The Fluctuating Housing Market

When there was an offer of very low mortgage rates the past years, Canadians have rushed to get one. Well who could ignore that splendid offer? Unfortunately, these new home owners may not have taken into consideration that the housing market fluctuates and that low interest rate may have allowed them to purchase a home they really could not afford.  When interest rates rise, these increased interest rates could cause those home owners to curb their spending in other areas, which could, potentially put a strain on the economy.

Although the low mortgage rate offer has helped the real estate industry in Canada and has aided in our recovery from the recession, in the future it may result in problems for some and may cause threat to other industry if people stop spending in other areas in order to pay their high debts and mortgages. To read more click here.

If people are not careful with regards to how they spend their money, they may find they have difficulty getting their feet back on the ground as their debt could consume them. So start saving and spend wisely!

Until next time,
Jamie

New Mortgage Rules for Canadians

Yesterday (Feb 16, 2010), the Department of Finance in Canada announced changes to government-backed mortgages. There was talk that there would be changes in how much would be required for a down payment, or changes in the amortization period, but that never happened. The following changes were announced:

•Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
•Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
•Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

These changes will take effect as of April 19, 2010. The purpose of the changes is to help prevent a housing bubble, and to aid Canadian home owners from becoming overextended.

Here are two great websites to learn more about the upcoming changes:

Deptartment of Finance is where the changes are stated by the government, and

The CBC News which has a video that discusses not only the changes, but the differences between Canadian and US financing rules. There is a written article on the site as well.

Hope you find this informative!
Until next time,
Jamie