Higher Interest Rates Make Homes 35% Less Affordable Than Last Year, Expert Says
CLARKSVILLE (WJZ) -- Homebuyers no longer have to worry about just being outbid. Those in the market now have to juggle high home prices and rising interest rates.
This comes at a time when inflation is already forcing increased pricing from everyday goods to gas.
Last week, the Federal Reserve made the most aggressive rate hike since 1994 in an attempt to tame inflation.
The Fed does not set mortgage interest rates, but there is a trickle-down effect from the hike.
"The word's affordability. The same home one year ago today is 35 percent less affordable," explained Mark Deitz, the Managing Director of SECU, Maryland's largest credit union.
Deitz said there has been an uptick in Treasury yields since the beginning of this year, the interest rate the U.S. government pays to borrow money. This has translated into a doubling of the standard 30-year fixed mortgage rate from about 3 to 6 percent.
"To put that into perspective, an average $300,000 mortgage at 3 percent would cost around $155,000 in total interest over the 30-year life of the loan and if you look at a 6 percent $300,000 mortgage, the total interest paid is over $344,000," said Deitz.
The managing director adds that when inflation comes down, home prices and mortgage rates will likely too.
"That might be the end of this year into 2023 is the ceiling of where the 30-year fixed rate mortgage may be," Deitz said. "Maybe not but I don't think we'll see too much north of here."
For now, mortgage interest rates are leaving some in a financial bind.
SECU suggests working with a mortgage professional well in advance of deciding to purchase a home.
