With mortgage rates on the rise, chances are good that affordability will continue to be a challenge as we enter the third quarter.
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Toronto, Canada (PRWEB) August 30, 2013
Canadalend.com, the leading low-cost private mortgage solution provider in Canada, is releasing its response to Canada’s big banks hiking their mortgage rates, explaining what home buyers can do to minimize interest rate payments.
Over the last two weeks, Canada’s biggest banks have hiked their mortgage rates, making home ownership less affordable for the average Canadian. According to the Royal Bank, its housing affordability index (which measures mortgage payments, utilities, and taxes) reversed course during the second quarter of the year in two of the three categories it measures: bungalows and two-storey homes. This means Canadians paid more of their pre-tax income in the second quarter of the year on servicing their homes compared to the first quarter. (Source: Beltrame, J., “Home buying becoming less affordable for average Canadian: RBC study,” CTV News web site, August 27, 2013; http://www.ctvnews.ca/business/home-buying-becoming-less-affordable-for-average-canadian-rbc-study-1.1428230#ixzz2dN8to5Gn.)
“With mortgage rates on the rise, chances are good that affordability will continue to be a challenge as we enter the third quarter,” says Bob Aggarwal, president of Canadalend.com. “Fortunately, interest rates are still near record lows. First-time homebuyers looking to avoid the sharp increase in mortgage rates should forgo fixed closed rates for variable rate mortgages.”
According to Aggarwal, Canada’s five-year fixed-rate mortgage moves in step with the Government of Canada five-year bond yield. At the same time, Canada’s economy and monetary policies are linked to the United States, and because of the rising bond yields south of the border, Canada’s fixed rates are also on the rise.
“The reality of the matter is that variable-rate mortgages tied to the prime rate are being offered for as low as 2.55%, while comparable five-year fixed closed rates are hovering near 3.50%. That’s a significant difference,” Aggarwal adds. “The majority of Canadians have fixed mortgage rates because they lock in at a specific price. Because of that, some say variable rates are too risky. In a normal economic environment, this might hold true.”
“But the Bank of Canada’s key lending rate, which prime is tied to, hasn’t moved in three years, and some predict that won’t change until 2015. That suggests that variable-rates should remain at attractive levels for the foreseeable future,” Aggarwal concludes. “Whether Canadian home buyers want to look into a fixed-rate mortgage or variable-rate mortgage, the independent licensed agents at Canadalend.com will shop around to ensure they get the best rate possible.”
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.