How much will Fed rate hike raise mortgage payments?

house money

With the Federal Reserve all but certain to boost rates on Wednesday, home shoppers are left to wonder how the first such move in nearly a decade might affect their housing costs.

Here’s one educated guess: $29 a month. That’s assuming 30-year mortgage rates rise to 4.25 percent from 4 percent, and that you borrow $200,000 on a $250,000 home. (You can run your own numbers on our mortgage calculator.)

A survey released Tuesday by Zillow says 70 percent of home shoppers will be undaunted if rates rise to 4.5 percent, which is where economists expect they will be by mid-2016.

“If the Fed does decide to raise rates this week, as we expect them to, there is no need for future homebuyers to feel that they’ve missed the ideal window of time to purchase a home,” says Erin Lantz, vice president of mortgages for Zillow Group. “It’s important to remember that while a hike would result in higher rates than we have been accustomed, they are still historically low.”

Just to be clear, the Federal Reserve doesn’t determine mortgage rates. But rising short-term rates, which the Fed does control, typically affect prices on home loans.

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