Funny how when things are good people, tend to forget that things are good, and good things don’t necessarily last forever. I’m referring to interest rates.
The other day, a client made mention of a “high interest rate” being 6%. It struck me funny,although I didn’t laugh. To me a 6% interest rate is actually pretty darn good! Of course in this market, it’s high, but I can remember when interest rates were 18% on mortgage loans!
Yes, that’s true, in the 1980′s we saw inflation and high interest rates like never before. I started selling real estate in 1984 and found myself “justifying” a TERRIFIC interest rate of only 14%! (ouch!) Yes, of course home prices were much lower then. We were selling nice entry level homes in the $40 and $60 thousands, but still at 18% that was like Master Charging a house!
Well these days of good interest rates maybe coming to a close. Starting April 1, 2010 the FED is stopping it’s purchase of mortgage backed securities. This isn’t new news. In fact the FED has been broadcasting the decision for several months now.
Experts seem to agree, mortgage rates will increase. It won’t be steep, (like the 1980′s thankfully!) but we do expect to interest rise.
How will this affect the average Denver real estate buyer? Well a 1% increase, say 5% to 6% on a $250,000 mortgage is $156 a month.
That means if a home buyer is qualified at 5% for $250,000, when the interest rate goes up, the same buyer can only qualify for a loan of $224,000!
That is a big difference!
Dan Green’s Mortgage Report uses logic saying the rate came down by one percent when the Fed stepped into help, therefore it might go up by the same amount. Nobody knows. One thing we all can agree on is to lock your rate.
If it’s time for you to buy a home, that time is probably right now.
Start your home search here, click on Denver Home Search in the bar above. You’ll love the convenience of being able to search the MLS-idx data base, save searches and favorite properties. Please call me if you need help.
About the Author
Kristal Kraft
Kristal has been helping buyers and sellers in Colorado since 1984. She enjoys sharing her knowledge of the Metro Denver Real Estate market via blogging and in person while driving around the beautiful Rocky Mountain town of Denver! For fun, Kristal enjoys shooting things with a Canon. Visit Denver Photo Blog
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Kristal Kraft
One Comment
Thank you Kristal for all the great stats. This is incredibly helpful
-Pat