I speculate you have 2 years before things start to get real nasty for some, the nastiness starts now with increased rates but I think most will be fine until we see 4 or 5 straight increases, which i think we will see during that time. We've had 7 years of historically low rates but I don't think will see a major impact until mortgage offers get around 5% on avg for a 5 year closed. Regardless I don't forsee a 40% correction but 20% is possible, the bottom line is people want to live here and as long as that demand continues it should cushion the correction on pricesI am curious to see whether the increased interest rate, with promise of another likely increase before the end of 2017, when added to the already slower real estate market in the GTA (in part due to the cooling measures imposed on foreign buyers), will trigger the Toronto real estate market correction that folks have been predicting for many years. The last time Toronto had a real estate market correction was in 1988-89, when values dropped by 40%, and it took 10 years for values to reach their previous levels. I have seen a number of newsletters advising investors (in residential and multi-residential properties) that now may be the time to sell, as well as many articles about how residential sales in the GTA have slowed significantly. On the flipside are the arguments that (i) there are many capable buyers that have been sitting on the sidelines waiting for the buying frenzy to slow, so those buyers may soon enter the market, and (ii) new buyers may want to take advantage of interest rates while they are still low, to lock them in at low rates for 5 years.
Very often, these kinds of predictions become a self-fulfilling prophecy.
I was in the market for an investment property in Toronto, but may decide to hold off as a result of recent trends.
why not? they're almost at 3% now (posted) BTW my timeline of 2 years is when we start to see things really go sideways for some.Ha ha, not gonna happen. Interest rates won't be back at 5% for 25 years. If you think essentially doubling the retail prime is gonna happen, I have a bridge for sale and prime real estate in Florida with your name on 6.
Yes but when the mortgage rate was 15-20 % what was the average house price ?? was it 1 million or closer to 100 K? it does matter.And there in lies the problem. 5% OMG. LOL
Ask anyone (perhaps your parents) that we're paying 15 - 20 percent for their mortgage and see if they could manage. But of course these would be the same people that lived within their means and didn't feel it was ok to buy whatever they want .
Different generation for sure and I'm somewhere in the middle but I have no expectation that rates will stay low forever, and I would have no problem if they go up 25 basis points once or twice a year.
They're not concerned at all about the overnight rate. Emphasis mine.I believe that these rates are being raised not in order to target inflation (around 2%), but as a measure of ensuring there's both room to cut if need be down the road, and prevent too much more non - mortgage debt.
Ask Japan about interest rates...
5 yr fixed is 3% posted... two increases already this year, likely a 3rd before 2018Ha ha, not gonna happen. Interest rates won't be back at 5% for 25 years. If you think essentially doubling the retail prime is gonna happen, I have a bridge for sale and prime real estate in Florida with your name on 6.
Following the Bank of Canada’s somewhat surprising decision yesterday to raise its base rate from 0.75% to 1.00%, which caught many in the market off. The C$ “Flew” from 1.2380 C$/US$ yesterday morning immediately to 1.2220 and has been cemented there since as the market
considers what the Bank has done and has said.
After the decision to raise the base rate was made, the Bank said simply that
Recent economic data have been stronger
than expected, supporting the bank’s view
that growth in Canada is becoming more
broadly-based and selfsustaining.
robust, underpinned by
employment and income
Further comments from the Bank made it rather clear that more rate increases shall be in the country’s future and almost certainly we shall see at least one more rate increase before the year’s end. But the point here is clear: the economy in Canada is more than merely “warm” and in the view of the Bank the real estate market is perhaps even a bit frothy… enough so that something has to be done to cool that segment of the Canadian economy down. 25bps is not nearly enough… nor shall 25 bps more be.