Rising Rates in Denver Affect the Cost Too

Without a doubt, when rates rise you can buy less home in Denver…especially with our continually expanding price point. Can I ever afford a new home? Read on…

Mortgage rates have risen 0.5% in 2018 on 30-year and 15-year fixed rate mortgages and experts expect them to continue to increase. Buyers paying attention to the market understand the relationship that inventory has on pricing; when the supply is low, the price usually goes up. Rising interest rates can affect the cost of homes also.

When interest rates go up, fewer people can afford homes. Lower numbers of buyers can affect the demand, which could cause prices of homes to come down. The question is how much do the interest rates have to go up to affect demand?

As the rates gradually go up, the affect may not be noticeable at all except for the fact that the payments for the buyer have increased.

A ½% change in interest is approximately equal to a 5% change in price. A $300,000 mortgage at 4.5% for a 30-year term will have a $1,520.06 principal and interest payment. If the mortgage rate goes up 0.5%, it would affect the payment the same as if the price had gone up 5%. The difference in payments for the full term of the loan would be $32,547.

There are some things beyond buyers’ control, but indecision isn’t one of them. If they haven’t found the “right” home yet, it is understandable. However, when that home does present itself, the buyer needs to be ready to make a decision. If they are pre-approved and have done their due diligence in the market, they should be able to contract before significant changes occur in the mortgage rates.

Contact me for some good Denver mortgage professionals.

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About Pete Doty

As a Realtor® Pete has been working in the Denver residential market since he first started in 1985, and focusing primarily in the south end of town. He finds the client the home they want, and then help them sell it when they want to move. Marketing is really where his heart is, and making sure his clients’ interests are watched over in Littleton, Highlands Ranch, Parker, Castle Rock, Centennial, Englewood, Morrison or Denver. His web site www.DenverRelocation.com ranks high in search rankings and generates numerous relocating buyers each year. Talk to Pete for a unique perspective on today's real estate market in Denver.
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