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
Oct 07, 2026
Mortgage Rates Continued to Rise in September
Mortgage rates rose sharply in September as multiple factors applied significant upward pressure on U.S. treasury bond yields, a key factor in mortgage rates.
Membership
Oct 06, 2026
Median Revenue of NAHB Associate Members Climbs to All-Time High
According to NAHB’s most recent member census from 2025, approximately two-thirds of NAHB’s total members are Associate members. These members include those involved in a wide range of support industries and professions including, trade contractors, manufacturers, retailers/distributors, designers, and architects.
Latest Economic News
Economics
Oct 07, 2026
ARM Share Increased as Mortgage Rates Spiked
Mortgage application activity declined as the 30-year fixed mortgage rate rose sharply. The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of total mortgage application volume, decreased 7.7% month-over-month in September on a seasonally adjusted basis. Compared to a year ago, total mortgage applications were lower by 35.4%.
Economics
Oct 06, 2026
Mortgage Rates Rise as Treasury Yields Top 5%
Mortgage rates rose sharply in September as multiple factors applied significant upward pressure on the U.S. treasury yields. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.86% in September, up nearly 20 basis points (bps) from August.
Economics
Oct 05, 2026
Two-Story Foyer Share Edges Up in 2025
In 2025, around a quarter of new homes were built with a two-story foyer, slightly up from 2024, according to data obtained from the Census Bureau’s Survey of Construction (SOC) and tabulated by NAHB.