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Relief could be ahead for mortgage rates in Colorado

Here’s how the latest inflation numbers are impacting the mortgage rate market.
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The U.S. consumer price index for October reported numbers that were lower than expected, and many in Colorado’s mortgage rate market are hopeful those numbers are the beginning of a downward trend, said Alicia Alpenfels, a senior mortgage loan originator with Planet Home Lending in Boulder.

“Now that inflation seems to have — what we hope — peaked, and is starting to come back down, we’re starting to see rates come back down,” Alpenfels said.

Mortgage rates in December 2021 were at 3.625, and since then, they went up to around 7.25 and 7.5, she explained. But the latest numbers have declined.

“Every rate is different, it’s scenario specific, but we’re starting to see that base rate come back down to the mid-6s,” Alpenfels said. “We are hopeful — we’ve been waiting for a while for these November numbers. We hope inflation will keep decreasing.”

Every time inflation decreases, the mortgage rates will improve, because inflation hurts the bond market, she explained.

“Nobody wants to put money into a fixed-rate return if inflation is high and they’re not going to get as much money for their dollar than they would in other portfolios,” Alpenfels said. “And so as inflation decreases, more people are going to be willing to put money back in the bond market, which will improve interest rates.”

If mortgage interest rates continue to decline over the next several months, purchasing a home now could be a surprisingly smart move, she explained.

“There are a lot of people sitting on those sidelines, and even though it’s a soft market right now — and it’s a buyer’s market — within the next few months, by March or April, we’re going to be back in the real estate frenzy again that we were just in last spring,” Alpenfels said. 

“All of a sudden, we’re going to be back to making offers over list price, multiple offers and no discounts from the sellers. And so if you can stomach the higher payment, then it’s worth it to get in now, because you might save $20,000 or $30,000.”

Those who can afford the higher initial mortgage rates until the spring can then refinance down to a lower rate once the market improves, she explained.

That outlook brings hope to families who don’t have any other choice but to buy now. One of Alpenfels’ recent clients was a family of six living in a 1,300-square-foot condominium.

“They just simply said, ‘we have to — we just can’t take this any longer,’ so for them, it was a non-negotiable thing,” Alpenfels explained.

The family went from a $2,200 monthly mortgage payment to a $4,800 payment, she said.

“We had to have a really long conversation about it, because that’s a huge payment jump,” Alpenfels said.

If inflation continues to ease, then that family — and many other Colorado families who also made recent home purchases — will get relief in the coming months.