Mortgage rates reached a fresh 14 year high as the Federal Reserve increased the fed funds rate by another 75 basis points. The 30 year mortgage rate rose to 6.35%, while many lenders adjusted their borrowing rates to over 7%. The new, higher rates are dampening demand for mortgages which are down by over 29% compared to last year. This is bad news for those who are trying to sell their real estate. What was once a sellers market is quickly becoming a buyers market. Compounding the problem is Joe Biden’s relentless desire to spend taxpayer dollars. Rather than authorizing a tax cut for the masses, he decided to single out those with student loans, offering a $10,000 stipend to help students pay off their educational loans.
Taxation without representation
In addition, he authorized 87,000 new IRS to be hired to assist him with tax collection. The so called “Inflation Reduction Act” does very little to actually combat inflation and was more of a “green energy” bill in disguise. It was also a way to secretly weaponize the IRS against political opponents as seen during the Obama Administration. See: IRS Targeting Scandal: Citizens United, Lois Lerner And The $20M Tax Saga That Won’t Go Away. As the administration continues pumping money into the economy, the Fed will continue raising rates to offset the additional spending. In addition, the Fed will sell off their bond portfolio to reduce the amount of available money in the economy. This will have a secondary impact of increasing lending standards across the board. While a 640 credit score two years ago would’ve been fine, a 680 or higher may soon be required to secure a primary or secondary mortgage.
Why higher rates matter to Texans
Texans all across the state will feel the pinch of higher interest rates. Those seeking a mortgage will have to pay more, and those requiring loans for their business will be forced to pay higher borrowing costs. With respect to mortgages, yes, real estate costs may come down, but they may not be material enough to offset the cost of higher mortgages. The Fed is on a mission to lower inflation and will continue to increase rates even at the expense of higher unemployment throughout the country. It’s going to be tough folks, so buckle up and save your pennies for a while.