Mortgage rates when President Joe Biden took office? 2.65 percent. Today? 6.28 percent.

On Tuesday, Biden held a weird celebration of his “Inflation Reduction Act” on the lawn of the White House. Why was it weird? Because at the very same time as Democrats were applauding themselves, the U.S. Labor Department was releasing figures that showed an “unexpected” rise in inflation, with the cost of rent, food, and other basic necessities continuing to skyrocket.

Now we learn that mortgage rates have climbed above six percent for the first time since 2008. Wonder what kind of party Biden has planned for this milestone?

30-Year Fixed Mortgage Rates⁰
Trump: 2.65%
Biden: 6.28%⁰
This adds $200,000 in interest payments for a $500,000 house.

— Stephen Moore (@StephenMoore) September 14, 2022

Why is this happening? The explanation is simple: the economy is experiencing high inflation, so the Federal Reserve keeps raising interest rates in an attempt to cool the economy. Mortgage rates are tied to the Fed’s rate, and so hence are rising.

I often wonder, what do we tell our kids? Housing prices are already at an all-time high; now you add in unaffordable mortgage rates and few can maintain any dream of owning their own home anytime soon. “I’m sorry, son. You see what we have, but unfortunately, the world has changed and you have no reasonable hope of obtaining it.”

It’s heartbreaking. From the Wall Street Journal:

A borrower who buys a $500,000 house with a 20% down payment and a rate of 2.86% could expect to pay about $200,000 in interest over 30 years for their $400,000 loan. If their rate is 6.02%, they could pay $465,000 in interest, according to a mortgage calculator by Bankrate.com.

Homeownership is “one of the most consistent ways to build a financial bedrock for future generations,” according to the North Carolina Housing Finance Agency (and most wealth advisors; that’s just the quote I chose to use). Unfortunately, that path is closed off for the majority of today’s youth. Messages like these read hollow to them:

June is #NationalHomeownershipMonth 🏡! Homeownership is the best path to wealth creation for a majority of Americans. No matter the conditions in the broader market, the best time to buy a home is always right now. pic.twitter.com/XxuAE6vw92

— Hope Credit Union (@HopeCreditUnion) June 2, 2022

Here’s the daunting reality of what they face:

With a down payment of 10 percent on the median home price listed in the database on Realtor.com, the typical monthly mortgage payment is now roughly $2,352, up 66 percent from $1,416 a year ago, taking both higher home prices and interest rates into account.

And that doesn’t account for other expenses — like potentially higher closing costs, along with property taxes, homeowner’s insurance and mortgage insurance, which is often required on down payments of less than 20 percent.
(Emphasis mine.)

Up 66 percent from a year ago? That’s staggering. And by the way, I don’t mean to imply that this just affects young people—it affects anyone who’s been striving to get off the rent hamster wheel and start building some wealth. A relative of mine in Southern California has been working for 30 years at decent jobs and recently got promoted to a senior management position in which she’s well paid.

And yet… the enormous sums to even contemplate buying into SoCal real estate has left her disheartened, and with mortgage rates exploding as they have, all hope is lost. She’s lucky enough to have upgraded her apartment with her new salary, but that’s as far as it goes.

Good luck first time homeowners – I seriously feel bad for you. Both Ds and Rs & Fed to blame!

Monthly mortgage payment, same home, same down payment, same mortgage type

Increased 133% in past two years

From affordable $1,016 in Nov 2020 to $2,370 today. Ouch! pic.twitter.com/80GHwTJGZK

— Peter Brandt (@PeterLBrandt) September 15, 2022

Further adding to the misery, as more and more people give up on owning a home, quality rentals become more and more desirable. Guess what happens? Rent goes up.

Inflation is a pernicious enemy, and while it can sound like an economics-nerd term, it affects our daily lives. Biden’s insistence on throwing more and more taxpayer dollars into insane spending bills like the Inflation Reduction Act has serious consequences and is lowering the quality of life of everyday people. He can throw celebrations all he likes, but he’s ruining people’s lives.