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Soaring interest rates create ‘barrier to the American dream’: Former investment banker

Soaring interest rates create 'barrier to the American dream': Former investment banker

Carol Roth, a former investment banker and author, argued Thursday that as soaring interest rates push mortgage demand down, a “barrier” is created to those pursuing the American Dream. 

“We have such a confluence of factors that are really pricing that first-time homebuyer out of the market,” Roth told “Cavuto: Coast to Coast” on Thursday.

“And everything the Fed has been doing has really been this transfer of wealth from Main Street to Wall Street and unfortunately, in the direction that they’re going, I think that with the increase of interest rates, it just, it is going to be that much more unaffordable and that much more of a barrier to the American Dream.”

A former investment banker argues ‘a confluence of factors’ are pricing the first-time homebuyer out of the market. (AP Photo/Elaine Thompson, File / AP Newsroom)

HOUSING MARKET ‘STARING INTO FACE OF PERFECT STORM,’ EXPERT WARNS

Roth made the comments one day after the minutes from the Federal Reserve’s March meeting revealed that policymakers were signaling that surging inflation and an incredibly tight labor market could warrant a half-point interest rate hike at future meetings.

Mortgage rates have increased 1.5 percentage points over the last three months alone, the fastest three-month rise in 28 years, according to Freddie Mac

The Federal Home Loan Mortgage Corporation noted that the increase in mortgage rates has “softened purchase activity such that the monthly payment for those looking to buy a home has risen by at least 20 percent from a year ago.”

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The 30-year fixed-rate mortgage increased to 4.72% annual percentage rate (APR) as of April 7, according to Freddie Mac’s Primary Mortgage Market Survey. Last year, at the same time, the 30-year fixed-rate mortgage was 3.13%.

It was revealed last week that home prices unexpectedly rose 19.2% year-over-year in January, according to the S&P CoreLogic Case-Shiller Index, as limited supply and a race to lock in rising mortgage rates drove enticed buyers. 

The 10-city composite saw an annual increase of 17.5% year-over-year in January, up from 17.1% the previous month, while the 20-city composite grew 19.1% year-over-year, up from 18.6% in the previous month. On a monthly basis, the 20-city index climbed 1.4% in January when non-seasonally adjusted and 1.8% when seasonally adjusted. 

Sixteen of the 20 cities reported higher price increases in the year ending January 2022 versus the year ending December 2021, led by Phoenix, Tampa, and Miami. 

FOX Business’ Lucas Manfredi contributed to this report. 

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