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The fastest rise in 35 years

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According to data from mortgage provider Freddie Mac, the average interest rate for a 30-year fixed-rate loan reached 5.78 percent, the level of November 2008, the crisis period. This rate was 3.2 percent at the start of the year and 2.93 percent a year ago.

However, there has been a slowdown in the speed of construction. Building permits, which are accepted as one of the important indicators of the US housing market, are compared to the previous month. 7 percent showed a decline.

IT MAY INCREASE TO MORE THAN 3 PERCENTAGE BY THE END OF THE YEAR

While the rise in policy rates has also raised the cost of borrowing, the alarm bell has begun to sound for the housing market, which is currently struggling with excessively high prices. While experts predict the Fed’s monetary tightening will continue, they think this will further increase credit costs.

Fed officials recently raised the official rate by 75 basis points between 1.50% and 1.75% due to the highest inflation rate of the past 40 years in the United States. Officials also reported that the official rate could rise to more than 3 percent by the end of the year.

Sam Khater, Freddie Mac’s chief economist, “These higher rates are the result of changes in expectations about the course of inflation and monetary policy,” he said. “Higher mortgage rates will lead to moderation and ultimately result in a more stable housing market.” She said.

During the coronavirus pandemic, many working-from-home Americans took advantage of low interest rates to buy homes, as home prices soared to record highs in the process. These sharp price increases have cooled a strong housing market. The recent rise in interest rates has slowed the demand for housing, threatening the affordability of new homes.

‘YOU WILL RECEIVE MORE’

According to the Financial Times, Joshua Shapiro, the US chief economist at consulting firm MFR, who pondered the matter, said: “Mortgage rates are likely to rise even more, but I think we have seen most of it. increase”.

Experts say higher interest rates will slow economic growth, which will affect consumer spending and cause home sales to drop. “Long-term interest rates could stabilize if the Fed’s aggressive stance leads to slowing economic growth and inflation,” said Nancy Vanden Houten, chief economist at Oxford Economics.

CRISIS 2008

Home prices in the United States showed a sharp rise during the 2000s. One reason for this increase was the easily obtainable mortgage.

Rising house prices have created an extremely upbeat atmosphere in the markets, prompting banks to easily lend low-income households to purchase housing.

Subprime mortgages suddenly appear as house prices plummet (high-risk, high-interest loan) This credit market, known as the so-called credit market, collapsed, resulting in the bankruptcy of low-income families, who could not pay the interest on the loan, and the confiscation of their homes.

With the bursting of the housing bubble in the United States, banks were at high risk and so the values ​​of all stocks related to the US real estate sector fell to the bottom, causing distress to global financial institutions, Lehman Brothers went bankrupt on September 15, 2008 and its banks were in crisis.

It was followed by the Icelandic financial crisis of 2008-2011, which began with a minor crisis in Greece in late 2009 and then escalated to the European debt crisis and the collapse of all three of Iceland’s largest banks.

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