As a younger generation enters their “home buying age” they are facing mortgage rates that have been pushed up to a 20-year high by the US Federal Reserve. For 2024, 30-year mortgage rates in the US are expected to fall between 6.4% and 6.5%, compared to 2.96% in 2021.
The US is facing a mounting debt of more than $34 trillion, The Hill wrote in an article published on Wednesday. And polling has found that Americans are growing more concerned over the national debt, and what that may mean for their future. Republican lawmakers, for instance, want to make cuts to key social programs like Social Security and Medicare, as opposed to increasing taxes.
A February report by the Congressional Budget Office (CBO) found that the debt held by the public will rise significantly over the next decade; climbing from 99% of GDP in 2024 to 116% in 2034. The report also found that the estimated net interest costs in 2025 would be “greater in relation to GDP than at any point since at least 1940, the first year for which the Office of Management and Budget reports such data.”
Desmond Lachman, a South African-born economist and finance author, explained that selling bonds is one move that increases interest rates, though the Federal Reserve has also increased interest rates to fight inflation, too.
“If the government is borrowing money, you’re needing to raise a lot of money, so it means I’ve got to sell a lot of bonds, that forces interest rates higher,” said Lachman. “If interest rates in general are higher, your mortgage rates are higher.”
“That’s important for young people, because they’re not in the housing market,” he added. “They’re not sitting on a house that has got a paid off mortgage fate, they are the ones who are going to have to go out and borrow money now at a very high, very high interest rate.”
Wednesday’s article also found that the higher national debt will have an impact on both the US job market as well as the housing market. As is the case with most economic disasters, the two industries will uniformly affect one-another. One economist explained that higher interest rates discourage businesses from making investments in “new capital” including building new homes.
Economists also told The Hill that future generations of Americans could see their taxes increase as a way to compensate the surging national debt.
“If the federal government doesn’t get its act together and start charging enough in taxes to cover what it wants to spend on programs, then the debt will go up,” said Joshua Gotbaum, a guest scholar in the Economic Studies program.
“If the debt goes up and the interest rate goes up, then the taxpayers at that time are going to be paying the bill,” he said. “Your parents avoided those bills, because the Congress instead of raising taxes to cover them, borrowed the money.”
A report from March 1 found that the US national debt – which is the amount the federal government borrows to cover its expenses – has been growing at an expedited rate of about $1 trillion every 100 days. In June of last year the debt was at $32 trillion before hitting $33 trillion in September.
