Interest rates increase
By Caleb Pugh | OW Reporter
There are many reasons attributed to the housing crisis in Los Angeles. The homeless issue has accelerated over the last few years and it won’t be an overnight fix. Mayor Karen Bass has made it a priority to fix the issue and has so far devoted heavy resources to get the homelessness issue under control.
As the government tries to get a handle on inflation stemming from the plethora of money given to Americans during the pandemic, interest rates have risen in different areas, especially in the housing market. Over the last year, inflation spiked by 9.1% but eventually lowered to 7.7% at the start of the new year. With the Silicon Valley Bank closure, there is another expected increase in inflation that will affect everything.
During a recent Federal Open Market Committee meeting, the Federal Reserve planned to increase interest rates from 4.5 to 4.75% as a way to cancel the debt that occurred over the last year.
“If the dust continues to settle, there’s liquidity in markets, and credit is flowing, the Fed will hike rates by a one-quarter percentage point,” said Greg McBride, chief financial analyst at Bankrate. “But this will be a game-time decision subject to any further instability in the banking system.”
With the expected hike in rates, credit card interest rates are expected to increase by 4% going from 16 to 20 percent. Auto loans rates which have increased a record number over the last year will see a 2.48% increase going from 4 to 6.48% on five-year new car loans. The federal student loan will also increase from 3.79% to 4.99 percent. Last, but not least, mortgage loans are expected to increase by 2.26% going from 4.40 to 6.66%.
The increase in everything begs the question of how Americans are supposed to sustain a life worth living, as most are struggling to keep up with basic bills and afford necessities. This also begs the question if the increase in mortgage loans will aid in the redlining many Black Americans experience. Redlining is a discriminatory practice where mortgage lenders decline home loans and mortgages to racially marginalized communities; this practice has led to Black families being steered away from certain areas.
In the last 15 years, Black homeownership has decreased at a higher rate than any other racial group. It reached the lowest point since the 1990s in 2022 as the ownership rate dropped to 44%. Black homeowners with incomes between $75,000-$100,000 had higher interest rates than white homeowners with $30,000 or less in household income. Across most income categories, white homeowners with primary mortgages had lower interest rates than the highest-earning Black homeowners with primary mortgages.
The lack of ownership has also led to equity disparity in the housing market as Black families can’t pass down homes and properties, unlike other racial groups.