HONOLULU (KHON2) — The Federal Reserve raised its key interest rate for the third straight time in an effort to fight inflation on Wednesday, Sept. 21.
KHON2 spoke to some financial experts to find out more about how the hike could affect locals’ wallets.
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Borrowing for a big purchase is about to get even more pricey. Milestone Wealth Management said a hike in interest rates means monthly payments will also see a spike.
“It becomes more expensive for us to buy our larger ticket items, right? So things like homes, cars, appliances and those kinds of things,” said Travis Tazawa, a certified financial planner with Milestone Wealth Management. “That’s gonna come with the impact of higher monthly payments because of the higher interest rates.”
Local lenders said with mortgage rates at 6%, housing affordability is dropping even though availability is up.
“So what that means is that we’re seeing maybe less competition, but then again because interest rates are high, we’re seeing less affordability so people aren’t able to purchase those homes,” said Element Mortgage lender Nicky Cruz.
Buyers also have more negotiating power since there are fewer competing offers for homes. One local realtor said that leverage is key.
“They have more room for negotiating their wants and needs and they have a little bit less demands on them as far as coming up with all-cash offers or a bigger cash payment in order to secure the contract,” said Amber Ricci, an Oahu realtor with eXp Realty.
Experts said the recent rate hike is not expected to be the last of 2022, so filing loan applications quickly should be a top priority.
“If you’re thinking of maybe trying to qualify for a loan or you’re trying to get a mortgage and get pre-qualified there, it’s something where there definitely is some urgency to do that right now,” Tazawa said.
“Make sure you talk with a local lender that knows the market and understands different ways to help that affordability be possible for you,” Cruz said.
“Maybe the one silver lining is that the economy does run in cycles, the market runs in cycles,” Tazawa said, “the market does need to pull back every once in a while to reach new highs.”