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What the rise in interest rates could mean for the housing market

Federal interest rates are set to increase in hopes of combatting inflation.
Federal interest rates are set to increase in hopes of combatting inflation.(WBTV)
Published: May. 8, 2022 at 9:40 PM MDT
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TWIN FALLS, Idaho (KMVT/KSVT) — Interest rates have risen a full 2% in just six months, which, according to mortgage loan officer Ross Farr from Zion’s Bank, is a dramatic swing.

The current interest rate is 5.25%.

Ross Farr says the reason that interest rates have risen so much is a complicated one to answer, but he says the main reason is inflation.

The cost of almost everything is going up, including the cost of borrowing money.

The federal reserve is currently trying to tame inflation, and Ross Farr says the tool they use to do that is to raise inflation rates.

He says he doesn’t see the interest rates going down anytime soon.

“When interest rates settle into a trend they tend to remain there for a while, as long as the federal reserve maintains its rate-hiking posture, we’re going to see interest rates stay where they are, if not continue to climb,” said Farr.

Farr says that even though he sees the interest rates staying high for the foreseeable future, there are ways people can still make large purchases, such as a home.

He says he recommends a mortgage that many are skeptical of, an adjustable-rate mortgage.

“They have their proper place and they can save an awful lot of money, most people don’t hold a mortgage beyond 6 or 8 years, that’s the track record, I know our favorite product is a 30 year fixed, but the vast majority of home buyers and people who take out mortgages don’t keep them anywhere near that long,” said Farr.

Farr says that even though interest rates are much higher than they were a few months ago, he doesn’t see this slowing down the housing market in Idaho.

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