The Bank of Canada has agreed to hold off on the interest rate hike that was speculated to come early this year. This is great news for homebuyers who may not have had the capital or the ability to get into the housing market last year but who are looking to take advantage of the record low interest rates. Canada’s central bank surprised Bay Street and Wall Street Wednesday by dropping from its latest policy statement any hint that it would raise interest rates to deter Canadians from bidding up housing prices and adding to record levels of household debt.
The Bank of Canada is now expected to hold off any rate hike until 2014, and this enables many first time home buyers and people that are currently renting to be able to enter the market and afford the monthly payments that 5 or 10 years ago they were unable to. For first time homebuyers there has always been incentives with tax breaks and government programs that allow for some financial relief in getting into your first home, but for people who may have at one time owned a home and now are renting and would ultimately like to get back into homeownership this is the perfect opportunity. It was easier prior to the government crack down on the mortgage rules in the last half of 2012, but the record low rates still make it possible for many families to be able to afford the carrying costs of a home.
Last year many people missed out on the opportunity to take advantage of low interest rates, 30 yr amortization and programs that allowed you to borrow 100% of the value of your home. If you were smart and continued to save between then and now and have built up enough for a down payment or are a couple months away from being able to afford one, this move by the government is in your favour.
Now I must warn the public that because the interest rates are at a record low and have been for a couple years, they WILL not stay that way. With that in mind you must be wary that once your mortgage term is up, be it a 5 yr, 10 yr, 2 yr or whatever it is, you will be subject to higher monthly payments down the road. Please take this into consideration when you are planning your finances for future, as many people could get caught and not be able to afford the payments once the rates go back up to a normal percentage point. There are options however when you do reach that point, if you are really stuck and cannot make the payments, there is the option to sell and take the equity you have built in your home to another property of lesser value, or you can keep the profits made from the sale and use it towards other investments or retirement.
I believe home ownership still remains the single best investment you can make in and I would recommend it to anyone looking to increase their net worth. There is a lot of information to learn regarding the process of purchasing a home and if you ever have any questions regarding it please don’t hesitate to contact me to discuss.
James
James Mink - Burlington Realtor, Homes for sale in Burlington, Oakville, Waterdown and Hamilton 