Mortgage rates are taking a breather, dropping for the first time in three weeks

“As the world reacts to developments in Ukraine, the uncertainty will likely mean a pause in the recent pace [interest rate] increases,” she said.

However, mortgage rates are still 84 basis points higher than they were just 9 weeks ago as expectations for economic growth, inflation and monetary policy have undergone a major reset, Hill said.

She said there have only been two similar spikes in recent history: the first right after the 2016 election, when rates jumped 85 basis points in 10 weeks, and the other during the 2013 “taper tantrum,” when rates rose 116 basis points in 11 weeks.

“In both cases, home sales momentum slowed the following year due to the impact on affordability, as higher rates mean higher home ownership costs even if home prices remain unchanged,” Hill said.

And Realtor.com found this to be especially true for those who put less money on a home.

A 3.9% interest rate on a 30-year fixed rate mortgage for a typical $375,000 home with a 10% down payment translates into $1,592 monthly payments. That’s about $228 higher than December 2020, Hill said. For a buyer offering 20%, the monthly payment is $1,415, or $203 more.

The higher costs of home ownership ultimately affect the buyer’s ability and interest in purchasing the home.

Mortgage applications fell to their lowest level since December 2019 last week, according to the Mortgage Bankers Association.

“High mortgage rates quickly closed refinancing operations, with activity declining in six of the first seven weeks of 2022,” said Joel Kahn, associate vice president of economic and industry forecasting at the MBA.

“Buy orders, already constrained by high selling prices and tight inventory, were also affected by these high rates and fell for the third week in a row,” he said.

Monthly mortgage payments on a typical U.S. home rose 31% in the past year, according to an analysis by Zillow, as skyrocketing home prices and rapidly rising mortgage interest rates slashed homebuyers’ budgets.

In January 2021, a buyer who bought a typical home in the United States, which was worth $271,650, with a 20% down payment and a 30-year fixed mortgage, would have paid $885 a month, Zillow found. By January of this year, after the typical home rose to $325,667 and mortgage interest rates rose, that same payment rose 31% to $1,162 a month.

According to Zillow, average monthly mortgage payments are the highest ever. It’s even higher than the July 2006 record of $1,118, when mortgage rates were a whopping 6.76%.

Higher borrowing costs are more likely to drive buyers to look for lower-priced homes, according to analysis by Jeff Tucker, chief economist at Zillow, which means buyers may move to a more affordable area, try to wait until prices expire or delay a home purchase altogether.