The US Federal Reserve has raised rates several times this year, in an effort to curb record inflation caused by government overspending, as well as soaring energy prices.
Rising college costs and teacher shortages bother Americans
While inflation may have peaked, it remains exorbitant and the Fed has shown no signs that it will begin to ease interest rates.
“The rising financial cost is taking a heavy toll on citizens as it forces those on limited incomes to choose between food and shelter or shelter and health care,” said Brookings senior researcher Darrell West. Institution, adding that the risk of recession arises if companies cut. feedback on their workers.
According to a Pew Research poll last month, the number of people changing addresses in May and June has fallen nearly 10% in 2022. Economists have cited rising interest rates and rents as key drivers of the decline.
The price of rent jumped more than 26% from pre-COVID levels and reached a median of $1,876 per month in June, Realator.com showed. Meanwhile, mortgage rates have risen and the national rate for a 30-year mortgage is higher than it has been in over a decade.
Clay Ramsay, a researcher at the Center for International and Security Studies at the University of Maryland, said one of the worst effects of rising interest rates is on rental costs for homes and apartments.
Higher interest rates are forcing people who could have paid off a mortgage earlier to return to the rental market. In the United States, people also depend on owning a car to get to work and hold a job. High interest rates make new and even used cars more expensive, Ramsay said, while noting that credit unions have been able to offer lower rates than banks.
Yet rising interest rates are unlikely to help slow the rise in food costs. People “can substitute cheaper food but can’t really stop buying food, and that’s the biggest source of suffering from inflation,” Ramsay said.
Soaring interest rates also caused turmoil in the stock market. While much of the market was indeed overvalued, many Americans were unprepared for the impact after rate hikes sent some tech stocks plunging as much as 70%.
However, rising interest rates have not hurt many home sellers, especially those who are well off. As real estate prices fall after their boom of the past two years, homes in the Washington DC area are selling fast — and at prices almost double what they were in 2019.