What This Rate Increase Calculator Does
A rate is any number you pay or charge on a recurring basis: an insurance premium, rent, an hourly rate, a utility tariff, a subscription, an interest rate. When it changes, this tool turns the old and new figures into a percentage and a difference. If you are the one setting the rate, the "Apply a Rate Increase" box goes the other way: current rate plus a percentage gives you the new rate.
The Formula
New rate minus old rate, divided by the old rate, times 100.
((New − Old) / Old) × 100
An annual premium going from $1,240 to $1,395 is $155 more, and $155 divided by $1,240 is 12.5%. Rent from $1,850 to $1,980 is $130 more, which is 7.03%. An hourly rate from $45 to $52 is 15.56%.
Insurance Premium Increases
Renewal letters usually give you the new amount and sometimes the dollar difference, rarely the percentage. $155 more on $1,240 is 12.5%. $155 more on $3,100 is 5%. The dollar figure alone does not tell you whether the increase is large.
Watch the billing period. $1,240 a year is $103.33 a month. If the renewal quotes $116.25 a month, that is the same 12.5% increase, but comparing $116.25 to $1,240 would tell you nothing. Put both numbers in the same units before you run them.
Rent Increases
$1,850 to $1,980 is 7.03%, or $130 a month, or $1,560 over a one-year lease. A number of US states and cities cap annual rent increases, and the cap is usually written as a percentage or as inflation plus a few points. The percentage from this calculator is the figure you compare against that cap. If your lease renews every year, remember the increases stack: three years of 7% is 22.5% on the original rent, not 21%.
Raising Your Own Hourly Rate
Freelancers and contractors put off rate increases because they expect to lose clients. Run the numbers first. Eight clients at $45 an hour is $360 for one hour each. Raise the rate to $52, lose one client, and seven clients bring in $364. You lost a client and made more money. The break-even is the point where clients lost equals the percentage increase; a 15.56% raise can absorb the loss of one client in eight and still come out ahead.
Interest Rates: Points vs. Percent
A mortgage rate going from 5.25% to 6.00% went up 0.75 percentage points and 14.29%. Both are true. The calculator gives you the 14.29%, because it treats 5.25 and 6.00 as two numbers like any other.
The percentage increase in the rate is not the percentage increase in your payment. On a $300,000 30-year mortgage, the monthly payment goes from $1,656.61 at 5.25% to $1,798.65 at 6.00%. That is 8.57% more per month, even though the rate rose 14.29%. If a headline says rates are up 14%, your payment is not up 14%.
Three Mistakes
Comparing monthly to annual
A $1,240 annual premium and a $116.25 monthly one look unrelated until both are annual: $1,395, a 12.5% increase. Match the period first.
Adding up yearly increases
7% a year for three years is 1.07 × 1.07 × 1.07, which is 22.5%, not 21%. On $1,850 rent that is $2,266.33 by the third year, not $2,238.50.
Reading points as percent
"Rates rose 1%" can mean from 5% to 6% (one point, a 20% increase) or from 5% to 5.05% (a 1% increase). Whoever wrote the sentence probably meant the first. Ask.
Frequently Asked Questions
How do I calculate a premium increase percentage?
New premium minus old premium, divided by the old premium, times 100. $1,240 going to $1,395 is $155 more, and $155 divided by $1,240 is a 12.5% increase. Make sure both figures cover the same period, monthly or annual.
How do I calculate a rent increase percentage?
Same formula. Rent from $1,850 to $1,980 is $130 more, which is 7.03%. If you want the other direction, a 7% increase on $1,850 is $129.50, making the new rent $1,979.50. Use the "Apply a Rate Increase" box for that.
What is the difference between a rate increase in percent and in percentage points?
An interest rate going from 5.25% to 6.00% rose 0.75 percentage points. As a percentage of the original rate, it rose 14.29%. This calculator reports the second figure. Percentage points are simply the subtraction.
How do I calculate an hourly rate increase?
New rate minus old rate, divided by old rate, times 100. $45 to $52 an hour is $7 more, and $7 divided by $45 is a 15.56% increase.
Does a 14% interest rate increase mean my payment goes up 14%?
No. On a $300,000 30-year mortgage, moving from 5.25% to 6.00% is a 14.29% rate increase, but the monthly payment goes from $1,656.61 to $1,798.65, an 8.57% increase. Principal repayment does not change with the rate, so the payment rises less than the rate does.
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