As mortgage rates are forecast to hit 8.5%, DailyMail.com looks at how repayments could soar
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Future homeowners will face mortgage rates of up to 8.5 percent in the coming months, economists have warned.
Average mortgage interest rates are at 7.1 percent on Wednesday, October 19, but there is still no sign of taming rising inflation.
That means more key Fed interest rates are a certainty — with economists warning that mortgage rates could exceed 8.5 percent in the coming months
Demand for mortgages is down 4% since last week and is down a whopping 38% from the same time last year, making it more difficult for homebuyers to finance a home in a volatile housing market.
Reports also indicate that market participation has fallen dramatically as the number of homes sold in the US fell 25 percent in September and the number of new listings dropped 22 percent.
People who are about to take out a new mortgage, or who want to buy a new home are now faced with a difficult decision whether to go ahead with their purchase or wait.
Buying now or in the coming months could leave them stuck in crippling interest rates for years to come.
But if the Biden administration fails to tackle inflation, those rates could rise even higher, making repayments even more expensive.
The data has left Americans wondering whether they should take the plunge now and take out a mortgage, put up with the skyrocketing rates — or wait to see if they cool down and allow lower payments.
An analysis by DailyMail.com showed what buyers in 10 markets would currently pay if they bought a mid-price home in that city, with mortgage interest at current rates.
We also looked at the level of repayments if interest rates reached 8.5%, as predicted.
Our analysis includes which refunds were this time a year ago, when rates were just 3.07%.
That’s meant to give an idea of how much cheaper paying off could be — if potential buyers choose to wait it out and inflation and interest both eventually fall. All calculations are based on a 20 percent down payment by buyers.
New York City, NY – Median Home Price: $800,000
(0% change in house prices on an annual basis)
The Big Apple has long been known for its volatile housing market, and the average apartment price has remained stable but high. This apartment in Clinton Hill in Brooklyn features a bedroom and a bathroom with 814 square feet of space.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $5,583
Repayment when interest reaches 8.5%: $6,203
October 2021 Repayment (3.07% Interest Rate): $4,005
Los Angeles, CA – Median Home Price: $955,000
(3.8% increase in house prices on an annual basis)
While the average price of a home in the City of Angels hasn’t risen much since 2021, buying a home still costs nearly $1 million. This apartment in West Hollywood features two bedrooms, three bathrooms and a variety of amenities including garage spaces, central air, and appliances.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $6,522
Repayment when interest reaches 8.5%: $7,258
October 2021 Repayment (3.07% Interest Rate): $4,467
Tampa, FL – Median Home Price: $390,000
(19% increase year-on-year)
Tampa was flagged as the nation’s hottest housing market, and it shows in the price of an average Florida city home, which is up a whopping 19 percent since last year. This one storey house has four bedrooms and two bathrooms in the main house, with a detached garage with one bathroom.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $2,644
Repayment when interest reaches 8.5%: $2,954
Repayment in October 2021 (interest rate of 3.07%): $1,855
Dallas, TX – Median Home Price: $400,000
(6.5% increase year-on-year)
While Dallas has had an incredibly competitive housing market in recent years, housing reports indicate it is slowly returning to normal with a higher inventory of homes. Located in the city’s Oak Lawn neighborhood, this fully furnished apartment offers stunning views of Dallas and has two bedrooms and two bathrooms.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $3,793
Repayment when interest reaches 8.5%: $4,103
Repayment in October 2021 (interest rate of 3.07%): $3,003
Chicago, IL – Median Home Price: $328,000
(0.2% year-on-year increase)
Despite rising interest rates across the country, the Chicago housing market has remained relatively strong as realtors say residents are putting more money into their homes. This one-bedroom, one-bathroom condo near the Lake Michigan shore comes with a coveted parking space.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $3,069
Repayment when interest reaches 8.5%: $3,323
Redemption in October 2021 (interest of 3.07%): $2,422
Phoenix, AZ – Median Home Price: $430,000
(8.9% increase year-on-year)
Another market that appears to be normalizing, Phoenix is seeing a rise in closed sales each month and many more homes on the market – up 133.6% in September year-over-year. This house features four bedrooms, three bathrooms and a large outdoor area with a pool and sitting area.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $2,706
Repayment when interest reaches 8.5%: $3,039
Repayment in October 2021 (interest rate of 3.07%): $1,858
Bend, OR – Median Home Price: $725,000
(13.2% year-on-year increase)
Bend has become the second most unaffordable town in Oregon, according to economists in the state, and it shows in the average cost of a home in the leafy neighborhood. This three bedroomthree bath home features a beautiful front yard and backyard, along with a large garage and 2,376 square feet of space.
20% down payment: $145,000
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $4,756
Repayment when interest reaches 8.5%: $5,318
Repayment in October 2021 (interest rate of 3.07%): $3,325
Miami, FL – Median Home Price: $530,000
(24.6% increase year on year)
Miami has seen the cost of a home rise lately, but realtors in the area have assured that costs are not sustainable and will continue to fall as more homes become available. For the average price one could buy this beachfront one bedroom, one bath condo in the famous ‘Millionaire’s Row’ neighborhood near Indian Creek.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $3,984
Repayment when interest reaches 8.5%: $4,275
October 2021 Repayment (3.07% Interest Rate): $2,938
Atlanta, GA – Median Home Price: $399,000
(10.7% year-on-year increase)
Another city eager to wait for a price drop is Atlanta, which has begun to see a decline after a hectic last few years in which some homes were valued by more than 20 percent. Currently, the median price hovers around $400,000, which could be: do you take this 2 bedroom, 2 bathroom condo in the Buckhead Forest area.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $3,281
Repayment when interest reaches 8.5%: $3,590
October 2021 Repayment (3.07% Interest Rate): $2,493
San Diego, CA – Median Home Price: $843,000
(8.7% year-on-year increase)
The price of a home in San Diego has typically remained high, with an average sales price per square foot in the city at around $649, up 12.5 percent from the same time last year. For the average price of $843,000 a potential homeowner could buy this one single storey house with three bedrooms, two bathrooms and a detached garage.
30-year fixed-rate mortgage payments
Repayment with current 7.1% interest: $5,399
Repayment when interest reaches 8.5%: $6,057
October 2021 Repayment (3.07% Interest Rate): $3,724
