Tuesday, December 23, 2014

One little secret to avoiding a housing slowdown

We’ve been hearing about the risks of housing overvaluation in Canada for the last few years. While there’s no way to tell for sure when housing prices will stop increasing, as this article in the Globe puts it, it’s going to happen sometime. Whether it’s a more significant correction, or an extended period of stagnant housing prices, it’s best to prepare now for the inevitable.
This means abiding by the 10-year rule—buying a home that, if necessary, you could live in for the next 10 years. This sounds easier said than done—particularly in Canada’s more expensive housing markets—but, in many cases, it is possible. It might mean buying in a less desirable location, or purchasing a home with renovation potential should it become cramped within the next 10 years. It also means skipping the condo purchase if you’re a first-time buyer who might be starting a family within the next five years, or foregoing that large mansion if you’re going to find yourself with an empty nest in the same timespan.
When abiding by the 10-year rule, you’ll also have to consider your mortgage options. Sometimes the traditional 5-year fixed makes sense, but occasionally longer mortgage terms can benefit you as well. If you’re wondering what mortgage option is your best bet over the next decade, feel free to drop me a line and we can find a solution that makes the most sense for you.

Wednesday, December 3, 2014

Interest Rate Announcement

As expected, the Bank of Canada decided to stand pat on interest rates today, leaving the target for the overnight rate at 1%.
While inflation increased by more than expected since October, it still remains below the 2% target. The Bank attributes temporary factors to the increase - such as a lower Canadian dollar and sector-specific factors such as telecommunications and meat prices. Low oil prices also "pose a downside risk to the inflation profile".
The U.S. economy is strengthening - particularly in the area of business investment. On the flip side, growth in the rest of the world continues to remain slow, with some regions recently deploying further policy stimulus. While Canada's economy is showing signs of a recovery, low oil prices and a slow labour market continue to hinder significant progress. The Bank also noted household imbalances could potentially pose a risk to financial stability.
With this mix of news, many pundits believe the Bank will wait until later in 2015 to raise interest rates, which is good news for variable rate mortgage holders. Feel free to reach out to me to discuss how you can take advantage of these low rates by paying off your mortgage faster – or any other mortgage-related topic you have on your mind. I'd love to chat!