The Ontario housing market has been showing signs of slowdown for some time now, but new measures, such as a provincial foreign buyers’ tax, new mortgage rules, and interest rate increases have cooled it even further.
In the Ontario housing market, house price indexes showed consecutive monthly decreases in the last quarter of 2017. Traditional dwelling types, such as attached and detached homes along with row houses, have all dropped in sales.
What does this mean for current homeowners? The decline of the Ontario housing market does not only affect house hunters. It also affects those who already hold a mortgage.
According to a CBC News article, a higher interest-rate environment could lead to a significant increase in Canadian household debt financing, as opposed to consumer spending. People would have to spend more on existing debt, such as their mortgages, and would have less to put towards other economic activity. This is what happened in the U.S. in 2006, bringing in a consumer-led recession.
Already, Canadian household debt is higher than ever. The average consumer debt in Ontario is $22,022. As the housing market has declined, mortgage values have also rapidly increased. When your mortgage term is up, you will probably face a higher interest rate at renewal, even if you have a fixed-rate mortgage. In addition, the increasing interest rates affect more than just mortgage debt. If you have a line of credit or a home equity line of credit, your payments will likely increase along with interest rates. It could also make it harder to sell your house if you need to make a move.
Those who currently hold a mortgage could benefit from getting their finances in order now as you may find in a declining market that you do not have enough equity to do it if your mortgage rate increases or the value of your property depreciates. A Licensed Insolvency Trustee can help you examine your financial situation so you’re not left staring at an empty bank account if interest rates increase further and the Ontario housing market declines even more.
At Spergel, we can help you best understand and explore the options that meet your current needs. We have the experience that translates to real results, no matter the current housing market. Want to talk to someone about dealing with debt that has become overwhelming?
We’re here to help: toll-free at 310-4321.