BEAUMONT, Texas — The Federal Reserve has raised interest rates by a quarter of a percentage point. But what does it mean? For starters, borrowing will become more expensive.
Buying a house for $200,000 on a 30-year mortgage on the previous 4% rate, you'd pay a little under $1,000 a month. With the new rates, you'd be paying about $75 more every month.
The Federal Reserve system has already forecasted rates to increase even more throughout this year. That's making realtors and mortgage lenders watch cautiously.
As the economy reeled from a global pandemic in 2020, the interest rates dropped. Those in real estate benefited.
"I’m 61 years old. I’ve been around it a long time and there’s certainly been good times, but this is probably one of the best times in the real estate market," said mortgage lender Roy West.
He said the only problem is there are not enough homes to keep up with the demand.
"The market is short on houses, West said. “We don’t have Wall Street builders down here building, so a lot of it's resale. There is new construction, but new construction costs have gone up a lot so new homes are a lot."
But now, the market could shift, and that's going to impact realtors, too.
"It just means most people are not going to be able to afford the same size house they would have a year ago," said Tim Williams, Lead Agent, Tim Williams Realty Group.
Williams is hopeful that interest rates won't skyrocket and leave folks priced out of the home.
"In the last 12 days, they have gone up by a quarter of a percent, that's significant," Williams said. "If they get out of hand and starting going up one, two, three points in one year, that could really put a halt on the market."
This rate change doesn't have a direct effect on what consumers buy, but experts said this increase is just the beginning, and it's difficult to forecast how the rest of the economy will react.