Great Lakes Wire

The Federal Reserve recently said that mortgage rates will once again rise, resulting in a drastic rise in rates in Michigan and across the rest of the country. 

The expected result is that potential homebuyers will be forced out of the market or be made to purchase less expensive homes with a lower payment. 

The move is an attempt by the Biden administration to lower the rate of inflation and cool off the economy. The Federal Reserve hiked up 30-year mortgage rates to a 13-year high and increased them by the fastest weekly pace in over 35 years. 

"The surge marks the largest weekly increase since 1987. It stands to add to the pressure on U.S. home prices, which remain strong despite rising rates and tumbling affordability," Sam Goldfarb, a reporter for The Wall Street Journal, said.

The increase will bring the 30-year mortgage rate to 5.78% as rates surpass 6% in many parts of the country. Last week, Freddie Mac reported an average mortgage rate of 5.23%, which represents a surge so large it hasn't been seen since 1987.

Adding to the duress of increased interest rates is the fact that the consumer-price index rose to 8.6% this week, which is another 40-year high, according to the Bureau of Labor Statistics.

The Wall Street Journal and other outlets acknowledge that the exact effect is not yet known, since the move is unprecedented. However, many experts say that it signifies that a lowering in rates won't come any time soon. 

According to the Journal, last month, home buyers paid an average of $740 more per month to finance a median-priced home than they did last year around the same time, when mortgage rates were around 3%.

Bankrate.com reports that this week, the average rate for a 30-year fixed mortgage in Michigan is 6.04%. Eric Finnigan, a director at John Burns Real Estate Consulting, said that the rise in mortgage rates effectively rules out 18 million households from being qualified for a $400,000 mortgage, according to MarketWatch.