YORK REGION MORTGAGE BROKER, SARAH COLUCCI, 20 YEARS OF EXPERIENCE HELPING HOMEOWNERS!
  • HOME
  • CONTACT US
  • PRIME RATE CANADA
  • MORTGAGE NEWS

Welcome to Our Smart Mortgage Blog

​Navigating mortgage financing can be daunting, but with the right strategy, it's manageable. This blog offers expert advice and insights on understanding interest rates and leveraging market trends for smart real estate investments. Whether you're a first-time buyer or a seasoned investor, "Our Smart Mortgage Blog" will provide the tools to make informed decisions and achieve your homeownership goals. Let's dive in and secure the best outcomes together.

The Housing Boom May Be Here To Stay: What could it mean for you?

12/6/2021

0 Comments

 
Picture

​The cost of real estate continues to rise at an unprecedented pace in Canada, making the housing industry fundamental to the economy. The explosion of buying activity and price increase may be why Canada's central bank is cautious about enforcing policies that will depress the market, bringing the frenzy to an end. 


During the pandemic, home prices have skyrocketed due to record-low interest rates, limited supply of property available, and lockdowns that cultivated a phenomenon known as 'pent up demand,' which means the period of little or decreased spending eventually led to a sudden surge in demand. 

Moving forward, the central bank could cool the market in the following ways:

  1. Create policies that end frenzied buying, like mandating the termination of blind bidding or similar to the B.C. Government allow a more extended cooling-off period that permits buyers to walk away from an offer to purchase without legal consequences. 
  2. Raise interest rates.
  3. Tighten mortgage rules further as it has done with the "Mortgage Stress Test" and implement a new formula used to calculate the monthly payment of unsecured debt on mortgage applications. 
  4. Impose taxation like capital gains on flips or the sale of primary residences. 


The Bank of Canada's overnight lending rate is currently 0.25 percent, and it has kept this rate low over the last two years, contributing to the explosion of real estate prices. The real estate market is worth 300 percent more than Canada's GDP, making some of its largest cities victims of housing bubbles. 

In reality, approximately 75 percent of Canadians hold most, if not all, of their wealth in real estate. According to a report by Stephen Punswasi, "Co-Founder and chief data nerd at Better Dwelling," $248 billion got invested in Canadian real estate in just the first three months of 2021. This figure represents a 42 percent increase compared to 2020. 

The significant issues with rapidly rising home prices include affordability, payment shock if interest rates rise, and risks of sharp corrections. When the cost of property becomes highly inflated, borrowers take on substantially larger mortgage debt, which places them in a situation where they could struggle with higher mortgage payments when rates rise. 

Poll after poll has shown that Canadians would enter turbulent financial waters if their mortgage payments unexpectedly rose by just $100.  Therefore, if suddenly, the housing industry plummeted into a recession, the consequences would be severe for homeowners, investors and Canadian homebuilders. 

Here is a list of what the government has tried to so far to cool the market but has been unsuccessful:

  1. Foreign Buyers Tax.
  2. Empty Homes Tax.
  3. Speculation Tax.
  4. Mortgage Stress Test.
  5. Record New Home Completions.

Despite all of these measures, home prices in Canada's largest cities continue to rise at an unprecedented speed. A report by Teranet shows that 25 percent of property purchases in 2021 were done by investors, people who already owned their principal residence.  What is obvious is the increase in value allows existing homeowners to purchase a new property by tapping into equity, which leads to a cycle of price growth that continues to benefit investors. Unfortunately, the number of new purchasers (i.e. first-time homebuyers) getting into the market is declining. 

It seems the government will eventually have to act. We will stay tuned about what they will propose next and update you accordingly. 

Do you have mortgage questions? Please shoot me an email at [email protected] 

RSS Feed

0 Comments



Leave a Reply.

    Picture

    By: Sarah Colucci

    Senior Mortgage Agent, Level 2, Lic. M14000929, 
    Sherwood Mortgage Group, Broker 12176, 
    Direct: (647) 773-4849

    RSS Feed

    Archives

    September 2024
    August 2024
    July 2024
    March 2024
    February 2024
    November 2023
    October 2023
    September 2023
    July 2023
    June 2023
    April 2023
    January 2023
    October 2022
    September 2022
    July 2022
    June 2022
    May 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    August 2021
    July 2021
    June 2021
    May 2021
    February 2021
    December 2020
    November 2020
    October 2020
    September 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    February 2019
    January 2019
    December 2018
    August 2018
    May 2018
    April 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017

    Categories

    All

    RSS Feed

GET IN TOUCH WITH SARAH

Let's get started today.



Address

411 Queen St. 
Newmarket, ON
​L3Y 2G9

Sarah A. Colucci, Mortgage Agent Lic. M14000929
Sherwood Mortgage Group
Licence # 12176

Telephone

Direct: 647-773-4849
​
Email: [email protected]
Picture
Photos from DFID - UK Department for International Development, wuestenigel, Free For Commercial Use (FFC)
  • HOME
  • CONTACT US
  • PRIME RATE CANADA
  • MORTGAGE NEWS