The Fed hikes and mortgages follow suit. This is known, predictable, and arguably intended.
The average rate on the 30-year fixed mortgage shot significantly higher Friday, rising 24 basis points to 4.95%, according to Mortgage News Daily. It is now 164 basis points higher than it was one year ago.
The housing market will be the first to feel the demand destruction of the rate hikes. And with more rate hikes on deck, there will be more demand destruction in housing to come.
The cure for inflation is always the same: recession. Only then do prices rebalance and reset.
Ben Bernanke hiked interest rates in 2006 to cool off the subprime mortgage market. He pricked the housing bubble in the process and touched off the 2008 financial crisis.
Between jawboning about interest rates and then actually raising the federal funds rate, Powell is on track to have a similar effect on the housing market. If the Fed sticks to its guns, we'll see 7% mortgage rates by year's end, and a greatly reduced housing market shortly thereafter.
Ballpark guesstimate from my past experience with savings accounts and interest rates, probably about three to six months. It depends on how often your bank resets the rate. Some savings products will reset monthly.
Yep, rates have been absurdly low for a very long time, which has driven housing prices sky high.
Ben Bernanke hiked interest rates in 2006 to cool off the subprime mortgage market. He pricked the housing bubble in the process and touched off the 2008 financial crisis.
Between jawboning about interest rates and then actually raising the federal funds rate, Powell is on track to have a similar effect on the housing market. If the Fed sticks to its guns, we'll see 7% mortgage rates by year's end, and a greatly reduced housing market shortly thereafter.
What is the average lag time for higher rates to dribble down to savings accounts?
Ballpark guesstimate from my past experience with savings accounts and interest rates, probably about three to six months. It depends on how often your bank resets the rate. Some savings products will reset monthly.
It gets worse. I saw a brief blurb in the news that people were getting a lot of ARMs. We didn't learn about that in 08