An advertising sign for building land stands in front of a new home construction site in Northbrook, Ill., Thursday, May 5, 2022. Record low-interest mortgages are long gone. Credit card rates will likely rise. You'll pay more for an auto loan. The unusually large three-quarter point hike, Wednesday, June 15, in the Fed's benchmark short-term rate is going to have a lot of impacts on Americans' finances. The hope is that by making borrowing more expensive, the Fed will succeed in cooling demand for homes, cars and other goods and services and slow inflation. Credit: Nam Y. Huh / AP

Mortgage interest rates are expected to rise further following an aggressive rate hike by the Federal Reserve on Wednesday, but there is a possible silver lining for prospective homebuyers in Maine.

Rates closing in on 6 percent could cool competition for homes and eventually slow the rise in prices, according to the National Association of Realtors.

The anti-inflation move by the Federal Reserve affects consumer credit, including rates for credit cards, auto loans and home loans. The Federal Reserve raised interest rates by 0.75 percentage points and is expected to increase them by a similar amount in July.

The hike is not directly tied to mortgage rates, but lenders typically adjust their rates based on Federal Reserve moves. That filters down to higher loan payments. On a $300,000 mortgage, the monthly payment has risen from $1,265 in December to $1,800 today.

“That’s painful and, consequently, will shrink the buyer pool,” Lawrence Yun, chief economist for the National Association of Realtors, said. “Home sales have recently been trending down towards 2019 figures.”

He said sales could fall even further, with some inventory sitting on the market for more than a month as they often did pre-pandemic. 

In Maine, the number of homes sold in April declined 21 percent, but prices were still on the rise, up 25 percent, according to the Maine Association of Realtors.

Camden National Bank and other banks already are seeing mortgage applications decline compared to last year, with far fewer people refinancing as interest rates rise. The current rate on a 30-year fixed mortgage nationally is 5.91 percent, according to Bankrate.com, up from the lows of 3 percent over the past two years.

For perspective, that rate is still lower than the 6.03 percent in 2008, the last time in the past 14 years when rates were above 6 percent, according to themortgagereports.com. Interest rates were at a 41-year high in 1981 at 16.63 percent.

Yun said mortgage rates should stabilize or possibly decline when consumer price inflation tops out. Inflation was 8.6 percent in May, the highest since 1981, when there was a deep recession.

Higher mortgage rates usually mean that the number of days on market lengthen for a home and the growth of pricing starts to decline. Both are good news for buyers, according to Bankrate.com. But knowing when to jump into the market still can be tricky.

“If you’re asking someone else if you should buy a home, you’re not ready,” Bankrate.com data analyst Logan Mohtashami wrote in a blog in April. “Follow your own gut.”