Mortgages / Real Estate Changes and Outlook for the future
real estate market
We have had a very heated real estate market over the last
couple of years. We have been seeing year over year increases of over 20% in
most areas and across most market types.
The government has been introducing a number of different measures to
curtail the rapid increase. As many of
you were aware there were some changes, introduced by the government, that took
affect October 17th. .The number one of these changes was
the way buyers with less than 20% would qualify for their mortgage at the
current posted rate compared to the discounted rate. The way it works is that,
years ago when you wanted a mortgage you would have to negotiate from the rate
on the window (posted rate) or now the web site to a discounted rate, the bank
depending on the business you were bringing to them would decide how much they
would negotiate. Lately most banks offer you the discounted rate right from the
start and you would qualify at the rate that they offered you. As of October 17th,
if you are putting down less than 20%, you will still get a discounted rate but
will have to qualify at the posted rate. What that means is most people will
now qualify for over $100,000 less on what they could have purchased before.
There were some other changes, but they will not have as much affect.
Since then we are seeing banks increasing and decreasing
mortgage rates, discounts and even prime rates, as TD did recently. Which means
rates are all over the map. This is also further fueled by some restrictions on
some non-chartered banks, coming into effect on November 30th, which
will limit some of the choices people have on purchases over a million,
investments properties and more.
As of November 15th, government also stated that
they would be increase the land transfer tax rebate that was being offered to
first time buyer from $2000 to $4000 as of January 1, 2017.
I recently came back from a conference in which one of the
most important and respected major bank Chief Financial Officer spoke and
explained what he believed was the forecast for the upcoming real estate
market. First of he agreed with the move
that the government was doing in, basically making it much more difficult for people
with less than 20% to purchase a home or at least the same valued home that
they were able to purchase before October 17th. He stated that if there ever was a change in
interest rates or other market changes, these people would be able to absorb it
now that they had to qualify at a higher interest rate. He mentioned that it
seemed that the new outlook for the government was that it was ok to rent and
that not everyone had to own their own home. He stated that interest rates
would not be going up or changing much, since most other developed countries
around the world had interest rates still lower than us. Since our economy was not doing as well as
the government would like, we might even see further drops. Then in regards to
foreign investors, he stated that this would also continue because other countries
might devalue their currencies further to stimulate their manufacturing sector,
thus causing funds to flow out, into a secure and profitable area – Canada.
As you can see there are lots of changes that are happening,
and it looks like things will stay steady and we will continue with a fairly
strong real estate market.
