Black Homeowners Pay Higher Mortgage Rates, Study Finds

Black homeowners pay higher mortgage rates
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Corrects fourth paragraph to say Black borrowers earning $30,000 to $44,999, not the lowest-earning Black borrowers, were charged 4.506%. Story was originally published on Feb. 16.

Black homeowners tend to pay higher mortgage interest rates than White homeowners, with even the highest-earners paying more than the lowest-income White counterparts, a new analysis found.

Although mortgage rates generally decline for higher-earning borrowers, Harvard University’s Joint Center for Housing Studies said Tuesday it found racial disparities in that trend that reflect a history of discrimination. The research, which relied on 2019 data from the Census Bureau’s American Housing Survey, shows Black homeowners who make $100,000 or more paid a median interest rate of 4.169% on their mortgages—higher than White homeowners across most income groups, including the lowest-earning.

"Black homeowners have experienced systemic barriers to homeownership and wealth-building opportunities that have limited their ability to access credit, which is a key component in receiving low mortgage interest rates," Raheem Hanifa, the Harvard research analyst who studied the data, wrote in an online report.

Within the same income group, the biggest disparity was among borrowers earning $30,000 to $44,999. Black homeowners paid 4.506%, while White homeowners were charged 4.213%, a 29-basis-point difference that would result in nearly $12,500 in extra payments for a home purchased at the U.S. median price of roughly $325,000, assuming a 3% down payment.

The inequity is not new, Hanifa wrote, and comes from a history of practices like redlining. As a result, Black people have had less access to homeownership and favorable mortgage terms that help build wealth, he wrote.