Why Are Mortgage Rates So High?

In the wake of the post-COVID era and some of the more... egregious economic decisions made in the past few years, inflation began to skyrocket in early 2021. In response, the federal reserve roared to life, raising interest rates in ways unseen for decades. The resulting shock stirred prospective buyers and sellers into a defensive crouch while pricing many millennial home buyers out of the market altogether. The Champagne & Parisi agents are here to deliver the facts and assuage concerns about this seemingly unprecedented time. However, this is far from unprecedented, and in fact, is closer to the mean in U.S. History than the past few decades would indicate. This is an unfamiliar, but not unprecedented time, and for our part, we're here to bring you some answers to the most pressing questions you have for us. So, why are mortgage rates so high? Read today's blog for a few of the prime reasons behind it.

Combat Rising Inflation

Rising rates are utilized in part to combat the accelerating inflation we've all experienced in the past few years. The rates are artificially implemented to reduce consumer activity, namely through the discouragement of loan activity and usage of credit cards. The hope is that in the days to come, the rates will continue to slow buyer demand while the nation (and Florida especially) works to resupply its woefully short housing inventory.

Slow Buyer Demand For A National Inventory Shortfall

Speaking of which, the surge of demand by both the existing citizenry and incoming migrants has created an enormous housing shortfall. While rising rates at large are meant to slow consumer activity. Currently, active listings in Florida are on the rise, following a bottoming out in January of 2022 - a time in which buyer activity was a veritable feeding frenzy that would make the sharks green with envy. As more housing is freed, built, and the post-COVID shuffle comes to a close, it remains to be seen how long the shortfall will continue, but builders have been hard at work while stabilizing forces are at play.

Tie Up More Consumer Funds In Outstanding Loans

It might be a bit dastardly, but until existing loans are paid, the nation as a whole will suffer. Without as many funds to burn discretionarily, and without as many new loans being taken, consumers will turn to their existing debts like their mortgages, credit cards, and student loans. Over time, these balances will be reduced in part thanks to the forced redirection of consumer attention as their belt continues to tighten. 

Slow Demand To Replenish Supply And Reduce Cost Of Living 

Amid all the post-Pandemic drama and economic shortcomings, our supply chain crisis manifested in $4.00 gallons of gas, cargo ships stacked outside Long Beach, and a fear-inducing shortage of baby formula. These everyday price increases are also part of what led to the inevitable slowdown in consumer purchasing. During this period of waning demand, manufacturers can see to their supply quantities, while consumers can learn new habits to make it easier for a post-inflationary future.

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