Rising interest rates are pushing up the cost of owning a home. See how average mortgage repayments are increasing in every US state.

According to estimates by the National Association of Realtors, the cost of owning a home across the US is going to go up between January and March because of rising mortgage rates.

The average 30-year fixed mortgage rate rose from 3% at the start of January to 4% by the end of March, adding to the monthly costs of paying off a home. Though costs are going up, they are still low by historical standards, with the last rate levels seen in the year 2018?

Between the start of January and the end of March in California, the median increase in mortgage costs was $560 with a 10% down payment, and the median mortgage repayment was $3,540 a month.

It marks a general trend of falling affordability across the West Coast, with monthly median costs in Washington and Oregon rising by $430 and $400 respectively.

There are pockets of affordability in rural states, according to the head of forecasting at the NAR. In Arkansas, the median monthly price increase was $140, while states like New York and New Jersey have seen comparatively mild rises.

Why are mortgage rates rising across the US?

After reaching record lows in 2021, mortgage rates have accelerated this year. The federal funds rate has been raised twice this year by the US Fed, with six more projected before the end of the year after inflation hit 8.5% last month.

The short term interest rate that the Fed sets is the rate at which banks borrow and lend to one another. While this is not the rate that consumers pay, a higher rate for banks tends to make borrowing more expensive for consumers.

This feeds into 10-year treasury bond yields, which are historically linked to mortgage rates, particularly the 30-year fixed mortgage rate chosen by buyers.

While some factors may slow the pace of interest rate rises, with an expected slowdown in inflation, it is not likely that mortgage rates will fall back below 3% any time soon.

What has been the impact on the US housing market?

More than 9 million people were priced out of the market because of rising borrowing costs, and 125 households were vying for one affordable home this year.

The number of people rushing to lock in mortgages soared in March as borrowers tried to keep their costs from rising further.

The market for first-time homebuyers is getting more competitive with investor and all-cash purchases rising. Homebuyers have been faced with difficult ultimatums, including rent-back agreements, which involve new owners paying for sellers to live in their homes rent-free for several months after completing a sale.

After the sub-prime mortgage crisis of 2008, prices fell in the manner they did because of low housing supply, but that is not likely to happen again, according to Evangelou. The market is different from the last housing bubble according to some economists.