Mortgage charges preserve climbing, as rates of interest poised to make one other soar

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The Federal Reserve will hike interest rates again to combat the rising cost of inflation without plunging the country into recession.

SUFFOLK, Va. – This week, the Federal Reserve is poised to raise interest rates again in a sustained and sustained fight against the rising cost of inflation without sending the country into a recession.

Reports on whether interest rates would rise by 50 or 75 basis points – or by 0.50% or 0.75% respectively – have been mixed.

“If things get serious and warrant action, they could go up to 50 basis points. But only in times of economic uncertainty or near crisis levels will they rise to 75 or 100 basis points,” said Robert McNab, an economics professor at Old Dominion University.

But no matter how large that increase, the trickle-down effect of such a move would signal another shift in how Americans borrow money from auto loans to home mortgages.

“We’ve seen mortgage rates already trending up, averaging over 5% from the low, which averaged under 3%. And we should expect 30-year mortgages to head towards 6% rather than back down in the coming months. The Federal Reserve will charge banks more for their money and restrict the money supply,” McNab said.

Meagan Herigstad has seen it from two sides: both as a Suffolk-based agent and as a recent homebuyer.

Herigstad closed a house towards the end of 2021 and was paying a mortgage rate of just over 3%. But even the difference of a few months saved her thousands of dollars in the long run.

“If we had to buy this year, we would have had to lower our purchase price by about $100,000. The 6% for a $350,000 house versus a 3.5 percent interest rate could easily add up to around $600 on someone’s mortgage,” she said.

According to national mortgage data from the Virginia REALTORS Association, mortgage rates are rising and approaching 6% for a 30-year fixed-rate mortgage.

With the US Federal Reserve considering raising interest rates again, banks are now looking to hike rates themselves.

“Home mortgage rates are forward looking. So banks are essentially saying, ‘What is the average rate of return I need to make money?’ That’s why 30-year mortgages are going up before the Federal Reserve hikes rates,” McNab said.

Herigstad said that this dynamic can reduce someone’s purchasing power. She said paying a higher mortgage rate could put a homebuyer off a certain price point for a home they really wanted.

“You can go in with the assumption that I can buy a $350,000 house at 4% interest. Now it’s like, wait. If there’s an interest rate of 6%, maybe I can only afford a $275,000 house,” she said.