Sponsored post by Principal Preservation Services and Principal Wealth Services
After the Feds raised the interest rates 11 times over the past few years, consumers have been greatly affected. Mortgage interest rates have risen 2½ times the all-time low over three years ago, and auto loans and personal loans have increased considerably as well. Many people are wondering if there is hope ahead of buying their first home, dream home, or even affording that next vehicle.
How has the high interest rate environment affected the housing market?
It has slowed down those potential first-time homebuyers and those who want to upgrade to their next home because the national average interest rate on a 30-year fixed mortgage is 7.22% today. A little over 3 years ago (January 2021), the 3-year fixed rate on a mortgage was at a record low of 2.65%. That’s $970/month more interest on a $350,000 mortgage. This has reflected in the decline of existing housing sales; from February to March, sales dropped 4.3%. Interesting though, the average housing prices have increased 4.8% from a year ago. It comes down to supply and demand. Right now the supply of homes for sale is low, which is helping the housing prices to hold and still rise.
How about the auto industry? How has this industry been affected by the interest rates?
Similar story here as well. The high interest rate environment has slowed down sales here as well. Used car sales dropped 7% from March to April this year and new car prices have dropped about 4% due to the lack of demand and the high prices. The average new car price today is $47,000!
When it comes to a car loan there are many different factors to determine your interest rate: new car loans are typically lower than a used car loan; the size of the downpayment; your credit score; the term of the loan (the longer the term, the higher the interest rates); your income/work history; and the age of the vehicle. Right now (Bankrate.com), interest rates vary from 4.99% to 29.99% — much higher rates than 3 years ago.
Is there hope ahead? And what should consumers expect or prepare for in the remainder of 2024?
Right now the Feds are expected to have the first decrease in interest rates since the hike this September. Right now there is a 75% probability that rates will drop. This will help these car loans and mortgage rates drop. The mortgage industry is expecting to have the mortgage rate drop to 6.125% by the end of 2024.
So, with rates expected to come down, this will give you some time and opportunity to make sure that you have your “ducks in a row.” Especially in the credit department! Remember that the better your credit score, the better the interest rates you get. Here are a couple of tips to help your credit score increase before the fall:
- Make payments on time; don’t go past 30 days late
- Pay off your credit cards monthly
- Try to not exceed 30% of your credit balance on a monthly basis
- If you don’t have enough credit, hopefully you could be an authorized user on someone else’s account to add credit to your name
- Limit how many credit inquiries you have; don’t be applying for credit consistently
Mike Kojonen
Mike Kojonen is an Investment Advisor Representative and the founder and owner of Principal Wealth Services and Principal Preservation Services. He can be reached at: zvxr@cevapvcnycerfreingvbafreivprf.pbz
