Thirty-year fixed mortgage rates recently hit over 6%, which means the typical new mortgage payment has risen 52% over the past six months.
At the start of 2022, expert predictions of where mortgage rates would land ranged from 3.5% at the low end to 5% at the high end. Many experts expected no more than 4.5%.
As the year progressed, these predictions quickly lost their weight.
Even as rates climbed to 5%, experts said they should soon plateau. However, as of mid-June, rates reached 6.28%.
According to Fortune, this 6.28% is up from 5.3% a month ago, and is 3.2% higher than a year ago. This is both the highest rate since 2008, and the largest upward swing since 1981.
Fortune used the example of a $400,000 home at a fixed rate of 3.1% in June 2021 vs. the new 6.28% rate.
The rate jump alone would result in paying more than $700 extra per month on the same home.
However, if the home value also jumped 20% year-over-year, as the latest figures show, the mortgage would then be $480,000, meaning the overall jump in price would go from $1,708 per month a year ago to $2,965 per month today.
This comparison serves as a visual explanation for why more and more borrowers have had to back down from a home purchase this year, according to Fortune.
Moody Analytics forecasts that over the next year, home price growth will fall from 20% to 0% as rising rates price more and more people out of the market. Overvalued housing markets may only drop 5% to 10%.
So, why were the mortgage rate predictions so far off?
Moody’s Analytics chief economist Mark Zandi said supply chain issues and the Russian invasion of Ukraine heavily contributed to the miscalculation.
He believes that had the invasion not occurred, mortgage rates would still be at around 3.8% right now.
The other factor was that experts expected inflation to be much more under control by this point.
While the current mortgage rates are far from where many believed they would be at this point in the year, experts say they are still historically favorable, and headed toward more normal averages.
Additionally, if home prices are expected to begin falling in the coming months, homeowners may soon want to take advantage of high home equity amounts with a cash-out refinance or home equity line of credit.
Cashing out on home equity provides opportunities for home improvement projects that can boost the home’s value for a future sale.
It also can help boost homeowner satisfaction for those who want to move but can’t afford to in the current market, experts say.