• Higher Mortgage RatesHigher Mortgage Rates Will Hurt Canadians’ Ability To Afford a Home

    At Robert Floris’ Mortgage Architects office in Hamilton, our thought process is not only to provide valuable mortgage services, but to educate and offer our opinion on the Canadian housing market. Every day we meet the average mortgagor and we are on the front lines as to what is occurring on the street.

    Government Meddling

    Let us begin from 2009, after the stock market crash. The Canadian Government wanted to get the economy going so they started lowering the Canadian mortgage rates. Rates dropped to record low historic levels. It is no coincidence that as mortgage rates tumbled, affordability skyrocketed and prices went on a tear. Let’s stop here for a minute.

    History has told us that only wage inflation or immigration would lead to higher house prices. This was different. The local Hamilton homes were affected by the following:

    1. Record low interest rates
    2. Unaffordability of prices in Toronto

    So now we have record home prices but also record mortgage debt in Canada. The problem? Rates bottomed out in 2017 and have been steadily going up. The results? Affordability. Canadians have over $2 trillion in household debt, mostly in mortgages. The fact is, with rates increasing, the ownership costs for a purchased home in 2018 is close to 54% of household income for a normal Canadian home. In my humble opinion, this is due to the current situation:

    1. Stagnant household income
    2. Increase mortgage rates
    3. New stress tested mortgage rules

    Affordability will be severely tested and higher price appreciation will not likely occur in the short term. So this is not something to be concerned about. Higher mortgage rates and affordability is what I will be watching. To conclude on a positive note, it is my own conclusion that rates cannot go too high as it would badly affect the Nation’s economy.

    Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

    If you would like to apply for a mortgage online, please follow this link.

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    Thanks for reading!

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