In an effort to cool inflation the Federal Reserve has launched its largest interest rate increase since 1994 and indicated it is doing so in order to tame price hikes and bring down the cost of gas and food. There are plans to apply further ongoing increases as appropriate. The Fed issued a statement pointing to the invasion of Ukraine by Russia as a tremendous human and economic hardship that is affecting the economy and contributing to rate hikes.
The average 30-year, fixed-rate mortgage rate spiked by 55 basis points from 5.23% to 5.78% for the week ending Thursday, June 16, 2022, according to the latest figures released by Freddie Mac.
For perspective one economist said a $300,000, 30-year, fixed-rate mortgage with a rate of 5.23% would normally cost a borrower about $1,653 a month, excluding other costs like taxes and insurance. At today’s new average rate of 5.78% that same loan would cost a borrower $1,756 which equates to $1,236 a year and $37,080 over the lifetime of the loan.
the rate increase could be an over correction by the lenders, and could possibly fall over the coming weeks as lenders adjust to the current high-inflation environment.
Keep in mind that believe it or not, rising rates isn’t all bad news. Less demand for housing could help alleviate the housing supply issues we’ve seen nationwide. We don’t expect housing prices to come down drastically but with increased supply there should be a slow down to home price growth giving home buyers more housing options.