The Difference Between a 3% and 7% Mortgage Rate: $1,000 Per Month
As the Federal Reserve continues to fight inflation, mortgage rates increased rapidly in 2022, starting the year at 3% and rising above 7% before dropping back to roughly 6.5% at the end of the year. How do rapidly rising mortgage rates affect housing affordability?
The difference between a slightly more than 3% mortgage rate and a 7% mortgage rate adds roughly an additional $1,000 mortgage payment to a typical, new median-priced single-family home and prices 18 million U.S. households out of the market for the home.
This means that a mortgage payment on a $450,700 home would have increased from $1,925 in January 2022 to $2,923 in late October when mortgage rates topped 7%.
And while mortgage rates fell back modestly to a level of 6.42% at the end of the year, the monthly mortgage payment on the same home increased from $1,925 in January when rates were just above 3%, to $2,740 in December when rates doubled, adding more than $800 to the cost of the home loan.
Higher mortgage rates have clearly worsened housing affordability as home prices remained high in 2022. As the charts below show, each 100-basis-point rise in mortgage rates requires roughly an additional $10,000 in household income to qualify for a similarly sized mortgage loan, and prices approximately five million additional households out of the market for a home at the same or similar price level.
NAHB economist Na Zhao provides more analysis in this Eye on Housing blog post.
Latest from NAHBNow
May 13, 2026
Why High School Students are Excited to Enter the Construction TradesNAHB caught up with three rising high school stars pursuing careers in construction about how they got their interest, their favorite student chapter moments, and what they hope to accomplish throughout their careers.
May 12, 2026
Talk to Your Local Code Officials as They Vote on Building CodesLocal code officials this week began voting on proposed changes to building codes. NAHB is asking members to share home builder positions on proposed changes with code officials.
Latest Economic News
May 13, 2026
Residential Construction Input Prices Move Higher In AprilPrices rose across a host of goods and services used in residential construction. Rising energy prices were the primary driver, but transportation service prices also rose at their fastest pace since 2022. Meanwhile, building material prices, excluding energy, rose at their highest yearly rate in three years, up 3.7% from a year ago.
May 13, 2026
Delinquencies Holds Steady in First Quarter of 2026Consumer loan delinquency rates continued to normalize in the first quarter of 2026 as pandemic-related disruptions diminished and credit conditions moved closer to historical norms.
May 12, 2026
Inflation Outpaced Wage Growth in AprilInflation accelerated to a nearly three-year high in April, driven by continued increases in energy costs from the Iran war. Energy costs drove more than 40% of the monthly increase, with national gasoline prices soaring above $4.50 in early May for the first time since July 2022.