The average home mortgage payment reached a record high in August, topping out at $2,070, according to the latest Intercontinental Exchange (ICE) Mortgage Monitor Report.
The global provider of mortgage data reported that August marked the largest average monthly payment in history among active mortgages in the U.S. Spikes in property insurance have been a constant culprit of higher payments, but all other elements of the mortgage, including principal, interest and taxes, have also been on the rise.
Andy Walden, ICE vice president of research and analysis, said mortgage payments were up about $140 from the same time last year and nearly $400 higher than just before the pandemic in early 2020.
“When you peel back the layers on the data, a clear delineation appears between those fortunate enough to have taken out their mortgages before the Fed began to raise interest rates in 2022 and everyone who’s taken one out since,” Walden said. “For this second group, a historically outsized share of their total mortgage payment is covering interest, with very little – even considering the young age of the loans – going toward principal.”
Even older low-interest rate mortgages have seen payments rise as the cost of insurance and other variable charges have risen. ICE reports that more than a third of the charges on a “fixed” housing payment consist of variable costs. Principal, interest and taxes have increased in the 15% to 17% range since the beginning of 2020. During the same time span, property insurance is up an eye-watering 52%.
Skyrocketing home prices, obviously, play a role in higher insurance costs. But when ICE compares costs for every $1,000 of home coverage, they found that insurance prices are much higher than one could expect from just home price increases.
“Not only are homeowners paying 12% more today for the same dollar amount of coverage that they were, on average, from 2013 to 2022, but they’re also insuring a smaller share of the property’s underlying value. Given that coverage amounts are based not on a property’s market value, but its replacement cost, the average policy has also gone from covering over 100% of the average home’s value back in 2013 to 2015 to just 88% today,” Walen said.
Not surprisingly, the high cost of insurance is a more acute problem in metro areas that are prone to natural disasters. In New Orleans and Miami, for example, annual insurance premiums on mortgaged single-family residents average about $17 per $1,000 of policy coverage, more than three times the national average of $5.38. Homeowners in parts of the Great Plains region, which are prone to tornadoes and hailstorms, are also paying higher mortgage costs. ICE found that in Oklahoma City, for example, annual premiums average more than $10 per $1,000 of coverage, which is nearly twice the national average.
Large metro areas that fall below the national average for insurance coverage include San Francisco and nearby San Jose; Las Vegas and Rochester, New York. Those cities have insurance rates that are below $3 per $1,000 of coverage.
On average, premiums make up more than 9.4% of monthly obligations on mortgaged single-family homes, which is up from 7.7% in the 2013-2020 timeframe and is the highest share on record. That figure, however, varies across the country. In higher-risk areas, such as New Orleans, insurance eats up as much as 25% of the mortgage payment. In major metro areas of Kansas and Oklahoma, insurance accounts for more than 15% of the mortgage payments.
For other parts of the country, property taxes play an outsized role in higher mortgage costs. In Rochester and Syracuse, New York, ICE found that property taxes alone account for more than 35% of the average monthly mortgage payment.
