The Federal Reserve raised its rates by 75 basis points on Wednesday, sending the average 30-year fixed-rate mortgage from the mid-5% range to over 6.20%, Realtor.com reports. The most recent rate hike is the largest incremental jump since 1994 and it proves that the Fed is taking an even more aggressive approach to controlling inflation than market experts initially expected.
A 6% mortgage rate is pushing a growing number of buyers to the brink of their budgets, and many are backtracking on their home purchasing plans. Additional rate hikes will create an even wider affordability crisis that the Fed hopes will slow home sales and quell runaway inflation, but for outpriced homebuyers, more gains are further delaying opportunities for much-needed home purchases.
About 18 million households, or 15% of all households, who could have qualified for a mortgage at the beginning of this year can no longer do so because of the higher rates, according to Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors.
“Some of the buyers have reached their financial limits—and they’re out of the market,” she says.
Others are choosing less expensive homes or postponing their searches. The latter is particularly bitter for many first-time buyers, who are contending with fast-rising rental prices