More than half (53 percent) of Americans surveyed by Zillow Group Mortgages identified rising interest rates as a top factor affecting their ability to purchase a home.
However, eight out of 10 survey respondents said rising interest rates won’t prevent them from purchasing a home if the rate hikes don’t push their mortgage payment up more than $100. Forty-nine percent of those surveyed said they would proceed with a home purchase even if rising rates increased their monthly payments by $200.
“For years, falling interest rates have been a boon to the U.S. housing market, keeping monthly mortgage payments low for first-time and move-up buyers alike, even as home values rose,” Zillow Group Vice President Erin Lantz said in a press release.
“As rates rise this year, first-time buyers and those looking to buy in expensive markets where affordability is already an issue will feel the pinch of higher rates on their budget,” Lantz said. “That said, for most borrowers, there is quite a bit of head room for rates to rise before home-buying becomes unaffordable.”
Sixty-five percent of survey respondents who were in the process of searching for a home said they were most concerned about the low inventory of homes.
According to Zillow, an increase in mortgage rates from 4 percent to 4.25 percent would increase monthly mortgage payments by approximately $23 for the typical homebuyer. If interest rates rise to 5 percent, 19 of the largest 35 metros would see monthly payments on the median home rise by $100 or more.
However, potential homebuyers in expensive U.S. metropolitan areas such as San Francisco could see monthly mortgage payments increase by $400 or more if mortgage rates rise to 5 percent, Zillow said.