The Rate Hike Saga Continues—Homebuyers to Be Hit With Even Higher Borrowing Costs
The U.S. Federal Reserve announced on Wednesday that it was increasing its short-term interest rates by three-quarters of a percentage point, the most recent gain in a barrage of rate increases meant to cool inflation and tame a volatile housing market. Though mortgage rates are separate from the Fed’s rates, they typically follow the same trajectory, meaning that homebuyers can expect borrowing costs to rise even further in the months ahead, Realtor.com reports.
At the start of the year, mortgage rates rested at a historically low 3.22% for 30-year fixed-rate loans, but during the week ending October 17, they averaged 7.08%, and the latest Federal Reserve announcement likely signals more substantial increases that will price out an already large share of stalled would-be buyers.
“People want to know when it’s going to end and how high rates are going to be when it does,” says Realtor.com Chief Economist Danielle Hale. “Housing is an interest rate-sensitive sector. When interest rates are high, it’s much more challenging for buyers. And it looks like interest rates are going to stay high for the foreseeable future.”