Mortgage Rates are staying steady into 2016

There are many speculations on 2016 will see regarding mortgage rates. We will discuss many of the scenarios and why they are the driving factor when considering how our mortgage rate will vary in the near future.

When we consider our past and how we have been a reflection of the USA, we tend to think mortgage rates will increase in 2016. The US has raised their prime lending rate, however the difference in our nations is becoming more apparent. We don’t take as many risks, we were not hit as hard during the housing market crash of 2008, and we are Canadian. The liberal government is concerned with consumer debt, especially mortgage related debt and the risks involved with many people carrying variable mortgages that may have increased minimum payments. But their approach to maintaining mortgage risks will be proposing tax hikes for high income, raising the minimum down payment on homes over $500,000.00. The liberals are approaching the mortgage market with caution and will not make vast changes to the prime lending rate, as it will affect more Canadians detrimentally. We are different than the USA and we will take alternative measures to maintain risk as best we see fit.

When we consider the prime lending rate as a reflection of the Housing Market, we are lead to think that we will continue to see a stable prime lending rate as the market fluctuates in many major cities. The prime lending rate would vastly effect the housing market. Currently we are seeing many of our major cities (Toronto, Calgary, Saskatoon, Regina, Quebec, Montreal) in a state of “Strong evidence of Problematic Conditions”(CMHC 2016). The reason for problematic conditions varies between cities, but that is not the purpose of this article to explain. We only want to state that because we have varied levels of risk across the country we will not see the national prime lending rate increase as it would put these municipalities at an even greater risk of a negative housing environment.

We also tend to predict the Prime Lending Rates based off what the Overnight Lending Rate is.

  • Prime Lending Rate- What banks lend to the person (us)
  • Overnight Lending Rate- What big banks lend and borrow money at

In January we saw the Canadian Government announce the Overnight Lending Rate would go unchanged into the next quarter of 2016 (currently it’s at 0.5 percent). In the past we have seen the Central Bank of Canada and Commercial banks rates go up and down in tune. However last year we have started to see that change slightly. When Central bank cut it’s rate by 0.25 the commercial banks only cut their rate by 0.15. Meaning this was one of the first times we saw there was a difference in savings for the big banks and us consumers. So even if the Overnight Lending rate was raised or lowered, it may not be reflected by commercial banks for the consumers the same way.

In conclusion, we should see our mortgage rates remain stable going into 2016. We are not going to reflect the US, we are concerned with our housing market, but will take a different approach than times of the past.








×

×

222014_Winner_Badge-2

×

×









×








×









×
Contact Jessica

 

×