Fed’s rate hike not hitting mortgages yet in Eagle County

Mortgage interest rates have already been rising this year, but the U.S. Federal Reserve Board’s June 15 interest rate hike isn’t yet having much of an effect locally in Eagle County.

William Desportes of Central Rockies Mortgage said the Federal Reserve’s increase has affected other financial markets, but not the mortgage business.

The mortgage market is driven more by demand on the secondary market — firms that buy mortgages from primary lenders. Inflation and secondary market demand have the biggest effect on home loan rates, Desportes said.

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In the current inflationary environment, banks and lenders have to increase home loan rates to attract investment from secondary investors, Desportes said.

Local mortgage rates are in the mid-5% range at the moment, Desportes said. That’s historically low but significantly higher than rates in the mid-3% range earlier this year.

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That seemingly small increase can have a very real effect on what buyers can afford, Desportes said. That rate increase can mean an increase of as much as $500 per month on a $500,000 loan.

That increase can be the linchpin in qualifying for a loan or could mean a buyer is no longer able to budget for that larger payment, especially as gasoline and groceries continue their price rises.

Residental impacted more than luxury

Michael Slevin, owner and president of Berkshire Hathaway HomeServices Colorado Properties, said buyers in the valley’s resort markets tend not to be as rate-sensitive as other buyers. But, he added, the impacts can be seen in the valley’s residential areas.

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Eagle County Housing Director Kim Bell Williams in an email wrote that increasing mortgage rates haven’t yet had an effect on the county’s buyers’ list.

“We have had relatively few listings this year, with up to 35 buyers per home,” Bell Williams wrote. “I know buyers are more anxious than usual to get under contract, but inventory is so low.”

Slevin said even as rates rise, his firm’s brokers remain busy. A lot of that work involves education with both buyers and sellers.

“We’re counseling sellers that the buyer pool may be diminished,” Slevin said.

Slevin called recent interest rate hikes “natural market forces coming into play. That doesn’t necessarily mean prices are going down, but they won’t increase as fast.”

On the buyer side, Slevin said his firm is “crafting creative ways to get buyers into properties.”

That means using interest-only or adjustable-rate mortgages. Adjustable-rate mortgages “make sense for some people,” Slevin said. “Very few of us live in a home for 30 years.”

While easy-to-get mortgages were part of the collapse of financial markets in 2007 and 2008, Slevin said the landscape today is much different.

“Borrowers are much more qualified (today),” he said. “It’s a different environment … but we may be losing a little air in the balloon.”