The Surge in Mortgage Interest Rates Could Trigger a Market Slowdown  

Earlier this year, the conventional wisdom was that mortgage interest rates would rise to the 4% range by the end of the year, so when the rates rose to 5% abruptly in early April, it took us all by surprise.

The agents at Golden Real Estate are noticing a reduction in bidding wars, which might be due to the increased cost of financing a home purchase. It may be too early to draw any conclusions, but the interest rate increase is not looking temporary at this point, so we’ll have to see how the statistics for April and May come out.

Principal and interest (P&I) on a 30-year $500,000 loan at 4% has a monthly payment of $2,387. At 5%, that rises to $2,684.  Earlier this year, you could get that loan for 3%, which would cost $2,108 per month for P&I.

How does this affect affordability?

With a 3% interest rate, a person could get a $637,000 loan for the same P&I as a $500,000 loan at 5%. That is enough of a shock to disrupt many buyers’ purchasing plans.

I’ll be watching and let you know.

Author: Golden Real Estate, Inc.

Golden Real Estate is a prominent member of the Denver/Jefferson County real estate scene. Based in Golden, we service both Denver and Jeffco, representing both buyers and sellers. We're well known for Broker Jim Smith's weekly "Real Estate Today" column published in the Denver and Jeffco editions of the Denver Post's YourHub section each Thursday. The column also appears in several weekly newspapers and is archived at We have nine agents, all of whom are Realtors and EcoBrokers. Our office is Net Zero Energy since December 2017, and several of us drive electrics cars. Known for our sustainable practices, we accept polystyrene (aka "Styrofoam") for recycling, keeping 200 cubic yards per year out of area landfills.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: