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
Economics
Sep 28, 2026
Median Revenue of NAHB Remodelers Grows 24%
According to the NAHB Member Census, 21% of NAHB builder members listed residential remodeling as their primary business. These remodelers tend to be relatively small, with a median of five employees and a median annual revenue of $2.1 million.
Labor
Sep 25, 2026
NAHB Amicus Brief Argues for Fair Due Process for Workers
NAHB filed an amicus brief in the Fifth Circuit immigration case Sosnava Rodriguez v. Ortega. The case asks whether a person who entered the United States without official inspection may seek release on bond from a judge while the government considers deportation.
Latest Economic News
Economics
Sep 28, 2026
Market Share of 5,000+ Sq. Ft. Homes Edges Higher in 2025
New homes with 5,000 square feet or more of living space posted an increase in market share last year. In 2025, 27,000 homes of this size were started, accounting for 2.9% of all new homes started. Both the number and market share of homes with 5,000 square feet or more increased from 2024, according to annual data from the Census Bureau’s Survey of Construction (SOC).
Economics
Sep 28, 2026
NAHB Remodelers: What the Data Says
Twenty-one percent of NAHB builder members listed residential remodeling as their primary business, according to the 2025 Member Census. These remodelers tend to be relatively small, with a median of five employees and a median annual revenue of $2.1 million. This means that remodelers are even smaller than NAHB builder members, who had a median of six employees and median annual revenue of $3.7 million, as reported in a recent post.
Economics
Sep 25, 2026
State and Local Government Tax Revenue Grows
Total tax revenue collected by state and local governments was up 5.8% from a year ago in the second quarter, according to the Quarterly Summary of State and Local Government Tax Revenue published by the U.S. Census Bureau. This was the highest year-over-year growth since the third quarter of 2024 (7.2%).