Source: MarketWatch —
Pity those first-time house buyers.
On Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 75 basis points to a 1.5% to 1.75% range, the biggest increase since 1994 as it tries to tame rising inflation, which has reached a 40-year high.
Eric Finnigan, a director at John Burns Real Estate Consulting, wrote on Twitter TWTR, +2.07% that mortgage rates rising from 3% at the start of this year to 6% effectively rules out 18 million households from qualifying for a $400,000 mortgage.
On a $400,000 loan, a 30-year, fixed-rate mortgage at a 3% interest rate would cost homebuyers approximately $1,686 a month, excluding taxes and other fees. That equates to $607,110 in total (with $207,110 in interest).
Compare that to current rates: At 6% that same mortgage would cost approximately $2,398 a month ($863,353 in total with $463,353 interest), a 42% increase in overall monthly repayments on the lower rate.
“The old maxim ‘desperate times call for desperate measures’ appears to have come into play with this latest rate move,” said Mark Hamrick, senior economic analyst at Bankrate.com said in response to the Fed’s 75-basis-point hike.
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We have had a slow market for the last 3 months, all due to being priced out of the market because of raising interest rates. This hurts the lower-income and middle income having no chance of home ownership. Thanks to this administration not caring and this will only hurt the market in the long run. Another crisis among us, due to our great government running this country.
After 40+ years as a Realtor, Home Builder and Flipper of 40+ homes most people are missing the magic words “Thirty Year FIXED” as whatever price point, or interest rate you can get a home your monthly P & I payment is FIXED to the exact same number for THIRTY years. Can you image doing that for food or fuel? I sat at open houses in 1981 and it was 17.5% interest for 30year fixed, and yes we sold homes