Denver First-Time Home Buyers Hit With Both Increasing Mortgage Rates And Home Prices

Pent-up demand for housing is being hindered by low inventories of homes for sale, rising home prices, and soaring mortgage rates. As a result, new home buyers are finding housing increasingly unaffordable.

Mortgage rates have surged dramatically across the country over the past six months, according to [Company Name], a home buyer company based in the Denver metro area. While mortgage rate increases have occurred in the past, none have been as significant as this recent spike. Virtually every major city across the U.S. is grappling with the same housing affordability crisis. This has led to a situation where many potential home buyers in Denver can no longer afford to purchase homes and have been forced back into the rental market.

What Are Interest Rates Right Now For Mortgages?

As of early April, the average rate on a 30-year fixed mortgage is 5.10%, according to Bankrate.com. A shorter 15-year fixed mortgage has an average rate of 4.22%. For jumbo mortgages, which are larger loans for properties priced at $500,000 or more, the current average rate for a 30-year term is 5.03%.

Why Are Mortgage Rates Rising?

The Federal Reserve raised its benchmark interest rate for the first time since 2018 in an effort to curb inflation in the country. The Federal Reserve has signaled that additional rate hikes are likely in 2022.

The surge in mortgage rates has coincided with two other major factors that are pushing first-time home buyers in Denver out of the market. These factors are a low inventory of homes for sale and significant increases in home prices. Together, these three elements have made the home buying process more difficult and expensive. As a result, even professional home buying companies in Denver are finding fewer and fewer opportunities.

How Are Higher Mortgage Interest Rates Affecting Monthly Mortgage Payments?

When mortgage interest rates rise, there are two key effects. First, higher rates lead to increased monthly mortgage payments. Second, the amount a buyer can borrow is reduced due to lender guidelines that limit how much of their income can be allocated to housing costs. Below are two simple examples showing how a 2% increase in the interest rate affects monthly mortgage payments:

• For a $300,000 home with a 10% down payment and a 4% mortgage rate over 30 years, the monthly principal and interest payment would be $1,289. If the rate rises to 6%, the monthly payment increases to $1,618, an increase of $329 per month.
  
  

• For a $400,000 home with a 10% down payment and a 4% mortgage rate over 30 years, the monthly payment would be $1,718. If the rate rises to 6%, the payment increases to $2,158, an increase of $440 per month.
  
  

Is There An Affordability Crisis In Denver Housing?

Yes. With both housing prices and borrowing costs increasing, fewer people are able to afford homeownership. Additionally, home builders are struggling to meet the demand for new homes, and it will likely take years, if not decades, for supply to catch up. As a result, first-time home buyers in Denver will likely remain renters for a longer period of time, with some possibly never being able to purchase a home.

[Company Name] will continue to purchase all types of residential properties, renovating and upgrading them to current standards. They aim to help maintain the housing supply in Denver.