Rising interest rates are already having an impact on the housing market. Specifically, on mortgage applications.
“We’ve seen an almost 4% decline in purchase inquiries over the past month,” said Joel Kan, associate vice president of the Mortgage Bankers Association.
He said that’s partly because there just aren’t many homes for sale right now. But it’s also because mortgage interest rates have risen and made mortgage payments more expensive.
“What we’ve seen, really over the last year, is an increase of about $300 or more in the median monthly mortgage payment,” Kan said.
Home loan refinance applications have fallen about 36% in the past month, according to Kan. Jim Vogel of FHN Financial said this limits spending for many people.
“Last year there was about $200 billion, $250 billion in purchasing power that was freed up by people refinancing and taking money out of their existing loans or their existing equity, and it goes straight into the economy,” Vogel said.
The decision by the Federal Reserve in March to raise its benchmark interest rate by a quarter of a percentage point also affected the rates paid by companies. Vogel said they were up about half a point in the past few weeks.
“These costs may alter some expansions they would consider, in terms of infrastructure or purchasing new plant and equipment,” he said. Higher interest rates increase costs for individuals and businesses and reduce purchasing power. And that dampens demand.
Senior Economist Sarah House of Wells Fargo said cooling demand is one way to achieve the Fed’s goal of reining in inflation.
“A lot of that inflation stems from the fact that we had seen such huge demand, which makes it difficult to sustain the production side of the economy,” House said.
She said we can also expect to see interest rates rise for auto loans. Credit card rates could also rise, making it more expensive to buy appliances and furniture on credit.
“So if you’re looking at an increase in that interest component, it will affect how much you’re willing to pay, how much you’re willing to buy, all inclusive, in some of these expensive purchases,” he said. she declared. .
According to House, demand for these items may already be falling as consumers spend less on goods and more on services.
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