Mortgage rates take a hike
Aug 30, 2013 / 5:00 am
Last Wednesday’s increases in fixed rate mortgage interest rates mean the costs of a fixed rate mortgage have climbed by more than a third in the past five months.
Is this the end of a low interest rate era in Canada? If you listen to the experts you could be convinced it is the case. In a recent Globe and Mail article, Benjamin Tal, deputy chief economist at CIBC World Markets was quoted as saying, “This is the end of extremely low interest rates, they are simply unsustainable.”
Is that so? The comment had me running over to see what kind of quarterly profits CIBC was turning. Frankly, CIBC’s definition of unsustainable and the average Canadian’s definition would appear to be farther apart than political opinions on prorogation of Parliament. CIBC’s most recent quarterly results showed only an 8% increase over the same quarter last year to $876 Million. I can see why they would be concerned.
Whatever way you look at it, this is not a good move for the Canadian housing market. Whether the impact is short term and the housing market activity drops significantly enough to have the banks correct again and react to the competitive market or long term, we have to deal with it.
In the long run for the Kelowna area, it will mean that together with Flaherty’s legislative changes last year, mortgages are going to be more difficult to access for the first time home owner and the move up homeowner.
I don’t believe the consumer expects mortgage rates to stay low forever, but there is an anticipation that rates would be tied to success in the economy and I am not sure if we have turned the corner enough to say everything is on the mend. Time will tell, but once again the impact is likely in a negative direction rather than being positive.
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