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Rising interest rates will soon lead to higher mortgages and credit card statements

PORTSMOUTH, Va. — The Federal Reserve has raised interest rates again as it tries to bring inflation down. On Wednesday, the Fed raised rates by three-quarters of a percent to rein in demand.

Robert Hansen said he saw it coming.

“Everyone knew this was coming,” said the Portsmouth resident.

Hansen said rising interest rates in the pipeline forced him to put his Portsmouth home on the market a few months ago, so he would have no problem finding a buyer and sell quickly. The recent sale of the house resulted in a big gain for buyers.

“They saved a lot of money by locking in a lower interest rate before everything went up,” Hansen said.

The Fed hopes another interest rate hike will bring high inflation under control by slowing consumer demand and lowering prices from a 40-year high. But real estate agent Erica Barner, owner of E-Wei Real Estate, says the 0.75% increase will slow something else even more – the housing market.

“I understand the government has to do what it has to do, but we have to be logical,” Barner said. “A lot of people won’t be able to afford a house.”

Barner said that could make home loans more expensive, which means your mortgage payment will be higher.

“It’s going to reduce purchasing power,” Barner said. “How are we going to get to the table with the sellers if we can’t even get to the table with a high pre-approval amount that’s not going to make us housing poor when we move in?” I don’t want to set people up for failure. I will not do it.

Not only do rate hikes lead to more home loans, but in the coming months borrowers should see higher interest rates on car loans and credit cards, which could put you further into debt.

And with the cost of food and rent already skyrocketing, some fear the economy is heading into a recession.

“I’m absolutely afraid of a recession,” Barner said. “Right now, our economy is shaking as it is, so with interest rate increases, a recession is almost around the corner.”

There is a silver lining. In some ways, higher interest rates have already contributed to inflation. Gasoline prices at some pumps have been falling for a month.

“It’s a necessary thing,” Hansen said. “There is going to be pain. It’s a bad thing, but it’s a necessary thing.

Some real estate agents, like Barner, say they see potential buyers putting off buying a new home right now and investing in a rental property instead, so they can have more cash for a down payment.