US mortgage rates reach a 14-year high owing to skyrocketing inflation

By
Vinisha Joshi
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The cost of a regular mortgage in the US has reportedly reached its highest level since the financial crisis of 2008, as the nation is struggling to control rising costs.

This week, the average rate of interest for a 30-year mortgage reached 6.02%, which is almost two times of what it was last year. The relocations make housing affordability issues worse for families who wish to purchase a home.

The increase coincides with the aggressive rate hikes made by the US central bank in a move to ease the pressures that are driving up inflation throughout the economy.

The Labor Department reported this week that US consumer prices have increased by 8.3% in the year ending in August, the quickest rate in nearly four decades.

Since the figure was more than anticipated, more people now believe that the Federal Reserve will keep aggressively hiking interest rates. Mortgage rates have also increased because of such moves. By increasing borrowing costs, officials hope to reduce demand from consumers and businesses, easing pressure on prices.

However, even though rising interest rates have hampered sales in the housing industry, the cost of homes are still increasing. In July, the average US home were sold at over $400,000, which was a jump of almost 10% from the previous year.

According to Sam Khater, chief economist at Freddie Mac, the government-sponsored mortgage company that issued the interest rate statistics, the hike in rates will continue to stifle demand and exert downward pressure on housing prices, but inventory still remains insufficient.

The Federal Reserve lowered interest rates when the pandemic broke in 2020, which helped to spark a wave of frenzied house purchases that resulted in unprecedented price hikes. That era came to an end when the bank began to quickly lift rates in March in response to indications that significant price increases have become ingrained throughout the economy.

In response to the slump, some mortgage realtors and brokers have already planned job cuts.

Source credit: https://www.bbc.com/news/business-62918085