We’re finally seeing some hopeful signs for the wannabe home buyer who has been priced out of the market.
The twin cities of unaffordability, Vancouver and Toronto, have cooled down some. And many other cities across the country are producing more or less normal price gains that make it possible to buy without committing financial self-strangulation.
A variety of measures taken by government have curbed the huge year-over-year price gains seen in the past in Toronto and Vancouver. Add the rising mortgage-rate trend and you get an outlook that could mean flat or lower prices. Aspiring buyers, it’s time to start thinking about your game plan.
To start, it’s important to understand that rising mortgage rates are as much your enemy as your friend. Cumulatively, higher rates could be the mallet that pounds housing prices lower. But for now, higher rates just make home buying more expensive.
We’ve seen rates for fixed and variable rate mortgages rise about 0.25 of a percentage point or so in the past couple of weeks. If you paid the June national average price of $504,458 for a house and put 10 per cent down, this rate increase would boost your monthly mortgage payment by about $60 over what you would have paid previously.
Let’s say mortgage rates go up another 0.25 of a point and housing prices pull back 5 per cent. Combined, these two developments would cut your costs by a bit more than $50 compared to current costs.
You’ll start to turn the corner on better affordability if price declines deepen. If rates rise 0.25 from current levels and prices fall 7.5 per cent, your monthly payments would cost $107 less than they would today. With a 10-per-cent price decline, you’re saving $162.