When markets cool down, consumers should become more aware!
In the event of an increase in lending rates, it automatically places pressure on the property market to the extent of a decrease in the price of homes. This could have a particular effect in cities such as Toronto and Vancouver which have seen upward pricing but now are displaying signs of cooling down. These are indications for first-time-homebuyers that perhaps they should not be in too much of a hurry to grab their first home investment!
There has been concern shown by some provincial governments who have acted in attempts to restrict the rapid rise of house prices. Some market indications for first-time homebuyers include a 15-percent tax placed on foreign buyers by British Columbia. This penalty has been attributed to influencing some price leveling in the marketplace. Comparably, a similar tax instituted by Ontario in April, with other measures, has succeeded in stopping rising house prices, stone cold!
Increasing debt equals non-affordability
For existing homeowners, it can be a feeling of great satisfaction to watch their prize investment continue to rocket in value. However, a more realistic approach could be related to what does it achieve if new buyers, seeking their own home, do not have the financial means to buy? The governor of the Bank of Canada has been active in his forecasting that the ultra-low interest rates period is coming to an eventual end.
Again, these are signs for first-time home buyers and the advantage they could gain by waiting for the right time to make their life-changing investment. They should consult a professional advisor, such as a mortgage broker, who will explain the present trends of increasing interest rates and more restrictions attached to mortgages.
Canadians could be confronted with a situation that is unique to their country, with their largest markets potentially being over-valued and consumers being over-indebted. Combine these factors with the possibility of severe limitations in the mortgage rules, and rate increases and buying a home becomes a more complicated process. Arguably, there is a safeguard for existing homeowners and first-time borrowers with stress tests designed to ensure they will still be capable of making their repayments in higher interest rate conditions.
If you’re buying a home for the first-time it could be a significant financial benefit if you play the waiting game. Remain aware by observing the “for sale” home marketplace and collect some qualified advice in the meantime!