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The Economy and Mortgage Rates: How does this affect you?

By
Real Estate Agent with RE/MAX Results Realty

Mortgage rates at the moment are among the lowest consistent rates that we have seen in the last 20 years.  While home affordability has edged to the upper end of the spectrum in terms of actual dollar price, the leveraged aspect of lower mortgage rates has provided many consumers with an opportunity to extend themselves to a level of affordability that was unavailable, even 10 years ago.  For the bulk of us this means that we have the opportunity to take some excess equity from our home investment, place it into RRSP's, investments, children's education, recreation properties, or a variety of other needs, and suffer little, if any, longer term negative impact.  The issue that has so many of us on the edge of our seats is the "sub-prime mortgage" crisis that we keep hearing about, primarily in the United States.  As you have read in past articles here, the U.S. situation is radically different in direct contrast to the Canadian mortgage scene.  Our lending institutions, while naturally more conservative (Canadian, eh?) were also constrained by our banking laws that essentially precluded the kinds of NINJA lending that took place in the U.S. (No Income, No Job or Assets).  While the U.S. Federal Reserve Bank is aggressively supporting the U.S. dollar, the Bank of Canada is taking a wait and see approach.

I don't think for a second that the fallout from the U.S. economic woes are going to leave us untouched, Canada's fundamental's are more diversified than in the past, and our Lower Mainland region in particular is so diversified that we will likely be the last bastion of market down turn.  Having said that, we must also be aware that changes are coming to the real estate market, and the economy in general.  The real estate market has become much more balance in recent months, buyers have a greater degree of control over their future, and the naysayers in the news are putting everyone on fear status.  Is this a good time to sell or buy real estate? Call me to discuss your specific wants and needs as to the answer that suits your particular situation.

Think Realtor, Think Rick

Rick Clements

604-715-6031

Comments (4)

Pam Pugmire
Silvercreek Realty Group - Meridian, ID
Meridian Idaho Real Estate

Rick, I think this is a thoughtful post.  I would like to challenge your notion that a home is an investment.  I know in the RE world, people constantly refer to a home as an investment, but that may not be the wisest way to think about it. 

Have you ever read Robert Kiyosaki's book 'Rich Dad, Poor Dad'? 

Just something you may want to check out.

Mar 31, 2008 06:28 PM
Pam Pugmire
Silvercreek Realty Group - Meridian, ID
Meridian Idaho Real Estate
One more thing-I am a proud American-but I think Canada bested us on this issue!  NINJA lending was the stupidest thing that ever happened, and I suspect the banks offering these programs knew that MOST of these loans would default but they didn't care....they were just in it for the quick buck!  Most of these banks don't actually hold on to the loans, so as long as they could sell the loan they didn't care.  And now look at the head of Countrywide-his company was a big player in this sub-prime mess and yet he gets a HUGE bonus for going with BofA.  It doesn't seem to me that he cares too much!
Mar 31, 2008 06:34 PM
Angela Reeves
West Coast Staging - Coquitlam, BC

What is your feeling about the new huge terms lenders are extending - 40 year and even 50year mortgages to get the payments to an affordable level?  To me it's crazy.  A change of just a few points in our interest rates and many over extended new buyers could find themselves overwhelmed.   Reminds me of back in the 80's when interest rates soared.   Isn't this just waiting to happen again?

Sep 06, 2008 01:31 PM
Debbie Stevens Top Producer Coaching for RE/MAX
Unlimited Success - Maple Ridge, BC

Hi Rick ! I'd love to see more of your blogs! You are a great writer so keep it up!

Sep 09, 2010 04:06 AM