The New Normal: Monthly Mortgage Payments Of $2,000+ A Month

WRE News September 7, 2023

Buyer

The average monthly principal and interest (P&I) payment for borrowers purchasing a home using a 30-year fixed-rate loan in July was $2,306, according to new data from Black Knight Inc., now part of Intercontinental Exchange Inc. (NYSE: ICE). That sum, which occurs before taxes and insurance are included, is a record-breaking average payment for P&I and a 60% ($871) increase over the past two years.

Black Knight reported that more than half of July purchase originations had a payment of more than $2,000 a month, up from just 18% two years ago, with nearly one-quarter (23%) having payments of more than $3,000 – up from 5% in 2021.

“Just when did the $2,000 monthly mortgage payment become the norm?” said Black Knight Vice President of Enterprise Research Andy Walden. “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%. 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.”

Walden added these higher sums aren’t just a problem for buyers.

“While tappable equity levels have returned to near-record highs, rising rates are having a clear impact on how – and how much – equity mortgage holders are willing to withdraw from their homes,” he added. “All in – including first-lien cash-out refis and second-lien home equity loans and lines – we saw mortgage holders withdraw $39 billion in equity from their homes in Q2 2023. That’s up slightly from Q1’s $37 billion, but only about half the volume of Q1 2022, before interest rates began to climb.”

Walden added that home equity line of credit (HELOC) rates increased as the Federal Reserve enacted its regiment of rate hikes, with the average HELOC offering now above 8.5% for the first time in the 15-plus years Black Knight has been tracking the data. As a result, second-lien withdrawals were down by a little over 30% from the same time one year ago.