Rate Hike Hits Homebuyers in Southern Colorado

The Federal Reserve has increased interest rates by a quarter point to help combat high inflation. According to Federal Reserve Chair Kevin Warsh, 'the plain fact is that inflation is too high and has been for too long.' The goal of this rate hike is to bring inflation back down to the 2% target.

Jill Gaebler, executive director of the Pikes Peak Housing Network, warns that higher borrowing costs can have a direct effect on the housing market. If mortgage rates rise from 6.5% to 7%, it could add around $150 to a borrower's monthly payment. For some prospective buyers, this added cost may be enough to prevent them from qualifying for a mortgage.

Gaebler notes that those who cannot afford a home may instead turn to the rental market, which is already under pressure. This increased demand could exacerbate the existing shortage of affordable housing in the region. Furthermore, higher interest rates can also affect the supply side of the housing market by making it more difficult for developers and builders to finance new construction projects.