Source: The Hill —
The Federal Reserve’s latest interest rate hike Wednesday of 0.75 percentage points is expected to intensify pressure on the housing market while pushing up mortgage rates that already have reached nearly 20-year highs.
The interest hike announced Wednesday is the latest effort by the Fed to slow inflation by raising the cost of doing business. The interest rate hikes are also making new mortgages much more expensive, cooling the housing market while potentially raising the cost of rent.
While announcing the new interest rate hikes on Wednesday, Fed Chairman Jerome Powell said that the economy is still far away from the point at which he expects the price of rent to come down.
“There will come a point at which rent inflation will start to come down, but that point is well out from where we are now. We’re well aware of that,” Powell said, referring to rent increases as measured by the consumer price index and personal consumption expenditure index.
The Mortgage Bankers Association (MBA) reacted to the Fed’s announcement by noting that peak mortgage rates have yet to come into view.
“The combination of elevated mortgage rates and steep home-price growth over the past few years has greatly reduced affordability,” MBA economist Mike Fratantoni said in a statement.
More hopefully, Fratantoni said, “the volatility seen in mortgage rates should subside” once inflation begins to slow.
The Fed indicated at its latest meetings, however, that it is likely to continue to raise rates to a top line higher than the 4.6 percent it had suggested was coming in September.
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