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Topics: News, US News, Donald Trump, Iran, Money
Kit Roberts
Topics: News, US News, Donald Trump, Iran, Money
US mortgage rates have risen after the US and Israeli war in Iran.
Trump's war in Iran has led to a spike in oil prices from around $70 a barrel to over $100 a barrel as the strategic Strait of Hormuz, through which 20 percent of global oil shipments pass, is blocked.
Following market disturbances and fears of inflation, the average rate for a standard 30-year fixed rate mortgage has risen from 6.11 percent up to 6.22 percent - the highest it has been since December.
The immediate impact of this is that it has just become more expensive to get a mortgage, and therefore to buy a home, in the US.
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These figures are based on the average salary and house prices across the US, so there will be variation depending on the state where someone lives.
Nationally, the average salary in the US is approximately $64,505 a year, and after you account for deductions for tax that comes to about $4,480 a month.
According to Zillow, at present the average price of a house in the US, though again this varies a lot by state, is $360,591, or around 6.7 times the average annual salary.
If we take the new rate of 6.22% rate, then this means that someone taking out a $360,591 mortgage on a 30-year-long term would have monthly repayments of $2,213.
So, if someone is repaying their mortgage by themselves then that's $2,213 out of $4,480 each month which is going on the mortgage - that's just over 49 percent of their income each month.
For comparison, Zillow puts the average rent 'for all bedrooms and all property types' at $2,000 a month - so with the new rates a mortgage is potentially more expensive than renting.
Meanwhile, it seems that the higher rates may already be having an impact according to the Mortgage Bankers Association, with applications for a mortgage falling by 10 percent last week.
Mortgage Bankers Association CEO Bob Broeksmit told CNN: “Whether this upward pressure on rates - tied to Middle East tensions - will temper what should be strong spring demand remains to be seen."
Fed Chair Jerome Powell has also warned of the impact not just of the war in Iran, but also Trump's tariff policies.
He said: “It has been five years and we had the tariff shock, the pandemic, and now we have an energy shock of some size and duration. We don’t know what that will be.
“You worry that is the kind of thing that can cause trouble for inflation expectations.”