But that could change later this year, as longer-term interest rates are expected to rise
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Toronto, Canada (PRWEB) March 05, 2014
Canadalend.com, the leading low-cost private mortgage solution provider in Canada, is weighing in on a recent report suggesting home affordability will deteriorate on the heels of rising mortgage costs.
According to the Royal Bank of Canada, the country’s biggest bank, housing became more affordable for the average Canadian toward the end of 2013, marking a reversal from the second and third quarters of last year, where housing affordability deteriorated. While the rising cost of home ownership increased in the fourth quarter, it was offset by the pace of growth in household incomes. (Source: “Home affordability to deteriorate with rising mortgage costs: RBC,” The Globe and Mail, February 25, 2014; http://www.theglobeandmail.com/report-on-business/economy/housing/home-affordability-to-deteriorate-with-rising-mortgage-costs-rbc/article17077571/.)
“But that could change later this year, as longer-term interest rates are expected to rise,” says Bob Aggarwal, president of Canadalend.com. “As interest rates rise, the costs of owning a home will outpace household income growth, which translates into strained affordability in some Canadian housing markets.”
According to Aggarwal, during the fourth quarter, it took 43.1% of the average household income to maintain a detached bungalow, while it took 48.7% to maintain a two-storey home. Both indicators are 0.2 points lower than in the third quarter of 2013.
“The report forecasts that bond yields will climb in tandem with the improving Canadian economy, which will also send mortgage rates higher. When it comes to long-term mortgage rates, Canada’s big banks pay more attention to five-year bond yields,” he notes. “The Bank of Canada, which has kept its overnight lending rate at one percent since late 2010 and has signalled it may not raise it until later this year or early 2015, has more of an impact on short-term rates.”
Aggarwal observes that the findings reverse the trend, which has seen Canadian mortgage rates remain stable or even move lower. Even though Canada’s big banks are offering five-year fixed rates near 3.5%, some lenders are offering five-year fixed rates below three percent.
“While affordability will have more of an immediate impact on first-time home buyers, since those who already own a home purchased them when prices were lower, rising mortgage rates will still impact those looking to refinance their mortgages,” he adds. “With many predicting short-term and long-term rates will rise later this year, now is the perfect time for potential home buyers to take advantage of near-record-low mortgage rates; especially with the spring home real estate market kicking off.”
“Those looking to get on the property ladder this year should contact an independent, licensed Canadalend.com agent,” Aggarwal concludes. “Unlike banks, which only promote their own products, Canadalend.com agents draw from hundreds of banks and lenders, and in most cases, can get their clients pre-approved in 24 hours or less.”
Canadalend.com is one of the largest, most trusted private mortgage brokers in Canada, with skilled independent, licensed professionals helping Canadians coast-to-coast. Canadalend.com provides its clients with residential and commercial mortgages, home equity credit, debt consolidation, and financing concerns. To learn more about Canadalend.com, visit the web site at http://www.Canadalend.com.