compared the average monthly payments on 30-year fixed-rate mortgages in April 2022 – when the rate hovered around 3.79% – and one year later, when rates jumped to 5.25%.It found that higher rates cost borrowers hundreds more each month and potentially added as much as $75,000 over the lifetime of the 30-year loan.
"Potential homebuyers and existing homeowners needing to refinance or with variable payments now face materially larger monthly loan costs, against much more modest changes in their incomes," the Moody's research said. Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan fell to 6.78% from 6.96% the previous week, the first decline since June and the biggest one-week drop since March.
Still, the rate remains well above the 5.54% recorded just one year ago and the pre-pandemic average of 3.9%. And they are unlikely to return to that 3% level anytime soon. The Fed is expected to approve an 11th rate hike at the conclusion of its two-day meeting on Wednesday, bringing the federal funds rate to a range of 5.25% to 5.5%, the highest level since 2007.
"The scope for long-term rates, including certain mortgage rates, to decline as central banks begin to shift to a neutral policy stance is limited," Moody's wrote in the analyst note. That is because long-term, risk-free benchmark yields are likely to continue hovering around current levels, assuming the central bank successfully wrangles inflation under control without tipping the economy into a recession.