In February 2022, inflation accelerated to a shocking 7.9 percent, the highest it has ever been since the Presidency of Ronald Reagan. Many disagree with the 7.9 rate of inflation and believe it is easily in the double digits. If the price of consumer products stays on its path of rising, interest rates for home loans will inevitably escalate as well.
The rarity back in January were the low mortgage rates and soaring inflation. Since November 2021, the inflation rate was 6.9 percent so it has only gotten worse. As a result mortgage rates have skyrocketed to all the way up to 5% from numerous reports.
Moreover, the Federal Reserve is reducing its holdings of mortgage-backed bonds which is also influencing interest rates upward. Given this, homeowners and buyers have to plan accordingly for a higher payment. Some borrowers are considering short-term fixed ARMs to obtain a low affordable payment.
The Dangers of Inflation
Looking back it was obviously a mistake on the part of the Federal Reserve to label the inflation as “transitory” and not act sooner to end the rapid increases. The country and the world overall were in a stage of deflation from March 2020 through the end of the year.
The federal government wanted to give people’s bank accounts some stimulus money since many were forced to not work. However, this misstep actually encouraged price increases and irresponsible consumer spending as soon as typical lifestyle spending returned.
Year over year inflation statistics do a comparison of prices from the prior year. All this tells you is that consumers are spending much more than a year ago for the same items or services. The transitory argument claims things will return to normal the moment people have spent all they can.
Sad to say, that is not the case or what is taking place. Due to the fact that there are still substantial shortages for appliances, building materials, automobiles, and even common grocery items the Fed quit describing inflation as temporary.
The benefit used to be lower interest rates and inflation but that has changed for the worse too. Real estate studies are showing the mortgage payment today is now 20 percent more than one year ago
Interest Rates
The Federal Reserve has already said it will raise interest rates in 2022 likely 4 to 7 times. Their first raise was at the March 16th meeting with a 25 basis points hike. They have also signaled in upcoming meetings they may have to raise by 50 basis points.
Decisions About Your Home
Some of the hottest real estate markets include California, Arizona, Texas, Florida, and a few other states. With its thriving economy and optimal temperature, Arizona is a location you may want to give some thought to when choosing where your home should be. It can be a very nice place to call home assuming that you secure the right mortgage before buying a home.
Your Mortgage Leader in Arizona and Beyond!
Hopefully, with the information above, you will be able to figure out what price range, monthly payment, and down payment will be comfortable for your financial situation.
Keep in mind that you need to make wise decisions when it comes to buying a property. When you have professionals at your side who strive to make your loan application process smoother, securing a mortgage will be a breeze.