Local experts respond to rising mortgage rates
Federal Reserve raising interest rates on mortgages viewed as necessary to combat inflation
CHATTANOOGA (WDEF) — The average interest rate for a typical 30-year mortgage rose this week to 7.16%.
These are the rate’s highest levels since 2001.
Chris Hopkins of Chattanooga’s Apogee Wealth Partners says his first mortgage rate in 1981 was a whopping 16%.
While the numbers aren’t as drastically high now as they were then, he says the rate at which they’ve risen is historic.
“This rise in mortgage interest rates is the most rapid in a single year ever on record,” Hopkins said. “We’ve gone from about 3-point-1 percent to about 7-point-1, round numbers.”
Bryan Fryar with TVFCU says since 2008, Americans have been “spoiled” from historically low rates.
But now that the Fed is trying to cool rampant inflation, he says, for now, they can’t stay that way.
“It is impacting pretty much anything that you borrow money, whether it be a credit card, a car loan, a mortgage loan,” Fryar said. “So rates are higher.”
Although both men agree with the actions of the Federal Reserve, they compare it to swallowing bitter medicine.
Families already struggling from inflation may be further impacted, but Hopkins says entry-level buyers have become priced out of the housing market.
He says progress can already be seen as a result of higher rates.
“That’s exactly what this is intended to do — to tame the rate of inflation in housing prices,” Hopkins said. “We’re beginning to see it work. We’re already seeing new home sales decline. It’s not fun to watch but it’s absolutely necessary because the alternative, runaway inflation, is absolutely unsustainable.”
“The Federal Reserve, they’re trying to tap down on that demand,” Fryar said. “Unfortunately, what you do is you raise the cost of borrowing — make it more expensive to reign in that. People aren’t spending as much and aren’t buying as much. Unfortunately, that’s kind of what they have to do.”