Your Path to Debt Freedom
Do you pay attention to the Canadian real estate market? If you already own a home, it may not seem necessary to stay on top of housing trends across the country. But for those who are considering moving in the future, want to ensure their mortgage is paid off as quickly as possible, or want to get out of debt, keeping track of the Canadian real estate market is vital.
In 2017, Canada saw much change in its real estate market. The Bank of Canada introduced two interest rate increases, taking the national interest rate from 0.5% to 1% — the hike was the first increase in seven years. The interest rate increases affect all forms of debt — student loans, lines of credit, and mortgage rates. For those who opted for a variable-rate mortgage, the interest rate increase could mean larger payments. Those with a fixed-rate mortgage won’t see any increases right now, but they could see changes when it comes time to renew.
For anyone with a mortgage renewal coming up, the interest rate increases could mean renewing at a higher rate. If an existing home equity line of credit has been taken out, increased rates could also affect those payments. Recently announcements suggest that interest rates are expected to continue to rise in 2018.
Rate increases weren’t the only change the Canadian real estate market saw in 2017. New mortgage rules were also implemented nationally. The Office of the Superintendent of Financial Institutions announced a new mortgage stress test in October 2017. The new rules mean that uninsured mortgages with a down payment of more than 20% must be stress tested. The effect is that homebuyers will be able to afford less house for the same amount of money. The new mortgage rules also put stricter limitations on lenders. Federal lenders, such as banks, will now have to look closer at the loan-to-value ratio (LTV) when considering mortgage renewals, meaning more emphasis may be put on other factors, such as your credit score, history, and your gross total debt services and total debt services ratios.
Experts predict the OSFI limitations will slow down demand in the housing market, but they’re not sure by how much. The new mortgage rules may also make it more difficult to qualify for a home equity line of credit as, like with mortgage renewals, lenders are encouraged to look at more than just the LTV.
Housing trends from 2017 showed sales of traditional-style housing, such as single-detached and single-attached homes, are dropping while non-traditional, but less expensive, dwelling types, such as condos, are increasing in certain areas.
Between the new mortgage rules and the interest rate increases, Canadians are likely to have less equity available in their homes, which means if you were hoping to rely on your house or a home equity line of credit to pay down debt or fund a major purchase, there may be less money available.
Spergel can help you get out of debt, whether it’s influenced by the Canadian real estate market or otherwise.
Call us for a free consultation today at 310-4321.