Archive for the 'Mortgage Rates Increase' Category

The Bank of Canada (BOC) interest rate is remaining at 1.5% for September of 2018.

The BOC increased interest rates from 1.25% to 1.5% in July of 2018 — the fourth increase in a year. On September 5, 2018, the BOC announced that interest rates would stay at 1.5% for now.

High cost of consumer price index inflation due to gasoline prices, the U.S. economy, and uncertain trade policies all influenced the BOC’s decision — as did the Canadian real estate market.

“Meanwhile, activity in the housing market is beginning to stabilize as households adjust to higher interest rates and changes in housing policies,” the BOC said in the September 5 announcement.

“Continuing gains in employment and labour income are helping to support consumption. As past interest rate increases work their way through the economy, credit growth has moderated and the household debt-to-income ratio is beginning to edge down.”

The Teranet-National Bank House Price Index has seen some stabilization over the summer months, although that stabilization has largely been seasonal.

The new mortgage stress test for uninsured mortgages, introduced on January 1, 2018, appears to have affected the market. Mortgage Professionals Canada “Report on the Housing and Mortgage Market in Canada” for July 2018 stated that an estimated 100,000 Canadians have been prevented from buying a home as result of stress testing.

Statistics Canada reported that the Canadian household debt-to-income ratio decreased to $1.68 for every $1 earned as of June 2018, although that figure is still higher than it was a year earlier.

The BOC said in the September 5 announcement that interest rates will continue to increase gradually. Many economists are predicting at least one more hike in 2018 — likely in October.

The next interest rate announcement is scheduled for October 24, 2018.

The property data tools from GeoWarehouse can help real estate professionals adapt to changing housing interest rates and more. Contact us today. Call 1-866-237-5937 or visit www.geowarehouse.ca.

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On July 11, 2018, Canadian housing interest rates rose for the fourth time in a year, going up to 1.5%.

The Bank of Canada interest rate increases began in July of 2017, going from 0.5% to 0.75%. From there, they went to 1% in September of 2018, and 1.25% in January of 2018. The July 11, 2018 announcement is the most recent increase.

Higher interest rates mean that Canadians will have to pay more on outstanding, unsecured debts, including credit cards, unsecured lines of credit, and variable-rate mortgages.

This could also affect potential homeowners as mortgage lenders have to stress test mortgages against current interest rates following the introduction of B-20 guidelines in January of 2018.

Lenders are encouraged to look at the gross debt service ratio (GDS), meaning the percentage of a person’s household-related debt, and the total debt service ratio (TDS), meaning the percentage of a person’s total debt, rather than using only the loan-to-value ratio of a potential property purchase.

The Bank of Canada (BOC) has been hinting for months that more interest rate hikes were on the horizon, and this month it came to fruition.

The BOC referenced several reasons for the increase in its statement, including the Canadian housing market.

“Canada’s economy continues to operate close to its capacity and the composition of growth is shifting,” the BOC stated.

In past years, the Canadian economy depended on lower interest rates to stay afloat — household spending and the Canadian real estate market were both big economic drivers. But recently that makeup has changed and those items are not as critical. Instead, exports, business investments, and the like are becoming the economic strongholds.

As a result, the BOC is now trying to curb the high level of Canadian household debt through higher interest rates. They also cited recent data “suggesting housing markets are beginning to stabilize following a weak start to 2018” .

More interest rate increases are expected to come but will take a gradual approach. The BOC will be monitoring incoming data, the impact of higher interest rates, capacity and wage pressures, and trade actions.

According to Bloomberg, investors are anticipating additional hikes every six months or so until the benchmark rate settles around 2 or 2.25% by the end of 2019.

The next BOC announcement is scheduled for September 5, 2018.

GeoWarehouse can help you navigate Bank of Canada interest rate impacts to the Canadian housing market. Our tools help make you a property expert, so you can find new real estate leads, assess neighbourhood demographics, compare sales, and more.

Visit www.geowarehouse.ca or call 1-866-237-5937 to get started.

 

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Mortgage Rates IncreaseAs Canada’s housing market continues to thrive, it appears that CMHC has taken yet another step to cool things down. This week, the Financial Post reported on the changes that CMHC announced which will restrict the amount of new guarantees it offers to banks and other lenders on mortgage backed securities.

CMHC advised the financial community of the restrictions this month. In the Financial Post article, Doug Porter, chief economist with the Bank of Montreal, surmised that perhaps the sales prices in the past month led CMHC to take an additional step to further cool the housing market.

According to National Bank financial analyst Peter Routledge, this change may lead to mortgage rates charged by the major banks increasing from between .15% to .45%.

Our question to you is: if the major banks raise their rates, what impact do you think this will have on the real estate market in Canada?

You can read the full article here at http://business.financialpost.com/2013/08/06/cmhc-restricts-levels-of-new-guarantees-for-banks-and-mortgage-lenders/.

If you would like more information about GeoWarehouse please visit www.geowarehouse.ca or call 1-866-237-5937.

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