INTEREST RATES ARE DROPPING: WHAT THIS MEANS FOR HOME BUYERS IN ONTARIO

INTEREST RATES ARE DROPPING: WHAT THIS MEANS FOR HOME BUYERS IN ONTARIO

Mortgage Price War Brewing Between Canada’s Banks In a surprise that few experts saw coming, the Bank of Canada recently decided to cut interest rates. Before the decision was announced, most industry experts predicted that interest rates were going to hold or even increase moderately by the end of 2015. In light of the Bank of Canada’s decision, RBC promptly lowered its five-year fixed rate for qualified borrowers (to 2.84%), which started a wave of rate cuts from other major banks such as ScotiaBank, TD, and the National Bank of Canada. Those major banks who haven’t yet dropped their interest rates will soon be forced to do so to stay competitive. A battle in the mortgage market seemed inevitable given the other extraneous circumstances that influence the housing market. To name a few, plunging oil prices and related job/economic losses, near-record-high house prices in major Canadian markets, recently-tightened mortgage lending regulations, and the increasing burden of rising household debt all make it difficult for new buyers to afford to jump into the market despite already historic low mortgage rates. The Bank of Canada’s decision to cut interest rates, and the resulting mortgage price war that has already started, is a win for home buyers due to the decreased cost of borrowing mortgage funds. However, with a lower-than-normal inventory of houses for sale, and the fact that first time buyers account for 40% of the buyer pool, many home buyers are still faced with a highly competitive real estate market that requires buyers paying top dollar with minimal conditions in order to get into the market. “Home Hunting? Bad Credit?...