Interest rates rise again, but next month could be better
BOSTON - For the sixth time this year, the Federal Reserve has raised the benchmark interest rate. Chairman Jerome Powell announced a .75 percent increase following the Fed's monthly meeting on Wednesday.
It is the fourth straight month the Federal Reserve has increased the interest rate by ¾ of a point in an effort to curb inflation.
These changes are aiming to limit consumer spending and have a direct impact on the housing market.
"The interest rates have definitely had an effect on the market."
Nicole Vermillion is a Realtor with Lamacchia Realty and does most of her business along the South Shore.
"They have decreased the buyer pool dramatically," said Vermillion. "People who could have gotten approved for a mortgage at 3,4, even 5 percent may not qualify for the amount of money that you would need to buy in Massachusetts."
The Warren Group listed the median home at a value of $610,000 in July of 2022.
When placed on a 30-year fixed rate, the monthly payment of that home with March's interest rate of 3.85 percent would be $2,860.
That same home with this month's 7.08% interest rate would bring a monthly mortgage payment of $4,091. A roughly $1,200 a month difference.
This example does not account for down payments or taxes.
Nora Yousif is a financial advisor and senior vice-president with RBC Wealth Management.
"This process of slowing down the economy takes time," said Yousif.
She described the Fed's strategy behind increasing rates as a lever to slow down spending. Yousif added the Federal Reserve is walking a fine line between stabilizing the economy while not stoking a recession.
"The reason the government takes this so seriously is because it is detrimental to those living at or below the poverty line," said Yousif.
Yousif also pointed out Chairman Jerome Powell hinted that December's rate increases may not be as steep as the previous months.
A signal to many financial advisors took that the economy may start showing consumers signs of improvement.