JACKSONVILLE, Fla. — The Federal Reserve announced a 25 basis point, or quarter-percent, interest rate hike Wednesday in an effort to slow high inflation. The increase could make borrowing more expensive for major purchases, including cars and homes. AARP also reports that credit card borrowing costs could rise.
Jacksonville resident John Leonard believes homebuyers may feel the impact.
“I think it’s a terrible situation, especially for somebody trying to get a new house right about now,” Leonard said. “It’s very hard. Rates are going to make it very difficult to get qualified for anything like that.”
A financial advisor for Burns Estate Planning and Wealth Advisors says the Federal Reserve’s target inflation rate is 2 percent. The current U.S. annual inflation rate is 3.4 percent.
As of Wednesday, the target interest range is 3.75 to 4 percent. It is the first increase in three years in an effort to slow inflation.
Jacksonville real estate broker associate, Lakeysha Joseph, spoke to Action News Jax about the impact it could have on homebuyers.
“A Fed increase could put upward pressure on borrowing costs, but mortgage rates are influenced by several other factors including the bond market and economic conditions,” Joseph said.
She says a higher rate could increase the monthly payment on the same priced home. A buyer who qualified for a certain price range at a lower rate may qualify for less home at a higher rate.
“That’s why I encourage my buyers to focus on the payment, not just the purchase price,” Joseph said.
Joseph says the rate hike also affects her work.
“I have to be even more proactive and creative for my clients,” Joseph said.
While borrowing costs could rise, financial advisors say higher interest rates can also mean higher returns on savings and money market accounts.
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