Many will soon face higher costs on home mortgages, credit cards following another interest rate hike

Posted at 4:58 PM, Jul 27, 2022
and last updated 2022-07-27 17:42:52-04

PORTSMOUTH, Va. – The Federal Reserve has once again raised interest rates as it tries to dial back on inflation. Wednesday, the Fed raised rates by three-quarters of a percent to tame demand.

Robert Hansen said he saw it coming.

“Everybody knew it was going to happen,” said the Portsmouth resident.

Hansen said the hike in interest rates in the pipeline forced him to put his Portsmouth home on the market a couple of months ago, so he wouldn’t have a problem with finding a buyer and selling it quickly. The recent sale of the house resulted in a big payoff for the buyers.

“They saved a whole lot of money by locking in a lower interest rate before everything went up,” Hansen said.

The Fed is hoping another jump in interest rates will get high inflation under control by slowing consumer demand and driving prices down from a 40-year high. But realtor Erica Barner, who owns E-Wei Real Estate, says the .75% increase will slow something else even more — the housing market.

“I understand the government has to do what it has to do, but we have to be logical,” Barner said. “A lot of people are not going to be able to afford homes.”

Barner said this could make home loans more expensive, meaning your mortgage payment will be higher.

“It’s going to cut the buying power,” Barner said. “How are we going to get to the table with the sellers if we can’t even get to the table with a great preapproval amount that’s not going to make us house poor when we move in? I don’t want to set people up for failure. I won’t do it.”

Not only do rate hikes result in higher home loans, but in the coming months, borrowers are expected to see higher interest rates on car loans and credit cards that could leave you with more debt.

And with the cost of food and rent already through the roof, some fear the economy is headed toward a recession.

“I’m absolutely fearful of a recession,” Barner said. “Right now, our economy is teetering as it is, so with interest rate increases, a recession is almost around the corner.”

There is a silver lining. In some ways, higher interest rates have already helped with inflation. Gas prices at some pumps are down from a month ago.

“It’s a necessary thing,” Hansen said. “There’s going to be some pain. That’s a bad thing, but it’s a necessary thing.”

Some real estate agents, such as Barner, say they’re seeing potential homebuyers holding off on buying a new house right now and instead investing in rental property, so they can have more money for a down payment.