A one-point rise in mortgage rates cuts what you can borrow for the same payment by roughly 10%.
The amortization formula is steepest right where typical rates sit. From 6% to 7% on a 30-year loan, the same payment services ~11% less principal.
The 10% figure is roughly right around 5–7% on a 25–30 year term and drifts outside it. On a 10-year mortgage most of the payment is principal, so a point of rate costs far less buying power; at very high rates each additional point costs proportionally less than the last.
At 5% the rule says 10% and the exact answer is 9.268% — 7.9% high. It holds to within 10% up to 5.4%, then drifts.
Closest to right around 4-6%, which is where it was coined. At high rates each extra point costs less than the rule claims, because the payment is already dominated by interest.
The rule against the exact answer, computed across the range. Inside the shaded band the shortcut is close enough to use; outside it, reach for the calculator.
Estimate with the rule, then check it against the calculator that models it properly.
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