As the country struggles to control rising prices, the cost of a typical mortgage in the United States has reached its highest level since the financial crisis of 2008.
In mid-September, the average interest rate for a 30-year mortgage reached 6.02%, which is significantly higher than it was a year ago.
The relocations make housing affordability issues worse for families wanting to purchase a home.
The increase coincides with the aggressive rate hikes made by the US central bank in an effort to ease the pressures that are driving up inflation throughout the economy.
The Labor Department reported in mid-September that United States consumer prices increased by 8.3% in the year ending in August, the quickest rate in almost 40 years.
Since the result was greater than anticipated, more people now anticipate that the Federal Reserve will keep aggressively hiking interest rates. Mortgage rates have increased as a result of the changes.
Freddie Mac chief economist Sam Khater, “Rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding 6% for the first time since late 2008.”
By increasing borrowing costs, officials hope to reduce demand from consumers and businesses, easing pressure on prices.
However, even though increased interest rates have slowed sales in the housing market, home values are still rising.
In July, the average United States home cost over USD 400,000, an increase of almost 10% from the previous year.
Sam Khater said, “Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate.”
For the United States housing market, which has benefited from relatively cheap borrowing costs since 2008 when the US central bank reduced rates during the financial crisis to support the economy, the rise in mortgage rates represents a striking change.
When the COVID pandemic struck in 2020, the Federal Reserve again lowered interest rates, which helped to spark a wave of irrational property buying that saw unprecedented price hikes.
When the bank began to quickly hike rates in March in response to indications that rapid price increases were becoming entrenched throughout the economy, that era came to an end.
In reaction to the slowdown, some mortgage brokers and realtors have already announced job cuts.