So, the bank has raised its rate by a quarter-point and you’re wondering why the h*ll the media has been acting like the sky is falling — us too. Nonetheless we’ll still tell you what this means for you and what this spells for the Toronto housing market.
Obviously, this means an imminent increase in payments for variable rate mortgages and lines of credit. For most, “It’s not going to be a huge dislocation… Canadians on mass are phenomenally responsible in managing mortgage debt.” Paul Taylor, Chief Executive of Mortgage Professionals Canada told the Star earlier this week.
AVERAGE INCREASE IN PAYMENT
With the average GTA mortgage balance of roughly $300,000 – $400,000 and variable loans representing 30% of the mortgage market that means an average increase of about $25 a month for those affected.
This is virtually nothing for most property owners! Unless you’ve been lying to yourself, you know variable rates are subject to change — and you should have been planning accordingly.
Historically, Toronto has been at an all time low and has benefited from one of the world’s lowest interest rates. Saying that, you should have suspected that this wouldn’t last forever. The Bank of Canada adjusts their rates quarterly, and historically rates increase by a quarter point… which is exactly what happened today.
Home owners should always be prepared (financially) for the unexpected, and be well funded so that a minimal increase of this nature is virtually a non-issue.
THE TORONTO HOUSING MARKET
Overall, these changes should have little, if any effect on the market. It’s the other factors surrounding the market that will have the greatest effect including: government intervention, government speculation, media coverage and a lack of inventory.
It should also be noted that the increase in interest rates have the greatest affect on the lower-end of the market. Increased mortgage rates make carrying a property more difficult and the most price-sensitive are those who are trying to get into the market.