Low Interest Rate Mortgages Are Still Driving Home Sales in Canada
The government has done a lot to try to drive down the housing bubble that’s said to be happening in certain parts of Canada. They introduced new mortgage rules in an attempt to deter new home buyers this year.
The constant growth in house prices has increased the wealth of home owners because home owners’ equity has risen. The investment in property has proved to be quite lucrative for home owners, and this has proved to be quite attractive to new home buyers.
It is shown that in the last 2 years, 61% of home buyers have made their purchases with down payments less than 20%.
The answer to this question is most likely the low interest rates available now, and that have been available in the recent past. The savings that come with the low mortgage rates available outweigh the cost of mortgage insurance. Low interest rates don’t last forever, and many Canadians are doing what they can to qualify for a low interest mortgages now with the goal of avoiding the risk of seeing the mortgage market enter a high-interest rate cycle.
What does this mean for the real estate market?
Low-interest rates driving home sales are a no-brainer, but what do the recent mortgage trends mean for the real estate market given the new mortgage rules? There is no concrete answer to this question yet. The Financial Post has has been reporting that the new rules have indeed slowed the housing market, but many critics disagree. Preliminary data has shown house prices have not fluctuated, but it is said that sales have slowed.
One thing is for certain, real estate is a cyclical industry. There are periods periods of high activity and periods of low activity. Market’s change from a “seller’s” market to a “buyer’s” market. Low interest rates will always help drive the market, but the new mortgage rules do present home buyers with serious blockage. It is unclear yet to see how things will pan out, but it will be interesting to see how things will develop in Canada’s ever-changing mortgage and real estate market.
By Cristobal Ravazzano
Tags: homes, housing, market, mortgage, Real estate
