A Monthly Mortgage Payment of $3,000 has Become the Standard

In today’s housing market, $3,000 monthly mortgage payments are average, despite rising interest rates and record high property prices.

According to Black Knight’s mortgage monitor report, as published by HousingWire, the average principle and interest payment among borrowers purchasing a home with a 30-year fixed-rate loan reached an all-time high of $2,306 in July. That’s before taxes and insurance (an average of $550 per month). It has increased by 60% in the last two years.

“Just two years ago, only 18% of homebuyers were facing that level of payment; as of the end of July that share had grown to 51%,” Black Knight Vice President of enterprise research Andy Walden stated.

“Beyond that, nearly one in four July homebuyers has payments north of $3,000, up from just 5% in 2021. We’ve been talking about affordability for quite some time now, but this puts the situation in stark relief,” he added.

Besides from purchase affordability, rising interest rates make it difficult for mortgage holders to get into their home equity. Mortgage holders drew $39 billion in equity in the second quarter of 2023 through cash-out refis, home equity loans, and lines of credit. It was slightly more than in the first quarter of 2023, but only half the volume of the first quarter of 2022 ($79B), when interest rates began to climb.

Mortgage holders took an average of 0.92% of available tappable equity per quarter between 2010 and 2021. Researchers discovered that this share has dropped to 0.4% in the last three quarters. Overall, it resulted in a 55% drop in equity withdrawals.

In other words, Black Knight estimates that since interest rates began to rise in early 2022, approximately $200 billion in equity that could have been taken and reinvested in the larger economy has gone untapped.

Walden emphasized that tappable equity levels remain high.

HELOC rates have grown in lockstep with Fed rate hikes, with the average HELOC offering now above 8.5% for the first time in the 15+ years Black Knight has tracked the data.