Recently this month, mortgage rates have noticeably been rising. Driven by the Federal Reserve’s monetary policies, the recent rises may come as a significant new expense for millions of Americans across the nations. Mortgage rates are currently sitting at a notable two month. The mortgage rates are the highest they have been since August. In the midst of a current housing crisis, potential and current homeowners may be at a loss for how to keep up with ever increasing mortgage expenses.
Mortgage rates are skyrocketing: That’s how it will affect you
This week, mortgage rates hit a two-month high at 6.25%. In addition to this two-month high, the interest rates for 30-year mortgages jumped the highest they sharpest they have done since February of 2023. This was also the third consecutive week of increasing mortgage rates since April of this year. The continued climbing interest rate may seem distressing to homeowners, however it comes with the Federal Reserves recent policies to mitigate inflation and risks of a recession.
The “recent uptick in rates has put a damper on applications,” Mortgage Bankers Association economist Joel Kan explained in a statement. Mortgage applications decreased by 17% last week because of the rising interest rates this month. Recent fluctuations in the 10-year Treasury have severely influenced the changing interest rates. Earlier last month, the Federal Reserve made some changes which have been increasing interest rates across the board.
High interest rates not a bad omen
While homeowners might be stressing now about covering additional mortgage expenses, the increasing interest rates are actually a good sign for the state of the economy. “If the economy continues to outperform expectations, then you’re likely to see rates come down more slowly,” said Gerald Cohen, chief economist at the Kenan Institute of Private Enterprise at the University of North Carolina, Chapel Hill.
In September of last month, the Federal Reserve cut their interest rates from 3.6% to 4.1%. The last time the Federal Reserve changed interest rates was four years ago. This change to Federal Reserve rates indicates that the Federal Reserve is confident that the economy is combating inflation and is switching strategy to prevent a recession. While this means a jump in mortgage rates intermittently, financial analysts and experts assure homeowners that this is a good thing in the long-run as it indicates that home principal amounts may be sold for cheaper.
Buy if you can and stay put: What experts have to say
With this recent uptake in mortgage rates, many potential home owners may be trying to judge the best way to time the market for when to buy. However, financial experts agree that the best way to combat changing interest rates is not to time the market but to buy when you can and stay put in that home. The housing market is consistently changing, and unless you are trying to invest in multiple properties, your best bet it to buy when you can and commit to make that house your home.
The bottom line is, the changing interest rates are not an indication of a collapsing housing market but rather the Federal Reserve’s ongoing battle with inflation. While recent cuts to interest rates were designed to stimulate the economy, the reality of a resilient job market and persistent inflation has complicated the situation. As the Fed continues to navigate these challenges, it is important to consider the larger picture of the state of the economy.
Many young people across the nation today are struggling to afford a mortgage for a home. In addition to this, rental prices are sky rocketing and the past four years of the economy battling with COVID19 has not aided the problem. The changing interest rates may be, ironically, a sign that homeowning may be within reach for more young people finally.
