

Mortgage payments differ widely, depending on the price of the home that a buyer is purchasing; where they’re buying, as rates can vary by geography; and how large or small their down payment is.

See: Home buyers will now be able to put down as little as 1% on their home, Rocket Mortgage says

The median monthly mortgage payment paid by homeowners in Hawaii was the highest in the nation in March, at roughly $4,400, while homeowners in West Virginia typically paid around $1,100, according to the Mortgage Bankers Association.

With mortgage rates bouncing around as home prices hold steady, “people really just have to buckle in,” Channel said,

For home shoppers looking to get a lower home-loan rate, shop around, advised Lisa Sturtevant, chief economist at Bright MLS, in a conversation with MarketWatch.

“Borrowers should really be shopping around and getting quotes from multiple lenders,” she explained, particularly because rates have been volatile over the last few months, which means that there is variation in rates and terms across lenders.

Not every lender will quote a potential buyer a 30-year mortgage at a 7% rate, Channel said. And rates could go down significantly, depending on the state of the U.S. economy. But they could also go up sharply. 

When will mortgage rates come down?

For those waiting for rates to come down, don’t hold your breath, Sturtevant said. “In the short term, the debt-ceiling debate has created uncertainty and will likely keep rates elevated, or perhaps push them even higher,” she explained. Zillow expects 30-year mortgage rates to move above 8% if the U.S. defaults on its debt. 

If the U.S. economy enters a recession, rates will go down, both experts said.

Nonetheless, don’t expect rates to go back to the pandemic levels of 2% and 3%, she advised. “My forecast is for the average rate on a 30-year fixed-rate mortgage to be around 6% at the end of 2023,” Sturtevant said.

For as long as Freddie Mac has been publishing weekly rate data, dating back to 1971, rates have only come close to 2% once, Channel noted.

How to win a bidding war

If you’re a hopeful buyer embroiled in a bidding war right now, the best tip Sturtevant offered was to get your financing locked in.

Buyers could also consider offering sellers an opportunity to rent the home back to them for a period of time, she suggested. “That could be an incentive if the seller is still looking for a place to move to.”