Is It Time For Caution?
On Wednesday the Bank of Canada raised its overnight rate by .25% and the banks have followed by increasing the prime lending rate to 3.70%. It now takes nearly 90% of pretax income to own a home in Greater Vancouver and the mortgage rate increases will only make it worse.
Lending remains very constrained and if your taxable income is less than $100k per annum, you will find it very difficult to purchase any type of property in Greater Vancouver with a prime rate mortgage. Higher interest rates, Increasing taxes and the high cost of property does not bode well for the real estate market. June sales decreased almost 38% over the same period last year. Buyers now have more choice with a 40% increase in the amount of properties listed for sale compared to same period last year. I believe it is time to be cautious with spending and refrain from listing your home for sale unless you need to sell it.
Although the prime lending rate has increased to 3.70%, mortgage rates are still attractive. Some lenders are offering Variable rates as low as 2.70% and a 5 year fixed at 3.34%. Did you know that you now can get a variable rate mortgage with an option of ‘interest only’ monthly payments?