Fluctuating mortgage rates impact Vt. housing market

BURLINGTON, Vt. (WCAX) - Fluctuating mortgage rates are making the cost of buying, selling, and owning real estate less predictable. But is that hurting the housing market in Vermont?

“It’s definitely taken a bite out of business,” said Terry Culver, the owner of Last Time Around Antiques in Barre. He says mortgage rates are getting back up to where they were last fall, which will cost him a few extra dollars. “It started out at 3.275 percent -- I believe it was -- now it’s over seven percent,” Culver said. He says they’ll just deal with it.

According to Joe Doud with Vermont Mortgage Company, that seems to be the general consensus. “Interest rates being higher are unfortunate, but we haven’t really seen a slowdown in interest because there’s such low inventory,” Doud said. “People have just accepted their mortgage will be a little higher.”

So what drives the mortgage rate? Charles Schnitzlein, a professor at the University of Vermont’s Grossman School of Business, says it’s a variety of things including the national debt and inflation. “The higher inflation goes, the higher the rate on 10-year bonds, the higher the rate on mortgages,” Schnitzlein said. “We’ve seen that quite dramatically.”

Schnitzlein says seven percent isn’t anywhere near an all-time high for mortgage rates but that it can feel high to those who took a loan when rates were still between three and four percent. Borrowers who took out a mortgage of $300,000 at three percent, would be paying roughly $1,265 per month. If they have a variable rate, or take out the same loan at seven percent, monthly payments would be roughly 60-percent more.

“An increase in interest rates simply makes this more challenging for first-time home buyers and I don’t expect relief to come in the form of dramatically lower interest rates,” Schnitzlein said.

Even with higher mortgage rates, housing prices in Vermont are staying the same due to high demand. “If people are deciding to sit out for a bit with a higher interest rate, maybe that’s better for someone who’s not,” Doud said. “Just a lot of demand and very little inventory.”

“We have graduates here who are very, very talented young people who would like to stay in Vermont, but they simply leave because they find it unaffordable,” Schnitzlein said.

Doud adds if you’re looking to take out a mortgage any time soon, make sure you go over all your options with an expert.

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