As mortgage rates keep climbing, homes are more expensive for both renters and buyers

One of the advantages to buying a home is that mortgage payments can be cheaper than renting — provided you have enough money saved up to afford a down payment and other costs of being of a homeowner. 

However, even though U.S. rent prices surged in the last year, that rent growth has been outpaced by rising mortgage payments in recent months as home prices continue to rise, according to a recent study from real estate brokerage Redfin.

The study looked at two metrics to measure price growth: the median monthly asking rent for all apartment types in the U.S. and the median monthly mortgage payment for new homebuyers with at least a 5% down payment. Rents have grown 15% year-over-year since last February, while mortgages have grown 31%.

The pace of mortgage payment growth has accelerated since the beginning of 2022, according to Redfin's data.

Rising mortgage costs hasn't immediately led to fewer buyers, however. "We haven't really seen a slowdown in the housing market yet, and it might just be a bit delayed, with people still rushing to buy homes before mortgage rates go up even more," says Daryl Fairweather, chief economist at Redfin. 

That may soon change, however. The average rate for a 30-year fixed mortgage is 4.53% as of Thursday, which is 0.06% higher since last Friday, according to Bankrate. Rates have been near or above 4% since last February — the highest they've been since May 2019.

In response to the rising rates, some economists are lowering their sales forecasts for the rest of the year, CNBC's Diana Olick reported. After double-digit price growth last year, home price increases are expected to slow to an annual rate of 7% by the end of 2022, according to Redfin's most recent projections. 

"I anticipate that as mortgage rates continue to increase, more first-time homebuyers will choose to keep renting instead of buying and that will drive more demand toward the rental market and sustain growth in rents," says Fairweather.

At the end of the day, both renters and new homeowners are paying more than they used to for a place to live. That's largely because housing supply, which was already low before the pandemic, simply can't catch up with demand.

"We really haven't done anything to address the hole we're in, in terms of building new homes, and it will take a long time to build our way out of that hole," Fairweather says.

Going forward, Fairweather predicts that "buyers will get to dictate more of the terms later in the year" as the overheated market of waived inspections and all-cash offers cools.

"It'll be more expensive than it was at the beginning of the year, but at least it might not be as stressful when it comes to making an offer on a home," she says.

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