LAKE WORTH BEACH, Florida – Further interest rate hike by the Federal Reserve this week aims to slow inflation, but it also hurts consumers and cools the housing market.
On Thursday on Lake Avenue in Lake Worth Beach, Rick Curtis greeted potential buyers outside this Coldwell Banker office.
Rising mortgage rates are a big topic of discussion.
“Unfortunately, what the Fed is doing with interest rates is hurting the middle class,” Curtis said.
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If you got a 30-year fixed mortgage on a $600,000 home at an interest rate of 2.6% in 2021, you have the same monthly mortgage payment as someone who just bought a $600,000 home. $392,000 at the current interest rate of 6.2%.
— Danny Baldus-Strauss (@BackpackerFI) September 21, 2022
In an effort to fight inflation, the Fed raises rates to lower prices for consumers, but that can also cost us all money.
“It’s harder now to find property because what they could afford last year with income and not everything is the same this year,” said Nancy Uhlman, broker-owner of the Lake Worth Beach office. of Coldwell Banker Hometown Real Estate.
Mortgage rates are now around 6.2%. Last September, it was around 3.4%.
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This means that a new home buyer is paying the same mortgage payment today as someone who bought a much larger home last year. They also pay a lot more interest, which scares off buyers.
“[Interest rates] were at an all-time low, and I try to put that into perspective,” Curtis said. “When I first bought a house many years ago, 9.5% was considered like very low,” Curtis said.
“The consumer is so tense,” said Greg McBride, chief financial analyst at Bankrate.com. “The Fed still has a lot to do, not just this year but also in 2023.”
Rising rates mean it’s more expensive to borrow money, and that’s especially true for mortgages.
“The skyrocketing mortgage rates we’ve seen have reduced buying power by a third, and that’s on top of the strong price appreciation we’ve seen over the past two years,” McBride said. .
Buyers are now forced to try and expand their home hunting requirements to try to lower mortgage payments.
“We’re in a bit of a mess right now, but we’re trying to work together to get there,” Uhlman said.