To tackle inflation, interest rates are on the rise too.
But why are cars and mortgages experiencing it he most?
Why is interest on cars and mortgages increasing?
Many people saved money during the pandemic. Reopening the economy has led to a flood of people buying new homes. This drives up their value. Read more about it here.
The Federal Reserve interest rates remained low for quite some time which kept mortgages affordable. During the last quarter of 2021, house prices had risen 14.2% in a year. This put the median average price of a single family home at $361,700.
As we transitioned into this year, there was a surge in mortgage rates. The average 30-year fixed rate is now 3.92%. Because the bank’s rates have increased too the interest you pay on your mortgage will continue to increase.
This same thing is going on with car sales. The bigger problem in auto sales though, seems to be the lack of computer chips. There have been supply shortages from the pandemic.
This has lead to a shortage of new cars and risen the price of used vehicles. For some perspective, the average price of a second-hand car has risen 38% since February 2021.
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