High Rates Hurt Borrowers

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     I used to be a loan officer and a document specialist in the mortgage industry before the mortgage bubble burst and Countrywide went bankrupt. When President Biden was sworn into office January 20th 2021 mortgage rates for 30-year fixed loans were just under 3% and had been mostly under 4% percent since 2012. On a 30 year fixed loan of $240,000, 3% used to mean a payment of $1,012 a month for principal and interest, at 4% it would have been $1,146 a month. But with current rates averaging 7.5%, the same 30-year loan requires a payment of $1,672 a month, $660 a month more than at 3% and $526 more than at 4%.
     In the first scenario 360 payments of $1,012 totals $364,320 minus the principal of $240,000 means you would have paid $124,320 in interest over the term of the loan. In the current scenario 360 payments of $1,672 totals to $601,920 minus the same $240,000 principal means you now have to pay $361,920 in interest over the term of the same 30 year loan. That is nearly three times the interest and the difference is not only $660 a month going directly into a banker's pocket, but also a total of $237,600 extra dollars over the life of the loan, almost equal to the principal, and that's just the difference between 3% and 7.5%.
     At 3% your loan interest came out to be about half the principal, only $124,320, not unreasonable for borrowing $240,000 and paying it back over 30 years. But no normal family should be buying a house after the Federal Reserve (the FED) just raised the rates 6 times in 2022 by a total of 3.75% as of November 2nd 2022, bringing the average 30-year mortgage to 7.5%, tripling the interest paid over 30 years vs just 2 years ago. Who can afford an extra $526 or $660 a month just for extra interest for the next 30 years?
     High interest rates hurt borrowers, and just wiped out the last decade's worth of efforts to make more people homeowners. The rich continue to get richer, now attempting to trap middle class Americans into loans that will force them to pay exorbitant interest rates over the next 30 years. If you wanted to buy a house last year, things have changed dramatically. If you don't already own a house and you don't have an extra $240,000, then it is time to be a renter.

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