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Thinking of buying a home?

Apr 27, 2018

It's not getting easier to buy a home

With all that is going on in the housing market the prospects for first time home buyers is not good. Although prices are rising smartly in some affordable and expensive places and some
prices are flat or weaker in some areas, there is no improvement in affordability due to mortgage rate increases and the tough stress test.

A housing-market crash would save the day for first-time buyers who can’t afford today’s prices but this is unlikely without the economy stalling or interest rates surging higher.
This leaves people either coming to terms with renting or keep saving in the hopes of getting into the market at a later date.

Updated Mortgage rates 

With our longer lifespan milestones such as buying a home or retirement can be pushed ahead.
Mortgage rates are a huge influence on affordability and they are headed higher. RateSpy.com reported on Wednesday reported that some non-bank mortgage lenders and
credit unions had raised the five year fixed rate by 0.1 – 0.15 of a percentage point and at least one bank increased its posted five-year fixed rate by 0.45 to 5.59 per cent.
Although most people don’t ever pay the posted rate anymore this is used in setting the rate that clients negotiate with their banker and also used for the stress test. This rate
may also be used in setting penalties for breaking a mortgage.

Rising rates make it harder for people to pass the stress test that buyers must undergo as part of the mortgage application process.

As of Jan.1. people buying homes with 20 per cent down payment or more have to be able to afford a rate set at the greater of Bank of Canada’s five year rate or the actual rate being offered plus two percentage points. The benchmark rate was 5.14 per cent midweek but could rise if the banks increase their posted five year fixed rate to 5.59.
Although the Toronto resale market fell 1.5 per cent in March year over year a rate increase will offset that. More of the same could be ahead in 2018 – rates rising a little more,
Prices falling some and not benefitting buyers in the end.

For those willing to work until 70 , buying a house as late as 40 is doable.

Adapted by Bob Carrick Globe and Mail