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It’s becoming harder to afford a home.
Prices are up almost 20% year over year, and mortgage rates are soaring.
The rate for a 30-year fixed loan is now 5.57%, according to Mortgage News Daily, up from 3.29% at the start of the year.
At the same time, consumer prices on everything from gas to food are also accelerating, costing Americans hundreds of dollars more in spending a month. In an effort to tamp down inflation, the Federal Reserve raised interest rates on Wednesday by half a point.
Mortgages rates don’t directly respond to Fed rate hikes on short-term rates, since the former is based on longer-term rates, such as the 10-year Treasury yield, explained Greg McBride, chief financial analyst at Bankrate.com.
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However, he foresees the possibility of some pain ahead for homebuyers.
“Until we see sustained evidence of inflation pressures moderating, the risk is very much toward higher mortgage rates,” McBride said.
“But when we do see inflation pressures ease, mortgage rates could reverse course quickly — especially if the economy is slowing, too.”
Meanwhile, rents are also rising.