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DENVER – If you’re having trouble deciding whether you want to keep renting or buy a home, maybe this will help: Interest rates on mortgages are on their way up.
In February, the average interest rate on a 30-year fixed-rate mortgage was 4.17 percent, according to Freddie Mac. That’s up from 3.66 percent in February 2016, but it’s still incredibly low.
Marni McMillan with VIP Mortgage in Denver said rates are likely to continue rising, so it’s a good idea to strike while the iron is hot.
“These are still amazing rates,” McMillan said. “Take advantage of the rates while they still are low.”
The Federal Reserve raised the federal funds rate in December and has signaled that it could raise rates several more times this year. While this doesn’t directly affect mortgage rates, it can affect the mortgage bond market, which is closely tied to interest rates on home loans.
“All indicators we are hearing is [that] rates will be on the rise in the future,” McMillan said.
If you can get into a fixed-rate mortgage now, you’ll be locked in at that rate, saving you money over the life of your loan. Even a seemingly small increase, from 4.5 percent to 5 percent, can add almost $30,000 to a 30-year mortgage on a $250,000 house.
Buying a home in the Denver area right now can be daunting. Housing inventory is at a record low and demand is incredibly high, making it a seller’s market. But McMillan said prices—for buyers and renters alike—are only going to get higher. By buying now, you can limit how much your housing costs will go up.
McMillan said there are no indications of any “softening” of property values in the near future, so homeowners shouldn’t be worried about buying a home only to have it lose value due to a downturn in the housing market.
The key is getting a good rate and locking it in with a fixed-rate mortgage. McMillan said prospective buyers should compare APRs from several different lenders to see where they can get the best rate. Buyers should also look at things like closing costs and other expenses to make sure they’re getting a good deal, McMillan said.