DENVER (KDVR) — A Denver-area home costs nearly $10,000 more a year in July than it did in January through interest rates alone.
The U.S. Federal Reserve Bank raised its target interest rate on Wednesday to a range of 2.25% to 2.5%, its highest level since 2018. The move responds to an annual inflation rate of 9.1%, the fastest annual rate in 41 years.
The rates of a 30-year fixed rate mortgage aren’t directly tied to the U.S. Federal Reserve Bank’s target interest rates, but they are linked. Since January, rates have nearly doubled, which makes the difference between roughly $3,000 and $4,000 a month for the same home.
The average rate for a 30-year fixed rate mortgage in January was 3.45%, according to Freddie Mac. Rates have risen roughly half a percentage point every month since then. This week in July, it was 5.84%.
With these rates, the same Denver-area home could cost up to $1,000 more a month.
The median sales price for a single-family home in the seven-county Denver metro has hovered around $650,000 for the last three months, according to market trend reports from the Denver Metro Association of Realtors.
Buyers between 23 and 41 typically put down 10% for a down payment. At January’s interest rate, these buyers would pay $3,104 a month for their homes.
At the current average mortgage rate, the same home would cost the same buyers $3,941 a month. They would need an extra $10,004 simply to afford the extra interest.