How Fed Rate Hike Could Hit Millions of Homeowners
A rate hike could increase borrowing costs, but experts seem to believe things cannot get much worse for homebuyers than they are.
The Federal Reserve is set to raise its interest rate on Wednesday for the first time in three years, potentially increasing borrowing costs for American homeowners. Chairman Kevin Warsh admitted the central bank bears responsibility for the high inflation in the United States over the past 65 months. Although Warsh did not pledge to act on higher inflation, a rate hike became more credible after the country's core inflation rose slightly higher than expected in the latest report.
The consumer price index increased by 0.4 percent in August, with the 12-month increase at 3.4 percent. The core CPI, stripped of food and energy prices, accelerated by 0.3 percent for the month, and the annual inflation rate stood at 2.4 percent. Mortgage rates are currently between 6.9 percent and 7 percent, closely linked to the 10-year Treasury yield, which set the benchmark for long-term borrowing costs.
High mortgage rates, combined with rising home prices, property taxes, and homeowners insurance premiums, have made homeownership challenging for Americans. Experts suggest that despite the Fed's rate hike, mortgage rates might not necessarily increase, depending on whether investors believe inflation is under control. The decision on the Federal Reserve's meeting could impact the affordability of the U.S. housing market.
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