The cost of living, food and driving is rising, leaving consumers with nothing but empty wallets.
Americans can’t get a break financially, thanks in large part to higher interest rates and “greed.”
Here are all the ways consumers are screwed and why.
The US economy may be in good shape, but Americans are under pressure from all sides.
Mortgage rates have skyrocketed to their highest levels in 23 years, along with rising food, fuel and new car prices. In addition, it has become more expensive to repay debt in a world with higher interest rates.
The Federal Reserve raised interest rates from near zero to more than 5% in an effort to cool the 40-year high inflation that swept through the US economy last year. While battling consumer price pressures has paid off, with inflation rising at 3% annually, it still remains above the Fed’s 2% target, paving the way for more rate hikes.
But rising borrowing costs don’t just drive up costs for consumers. Supply shortages due to extreme weather events and strategic cuts in oil production have also driven up food and gas prices.
Here are all the ways US consumers are being pressured and why.
US mortgage rates are at their highest point in 23 years
A higher interest rate affects the mortgage interest rate. With the Fed continuing to raise borrowing costs, it means owning real estate has become less affordable.
US 30-year mortgage rates have risen in recent days to a 23-year high, data from Freddie Mac shows. As of August 3, the average mortgage with a term of 30 years has risen to 6.9%.
“The combination of optimistic economic data and the downgrade of the US government’s credit rating caused mortgage rates to rise this week,” said Freddie Mac. A surprise rating downgrade by Fitch last week caused a jump in bond yields.
Mortgage rates usually fluctuate with the yield on 10-year Treasury bills, as lenders typically peg interest rates to the yield of the 10-year bond.
High mortgage rates are not the only pressure on homeowners, but also on homebuyers. Higher borrowing costs have limited the number of homeowners willing to sell as they feel trapped by their current low mortgage rates. That has put pressure on the supply of homes for sale on the market, driving up prices for first-time homebuyers.
Gas prices are turning
In recent months, drivers have enjoyed the lowest petrol prices since the outbreak of war in Ukraine. But now those costs have turned around.
The average gallon of gas traded at $3.83, the highest level since October 2022, per AAA.
It’s largely because of “greed,” as oil suppliers, including Saudi Arabia and Russia, have cut production in an effort to raise crude oil prices. Both benchmark Brent crude and West Texas Intermediate are currently trading above $80 a barrel.
It threatens to exacerbate the US inflation problem that the Fed has been working so hard to kill in what would be yet another blow to consumer wallets.
From a glass of orange juice to a piece of chocolate, buying groceries also hurts the consumer.
Just after a spike in the price of orange juice, cocoa costs rose to a multi-year high, both due to crop diseases and extreme weather conditions.
Rice, sugar, soybeans and wheat have also increased in price, market guru Larry McDonald noted in a place on X.
“Greedflation” has also been part of the problem, said Nobel economist Paul Krugman, with companies raising prices in an effort to reap higher profits in times of high inflation.
Credit card debt
Just when you thought consumers are under enough pressure, credit card debt arrives.
Consumer credit card debt rose to a record $1.03 trillion in the second quarter. It comes at an unfortunate time for Americans grappling with skyrocketing interest rates, set to rise even higher in the coming months. That has made the cost of paying off debt more expensive.
In addition, the resumption of student debt in October will make things even worse for the average consumer.
In general, it forces one question. When, if ever, will consumers get a break?
Read the original article on Business Insider