Zillow Launches 1% Down Payment Mortgage Program Amid Housing Affordability Crisis The initiative comes amid a nearly 40-year low in housing affordability.

Zillow is introducing a mortgage program that offers a 1% down payment, aiming to lure in potential homebuyers grappling with an acutely unaffordable housing market, the real estate company announced on Thursday.

The program is initially being rolled out in Arizona, with plans to expand to other markets. The initiative intends to accelerate the path to homeownership for eligible buyers by reducing the time they would otherwise need to save and broaden access to properties.

Zillow's 1% Down Payment Program comes as housing affordability has reached its lowest point in nearly 40 years. Recent market developments, such as ongoing rises in U.S. home prices, which have been continuing to increase since January, and the Fed raising rates for 30-year fixed mortgage rate to 7.23% this week, hitting a 22-year high, have worsened the already challenging affordability situation, and trapped would-be buyers in a cycle of renting instead of owning.

"Homeowners are smiling big, while the renters feel like their dream is out of reach, frustrated that other people are getting the housing wealth while they are left out paying higher rents each month," Lawrence Yun, chief economist with the National Association of Realtors, told Yahoo Finance.

Related: The Average Homeowner Became 40 Times Wealthier Than Renters Over The Past 10 Years

At present mortgage rates, purchasing (which is currently over $422,000) requires a monthly payment of $2,440 for those with a 20% down payment, a $1,172 increase from just two years ago, according to mortgage technology and data provider, Black Knight, per CNN.

The rise is due to the 11% interest rate hikes by the Federal Reserve over 18 months, resulting in 38.6% of median household income being required for the monthly payment on an average home purchase, the highest since 1984.

"To put today's affordability levels in perspective, it would take some combination of up to a 28% decline in home prices, a more than 4% reduction in 30-year mortgage rates, or up to a 60% growth in median household incomes to bring home affordability back to its 25-year average," Andy Walden, vice president of enterprise research and strategy at Black Knight, told the outlet.

With Zillow's 1% Down Payment Program, the company said in the release that it's aiming to mitigate the current buyer market and lower the financial barriers currently pricing out millions of would-be buyers.

Zillow Home Loans' analysis found that by cutting the down payment to 1%, an individual seeking to buy a $275,000 property in Phoenix, Arizona, and earning 80% of the local median income and saving 5% of their earnings, would be able to accumulate sufficient funds for the down payment in just 11 months, the company stated in the release. In contrast, a buyer in the same scenario who would typically be required to save 3% of the purchase price, would need 31 months to make the down payment.

Related: Housing Is Less Affordable Now Than at the Peak of the 2008 Housing Bubble