Mortage Rates and Price Reductions

Posted by Emily Ray-Porter Group on Monday, March 3rd, 2008 at 2:45pm.

A couple of weeks ago, in early February, the fixed mortgage rate jumped a full half-percent, making it the fastest rate increase in 20 years.


The table below demonstrates how even as home prices may drop, monthly mortgage payments basically stay the same; due to increased interest rates:


Scenario 1:
Prices decrease by 5% and interest rates increase by 0.5%

Scenario 2:
Prices decrease by 10% and interest rates increase by 1.0%


Scenario 1

Scenario 2

Home Price

$218, 900

Home Price: -5%


Home Price: -10%


Interest Rates


Interest Rates: +0.5%


Interest Rates: +1.0%


Monthly Payment


Monthly Payment


Monthly Payment


Table: Kadlec, Dan. "Ignore the Headlines!"  Time 25 February 2008



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