Today’s 0.75% federal interest rate hike marks the largest rate hike in 40 years. Economists say the move is aimed at tackling inflation, making it more expensive for consumers and businesses to borrow money, and lowering the costs of goods and services.
According to the Mortgage Banking Association, the average contract rate on a 30-year fixed mortgage was 5.65% for the week ending June 10. This is the highest level since 2008.
They MBA says there was a spike in home purchases last week compared to the previous week because people were anticipating higher federal rates.
Meanwhile, the MBA says home buying inquiries are down more than 15% from the same time last year, an indicator that supply may finally be catching up with some of the recent demand for homes. houses.
Paul Murphy breathes a huge sigh of relief. He just closed his newly built house in Surprise two weeks ago.
“We went through four drawings,” Murphy said, reflecting on the process it took to secure his fate.
Murphy started with a 3% mortgage interest rate, but saw rates rise steadily during the construction process.
“They were going from 3.0%, to 3.2%, to 3.6%, so we started to get a little scared with things,” he said.
Murphy decided to go with a locked-in rate of 4% with a strict 105-day deadline. And Murphy would have to pay a huge penalty if he didn’t close on time, $1,142 for every 7 days over the 105-day cap.
“It was starting to get a little stressful,” he said. “We kept getting pushed around with our shutdown,” he said.
But Murphy says his builder finally arrived and they were able to close with just a slight extension.
Murphy still tracks mortgage rates, noticing them climbing to almost 6% in recent days thinking if he hadn’t closed when he did, “we most likely would have been out,” he said. .
Murphy thinks the recent rate hike by the feds could eventually drive down house prices. In fact, he says, one of his colleagues has seen this happen before with a builder in a new home development.
“They’ve actually dropped the price by about $75,000, so I think what you’re going to see now is that to get people to keep buying, builders are going to have to start lowering their prices,” Murphy said.
In the short term, however, he thinks the higher rates will push some people out of the market.
“Unfortunately, it’s probably going to cost some people their dream of having their home right now,” he said.
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