When mortgage rates move by one percentage point, it may not seem like it matters. But even the smallest change can result in significant savings, or make home ownership unaffordable for many potential buyers.

For a home currently listed at the median price, buyers will pay about $800 more per month than they did a year ago, largely due to rising mortgage rates.

Last week, mortgage rates on 30-year fixed-rate loans rose again to around 6 per cent, up from just under 6 per cent last month, according to Mortgage News Daily.

While these rates are down from more than 7 per cent in November 2022, last week's modest increase is affecting the bottom line of many buyers already frustrated by stubbornly high home prices.

"When home prices are high, people borrow more money, so the sting of rising mortgage rates is extra painful," said Danielle Hale, chief economist at Realtor.com®." Homebuyers will either have to spend more of their paychecks on housing costs or cut back on their list of must-haves. For some buyers, this will be an impossible equation to solve, so they'll end up staying put and many wannabe first-time buyers continue to rent for longer."

Even with the recent drop of about one percentage point, mortgage rates are still several percentage points higher than the lowest levels of previous years. The last time mortgage rates were close to 6.5 per cent was in 2008; the last time rates exceeded 7 per cent was in 2002.

So, what do the current figures show?

Well, the current median listing price for a single-family home was $405,950 in January, up more than $100,000 from three years ago, before the COVID-19 pandemic began.

And data collected by the National Association of REALTORS® shows an average down payment of 14 per cent in 2022. Combined with the latest interest rates, the median-priced home would have a monthly mortgage payment of slightly more than $2,200.

The same home would cost about $1,150 per month at January 2020 prices and mortgage rates.

And that's before taxes and insurance. With these costs, the new monthly cost of the median home would be just under $2,800, whereas a year ago it would have cost around $2,000.

At current interest rates, the median home price would need to fall by 27% to have the same monthly payment as it did a year ago. This would mean a median home price of $295,000, compared to the current $405,950 for a single family home. And to achieve the same monthly payment as two years ago, the house price would need to be 37 per cent lower than it is now, or $254,000.

And using the same monthly cost as three years ago, just before the COVID-19 pandemic, the price would need to be about 42 per cent lower, at about $234,000.

Prices are still rising year on year in most parts of the country.

So what's a strapped prospective homebuyer to do? For starters, buyers should look for the lowest rates among different lenders to save themselves some cash.

"You can get something different," says Hale, adding that borrowers should also look at different types of loans, which may be cheaper." Specialised loan products, like if you qualify for a [Veterans Affairs] loan, or if you're doing a first-time homebuyer [assistance] loan, you'll get a different offer."

Interest rates rose following the recent jobs report, which surprised economists by adding 517,000 new jobs.

Investors expect the low unemployment rate to spur the US Federal Reserve to raise its benchmark interest rate further in an effort to slow the economy and curb inflation. Mortgage rates have followed a similar trajectory.

While economists at Realtor.com expect rates to end the year above 7%, others predict mortgage rates will remain stable or slightly lower for the rest of 2023, as the outlook for a recession in the coming months remains unclear.