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As if rising house prices weren’t enough, rising mortgage rates have made home ownership an even more expensive proposition. According to Bankrate.com, the interest rate on a 30-year fixed mortgage has fallen from a national average of 3.77% in February to 5.54% today.

Worse still, mortgage rates could continue to rise. Assuming, of course, that the Federal Reserve continues to raise interest rates by 50 basis points (0.5%) per meeting. A hawkish Federal Reserve governor believes this is the central bank’s best course of action when it comes to bringing down the currently high inflation rate.

At the height of soaring house prices during the pandemic, what does it mean if you’re looking to buy a home today? Expect monthly mortgage costs hundreds of dollars higher than they were a few months ago. So, is this a sign that renting is better than buying right now? Let’s take a closer look.

What rising mortgage rates mean for housing costs

Rising mortgage rates will increase housing costs for borrowers. Soaring interest rates usually mean the end of soaring real estate prices. Demand is falling rapidly, signaling that further near-term price appreciation, if any, will be limited.

However, this does not necessarily mean that housing costs are going down. Factors such as the chronic shortage of housing in the United States could counter the drop in demand and keep prices stable. With this, we will assume that house prices remain constant. For our example, we will use the current median sale price of US homes.

According to the St. Louis Federal Reserve’s Project FRED, the median selling price of a home in the United States is $428,700. Assuming a standard mortgage with a 20% down payment, with an average interest rate of 3.77% in February 2022, buying a house at this price would have cost you about $1,592 per month in capital and interests.

At today’s rates (5.28%), the monthly principal and interest for an average US home would be around $1,900 per month. That’s $308 more per month, almost $3,700 more per year, $110,880 more in interest payments over the life of the mortgage. Rising by about 19.4% in just a few months, mortgage costs have far exceeded today’s high rate of inflation.

Should you rent or buy? It depends.

So with rising mortgage rates and the uncertain prospect of whether housing will hold steady or sink from here, is it better to rent or buy? Simply put, your mileage will vary. In other words, there are many other variables related to your personal housing situation that can determine whether renting or buying is the best decision today.

For example, if you’re looking to stay in one place for many years, buying might be a good idea. Home ownership makes less sense if you intend to move in a short period of time. Even the National Association of Realtors himself will tell you that it takes several years before owning beats renting.

Specifically in the state of today’s housing market, a sharp rise in rents can make buying (if you’re looking to stay put) a worthwhile decision. Rental prices for apartments and houses have skyrocketed since the pandemic resumed. In some markets, like Las Vegas, rents have risen nearly 25% since 2019.

That said, it is not certain that rental prices will continue to rise at a rate much higher than wage growth. It’s possible that interest rates here will rise faster than landlords are able to raise rent reasonably.

Takeaway meals

Unless you opt for riskier financing options like variable rate mortgages, there’s not much to get around the rising cost of a monthly mortgage. Expect to pay almost 20% more to buy an average US home today than four months ago.

Obviously, now is not the most ideal time to become a homeowner. Although the housing market has peaked, it remains largely a seller’s market. Even if house prices correct from here, that may not mean big savings on mortgages. A continued rise in interest rates could win out.

Still, that doesn’t mean “forget it” when it comes to whether it’s best to buy a home today. Again, it all depends on your personal situation. Not just your mortgage interest rate.

The long-term benefits of home ownership could outweigh the spike in upfront costs, including rising mortgage rates.

How much will rising mortgage rates add to the cost of buying a home? appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.