# What the Fed’s interest rate hike means for mortgages

The rapid rise in mortgage rates means home buyers will need to pay significantly more for a home loan compared to even just eight months ago.

In November, a 30-year fixed-rate mortgage, the most popular home loan product, was barely 3 percent. As the rate approaches 6 percent, the added cost to a 30-year mortgage is hundreds of thousands of dollars.

How higher interest rates increase the cost of a

30-year home loan

6% rate

3% rate

Cost of a 30-year mortgage over time on a:

\$250,000

home

\$500,000

home

\$863K

\$256k

more

750K

\$607K

500K

\$432K

\$128K

more

250K

\$304K

0

0 years

30

0 years

30

\$750,000

home

\$1.3M

1.25M

\$384K

more

1M

\$911K

750K

500K

250K

0

Note: Assumes a 20 percent down payment. These calculations exclude other costs like property taxes and HOA fees.

How higher interest rates increase the cost of a 30-year home loan

6% rate

3% rate

\$750,000

home

\$1.3M

Cost of a 30-year

mortgage

over time

on a:

\$384K

more

\$500,000

home

1M

\$863K

\$911K

\$256K

more

\$250,000

home

750K

\$607K

500K

500K

\$432K

\$128K

more

250K

\$304K

0

0

0

0 years

30

0 years

30

0 years

30

Note: Assumes a 20 percent down payment. These calculations exclude other costs like property taxes and HOA fees.

How higher interest rates increase the cost of a 30-year home loan

\$750,000 home

\$1.3M

6% rate

3% rate

\$384K

more

\$500,000 home

1M

\$863K

\$911K

Cost of a 30-year mortgage over time on a:

\$256K

more

750K

\$250,000 home

\$607K

\$432K

500K

500K

\$128K

more

\$304K

0

0

0

0 years

30

0 years

30

0 years

30

Note: Assumes a 20 percent down payment. These calculations exclude other costs like property taxes and HOA fees.

How higher interest rates increase the cost of a 30-year home loan

\$750,000 home

\$1.3M

6% rate

3% rate

\$384K

more

\$500,000 home

1M

\$863K

\$911K

Cost of a 30-year mortgage over time on a:

\$256K

more

750K

\$250,000 home

\$607K

\$432K

500K

500K

\$128K

more

\$304k

0

0

0

0 years

30

0 years

30

0 years

30

Note: Assumes a 20 percent down payment. These calculations exclude other costs like property taxes and HOA fees.

A jump in rates from 3 to 6 percent causes the lifetime cost of a standard 30-year fixed-rate mortgage to increase by more than half the price of the home’s price at sale.

For a \$250,000 home, the mortgage would cost \$128,000 more over 30 years. That translates to a monthly mortgage bill that is \$356 higher. For a home purchased at \$750,000, homeowners would pay \$1,067 more.

Mortgage rates have been on a rapid ascent over the past year as inflation climbs and the Federal Reserve moves to dampen it.

This week, mortgage rates had their biggest one-week jump in decades. The 30-year fixed-rate mortgage now stands at 5.78 percent, a level not seen since 2008, according to data released by Freddie Mac.

Seven ways you can financially prepare for a recession

Higher rates can be a major factor in deciding whether to buy a home and signs of a cooling housing market were already apparent this year. While Realtor.com originally forecast a 6.6 percent increase in home sales this year, the real estate listing website recently downgraded its projection to a 6.7 percent decrease in 2022 compared with the year prior.