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Potential homebuyers could face steep mortgages due to interest rates staying put

Rates for car loans, credit cards and mortgages will stay relatively the same for the time being.
A "Sold" sign stands along side a housing lot
Posted at 5:09 PM, Jun 12, 2024

Federal Reserve officials announced the Fed does not plan to cut interest rates on Wednesday, leaving rates at a 23-year high.

While inflation eased last month, a statement from the Fed says inflation "remains elevated" and that officials are "strongly committed to returning inflation to its two percent objective."

This means rates for car loans, credit cards and mortgages will stay relatively the same for the time being.

For some Americans, leaving rates the same means holding off on big life changes.

The effects of an up-and-down economy have been a roller coaster for Peyton Megown, the owner of Trim-N-Proper, a Colorado hair salon.

"I feel like I can't really catch a break," Megown said. "But things are expensive for everyone."

The same goes for Mallory Poux, the owner of the salon Manpered in Denver.

"I mean, I feel like it's up and down there are folks who are doing really good," Poux said. "There are folks struggling. I think it's just finding that middle. I'm in the middle."

 A sign announcing a home for sale is posted outside a home.

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Megown and Poux and each are searching for new homes, but say mortgage rates are still too high.

"Well, I'm trying, since I'm trying to get into a bigger place," Megown said. "I'm just trying to wait and see what I can get, if potentially I can get a house or if I'm going to be stuck in something that's still a little smaller, like a townhome or a bigger condo."

"I've been trying to buy a house now for five-plus years and it's just, it's so expensive," Poux said.

The Federal Reserve's benchmark interest rate remains in the range of 5.25% to 5.5% for now, and some economists don't believe a drop will happen any time soon.

The annual inflation rate fell to 3.3% according to May's Consumer Price Index, still above the Fed's 2% target.

"So, that's why they end up holding rates steady," said Aaron Cirksena, the founder and CEO of MDRN Capital. "The Fed was sort of raising rates to a point that they were hoping to cool off the economy to a degree. And if the economy cooled off and they saw inflation cooling off to a certain degree as well, then that was what was going to eventually let them know that they could start reducing rates again and they just haven't fully seen that yet. If you wanted to go out and get a mortgage and you were hoping to wait to maybe see a reduction in mortgage rates to see them come down, you might be waiting a long time."