Why Suze Orman Says Mortgage Rates Could Go Even Higher

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  • Mortgage rates are sitting at much higher levels now than at the start of the year.
  • If the Federal Reserve keeps implementing interest rate hikes, borrowing for a home could get even more expensive.

Should buyers gear up to pay more?

These days, sellers are commanding outrageous prices for their homes -- namely, because they can. Housing inventory has been extremely limited over the past two years, and that's given sellers a clear upper hand in the market. As such, today's home prices are pretty much out of control. That's been forcing many buyers to put their homeownership plans on hold.

But that's not the only challenge facing home buyers today. Mortgage rates are also sitting at much higher levels than they were at the start of the year. And in a recent Suze Orman podcast episode, the financial expert warned that buyers may need to brace for even higher borrowing rates to come down the pike.

Buyers shouldn't anticipate relief

It's probably not a secret that the cost of living has gone way up over the past year. Right now, consumers are grappling with record levels of inflation, and that's forcing a lot of people to rack up debt just to cover basic expenses like food, gas, and utilities.

The Federal Reserve wants to do its part to cool down inflation and give consumers some much-needed relief. As such, it's been implementing interest rate hikes all year in an effort to slow the pace of consumer spending.

When interest rates go up and borrowing becomes more expensive, consumers tend to spend less money. That's what the Fed is banking on with its interest rate policies, and as such, it intends to move forward with more rate hikes this year.

But while inflation cooling down would definitely be a good thing, the reality is that the Fed's actions have the potential to drive mortgage rates even higher. And at a time when home prices are so inflated, that's apt to put buyers in a really tough spot.

Should buyers act quickly?

Since mortgage rates do have the potential to rise this year, buyers who are serious about purchasing a home in the near term may want to act quickly. But those who are in a stable housing situation and aren't in a particular rush to move may want to sit tight and wait a year or more to purchase a home.

In time, home prices are apt to come down as real estate inventory picks up. Also, higher mortgage rates might drive some buyers out of the market over the next year, thereby lessening the competition and forcing sellers to start coming down on price.

While waiting to buy a home does mean running the risk of ending up with a higher mortgage rate, it could also mean spending 20% less on a home's purchase price. And all told, that's a better bet than paying a massive premium for a home right now at a slightly lower mortgage rate.

Of course, we can't say with certainty when real estate inventory will increase. But in recent months, listings have slowly but surely picked up. As such, there's reason to be hopeful that eventually, enough inventory will hit the market to bridge the gap between housing supply and buyer demand.

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