A Surge in Mortgage Payments
In the current climate of soaring interest rates and unmatched home prices, monthly mortgage payments of $3,000 have become the norm. According to Black Knight’s mortgage monitor report, the average principal and interest payment in July stood at its all-time high of $2,306, and this is without accounting for taxes and insurance which add approximately $550 more. Over just two years, this amount has inflated by 60%.
Shift in Homebuyer Commitments
Andy Walden, Black Knight’s Vice President of enterprise research, shared an insightful perspective on the dramatic shift in homebuying. “Two years back, a mere 18% of homebuyers faced this payment level. Come end of July, this statistic ballooned to 51%,” he observed. Further underscoring the issue, Walden noted, “Now, one in four July homebuyers has payments exceeding $3,000, a leap from the 5% in 2021.”
Equity Access & Trends Amid Rising Rates
The spiraling interest rates have more ramifications than just purchase affordability; they’re directly impinging on mortgage holders’ ability to access their home equity. In Q2 2023, mortgage holders extracted $39B in equity via avenues like cash-out refis and home equity loans. Though slightly more than Q1 2023, it’s significantly less than the $79B in Q1 2022, prior to rate escalation. Between 2010-2021, mortgage holders, on average, withdrew 0.92% of available equity each quarter. This has recently plummeted to just 0.4%, translating to a 55% decrease in equity withdrawals.
Impact on the Economy & HELOC Rates
lack Knight’s analysis pinpoints nearly $200 billion in equity that’s lain dormant since rates started climbing in 2022. This is equity that could have potentially invigorated the broader economy. Walden also brought attention to the surge in HELOC rates due to Federal rate hikes, highlighting a first in 15 years: the average HELOC rate now exceeding 8.5%.
