a man in black jacket having a deal with the agent

Two perspectives on Mortgage Rates


Outstanding mortgage debt totaled $11.71 Trillion on June 30, 2022

white and brown concrete bungalow under clear blue sky
Photo by Pixabay on Pexels.com

Home loans, the largest type of US household debt, are equal to 72.6% of total personal debt (Federal Reserve Bank of New York).

Recent headlines point to the sharp increase in interest rates and the expected impact on both home buyer and sellers. Not surprisingly, housing sales have slowed in recent months.

The simple fact is that higher interest rates make homes less affordable.

Let’s look at the example of a 30-year mortgage on a $250,000 home loan.

  • With a 3% mortgage rate home buyer spends $1,054/month.
  • With a 7% mortgage rate home buyer spends $1,663/month.

For the same home! That’s a 63% increase in mortgage payment on the same $250,000 loan.

So what happens next?

Below are two perspectives on mortgage rates. A 30-year fixed rate mortgage is 7.24% on the day of this posting according to bankrate.com.

Perspective #1: Mortgage rates have risen sharply over the past year

Perspective #2: Mortgage rates have dropped sharply over the past 30-years

In the case of this example, BOTH perspectives are correct.

  • Perspective #2, clearly shows that recent history, a time period that saw the interest rate on a 30-year fixed rate mortgage drop below 3%, appears to be an anomaly.
  • Perspective #1 clearly shows a sharp increase from those historical low mortgage rates.

What will this mean for future home prices and interest rates? We’ll learn what happens next together, but some things won’t change.

The true cost of your home is far more than your mortgage.

Insurance, utilities, appliances, home repairs and unexpected events are all home expenses to plan for. Regardless of what direction mortgage rates and home prices trend, the most important thing to remember when buying a home is:

“If you can’t afford it, you can’t afford it.”

The Missing Semester

While your mortgage reflects the price you paid to purchase the house, the true cost of a home is far bigger than the mortgage payment.

Own your financial future!

Gene Natali
Gene Natali

Gene Natali is Co-founder and CEO of Troutwood, a software company founded out of the Carnegie Mellon University Swartz Center.  He is a Chartered Financial Analyst, board member of CFA Society Pittsburgh, Executive in Residence at the Black School of Business|Penn State Behrend and a part-time lecturer at the University of Pittsburgh, where he has taught Personal Finance since 2015.

Prior to founding Troutwood, Gene spent 17-years personally working with some of the largest and most sophisticated institutional investors and retirement plans in America.  He is an award-winning author (The Missing Semester), has spoken in over 1000 unique high school and college classrooms, and regularly keynotes investment and education conferences across the country. 

Gene holds an MBA with a concentration in finance from Carnegie Mellon University and a bachelor’s degree with a concentration in economics from Allegheny College. He, his wife, four children and chocolate lab, live in Pittsburgh, Pennsylvania.

Leave a Reply