Mortgage Rates Rise, Defying Expectations
STEVE INSKEEP, host:
You could also try a video game called "Save My Mortgage," although it would be rather depressing. The Federal Reserve's been cutting its key interest rate to try to boost the economy. And you would think that mortgage rates would also go down, but last week mortgage rates jumped, sharply.
NPR's Adam Davidson looks at why that's happening.
ADAM DAVIDSON: Everything worked like it should in January. Just as the economy started to slow, banks offered long term fixed mortgages at lower rates. This makes sense. With a slow economy fewer people can buy houses, so banks have to entice them with better mortgage terms. When the Fed cuts its rates banks can borrow money cheaper, so they lend to homeowners at lower rates.
But then, in mid-February, things stopped making sense. Mortgage rates went up, rising above 6 percent for a 30-year fixed. Why? The answer is one word: inflation. Banks fear that growing inflation could eat into mortgage profits, so they've demanded higher rates, which means fewer people will buy homes, which could, in turn, make the economy slow even more.
Adam Davidson, NPR News.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.