As the Federal Reserve raises interest rates, questions remain regarding the impact of the rising rates on the housing market. Does this mean the market will start to slow? In Colorado, there is evidence that demand is exceeding supply, although the number of homes available is increasing, particularly in the Colorado Springs area.
According to the most recent Ellie Mae Origination Insight Report, purchase loans are still high and builder confidence is strong. With affordability, higher interest rates, and rising prices, what is helping home buyers to keep purchasing?
Factors Impacting Housing Market
One of the main factors driving the purchase of homes now is the need to lock in the interest rate before it rises again. Buyers are concerned that rates will rise again, so they want to avoid yet another increase. Rising rates can increase demand, as buyers crowd the market, hoping to lock in the rate and the home price before either one goes up.
Plus, rent is increasing, so buying a home and having a steady mortgage payment is more appealing. Depending on the market, your rent could be eating up a significant amount of your income. The recent Rental Affordability Report from ATTOM Data Solutions showed that renting a three-bedroom property s more expensive than buying a home in 54% of major markets. What is even more telling is that renters are often paying almost 40% of their income for that 3-bedroom property.
Inventory can also play a factor, as individuals want to purchase quickly to avoid losing a property in a market with limited inventory. Millennials are also finally able to afford to buy a home and want to do so.
Will I Pay More With a Higher Rate?
A higher interest rate generally does mean a higher monthly payment. That being said, Elevation Mortgage always works to get you the best rate by comparing rates across lenders. Additionally, we offer options to allow you to lock your rate, so that even if rates go up later, you will not be impacted.
Still the question remains, how much do these interest rate increases impact your monthly payment? While several interest points can make a large difference, it is important to know that rates are not climbing dramatically. For instance, a $300,000 mortgage that has a 30-year fixed interest rate with an increase of .25% in interest translates to an additional $45.52 a month, $546.24 per year, and $16,387.20 over the life of your mortgage. If you want to know how much your interest rate could cost you, take advantage of our mortgage calculator.
Breaking it down with your loan originator can help you to see what works for your budget and how much an interest rate increase can mean over the life of your loan. Therefore, it is important to shop rates and lenders to determine the best financing for your needs and budget. If you are looking to purchase a home in Colorado, we can help! Contact us today for a free, no obligation quote.