JUANA SUMMERS, HOST:
The financial pressure continues to grow on Americans. Already dealing with inflation, today mortgage rates hit their highest level in almost three years. That's as the Federal Reserve raises interest rates and bond yields surge. NPR's Stephan Bisaha reports that with borrowing costs surging, life's major purchases are falling further out of reach for many consumers.
STEPHAN BISAHA, BYLINE: Carrie Goldstein is dreaming of a few big buys. Number 1 is a new house.
CARRIE GOLDSTEIN: It kind of all started when we went to Milwaukee to visit my cousin for our family reunion, and we were kind of in awe and, like, drooling over her walkability.
BISAHA: Walkability does not describe Goldstein's Cleveland suburb.
GOLDSTEIN: Like, you can walk within the neighborhood. There are lots of sidewalks, but you can't really get anywhere (laughter).
BISAHA: So she's got her eye on a more expensive suburb nearby.
GOLDSTEIN: You know, it's got a quaint downtown. All the houses are older and have character.
BISAHA: And you can even walk to Lake Erie. So moving seems like an easy decision.
GOLDSTEIN: However, you know, the mortgage rates being what they are - above 7% now - you just can't justify the move.
BISAHA: Interest rates for mortgages often follow bond yields, and they've been surging since the U.S. war against Iran started. Mortgage rates are up more than 1 1/4 percentage point since February. That's enough to bump up the cost of a new mortgage by almost 300 bucks each month, assuming a median-priced home and a similar-sized standard loan. So for Goldstein, walking to Lake Erie is out. She could still drive there, but her car's getting up there in age.
GOLDSTEIN: Eleven years old and 150,000 miles and, like, has all these quirks.
BISAHA: So a car is Goldstein's second dream purchase. Unfortunately, interest rates for auto loans are likely going up too. They're tied closely to the Federal Reserve's interest rate, and the Fed raised rates a quarter of a percentage point last month. Some investors believe we could see another rate hike as early as this month. All that on top of the already high sticker price for cars, and Goldstein is delaying buying as long as she can.
GOLDSTEIN: You can't go and get a car for 150 or 180 bucks anymore a month.
BISAHA: Now, so far, the Fed's rate increase has been modest, and the increased cost for car loans will likely be modest too. The problem is when higher car payments pile on top of other loans, which are also getting more expensive. Interest rates are making the cost of other things like borrowing for education more expensive too.
JOHN DIAMOND: It's added to higher mortgage payment, higher student loan payment.
BISAHA: John Diamond is the director of Rice University's Center for Tax and Budget Policy, and he says consumers are also dealing with inflation.
DIAMOND: That's what makes it really painful.
BISAHA: Painful to make any major life purchase. After all, most Americans need to borrow for those expenses, like cars, homes and education.
DIAMOND: If you need to borrow, boy, it's really not a great time. And this is why we say when the Fed raises rates, the economy slows down and it will bring inflation down because consumers say, wait a second. Rates are high. It's expensive to make a change. I'm going to wait six months to a year and then do it.
BISAHA: Carrie Goldstein is one of those people holding off. She eventually unsubscribed from real estate updates for that walkable suburb she dreamed about.
GOLDSTEIN: 'Cause I, of course, had signed up and, you know, was looking every day. And, you know, it just became more and more disheartening when I did the math. You know, combining with the interest rates, it's just not in the cards.
BISAHA: She says if interest rates do drop, then maybe she can make the move she wants. But for now, rates are moving in the opposite direction, and Goldstein is stuck at status quo. Stephan Bisaha, NPR News.
(SOUNDBITE OF HI-TEK SONG, "ALL I NEED IS YOU (FEAT. CORMEGA & JONELL)") Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.