According to Diana Petramala an economist who works with TD Economics, the mortgage rates should start rising any time from now. After carrying out an analysis on the interest rates and how they affect the Canadian real estate market, they have noticed that the changes could result in a decrease in sales by between 10 and 15 percent. Diana reports that the yield of the 5-year government bond is set to increase by 10 basis points from 60 to 70 as at 2016. According to Petramala, this is likely to be passed to the consumers who are likely to earn higher 5-year fixed mortgage rates that are of similar sizes.
When interest rates go down, more people are able to buy homes. It is also worth noting that with lower interest rates, homebuyers are able to acquire more homes at the same monthly installments they would have paid when the rates were higher. This means that this is the best time for you to approach your financial institution to apply for a mortgage and have it preapproved before the interest rates can rise again. However, you need to make the right choice of a mortgage that is suited for your need and budget.
The interest rate outlook
According to market, analysts, even though we are enjoying low market rates, this should change in 2016. The rise in interest rates will only cause a worsening of the real estate market in Calgary. According to Diana, the prices of homes in Calgary are likely to increase by 10 percent while the mortgage rates will start going up as early as in December 2015.
An increase in the mortgage interest rates will cause a dip in the demand. However, the homeowner’s decision to buy will be affected by other factors such as low unemployment rates as well as lower levels of migrations. Experts suggest that the situation in Calgary can be termed as a correction and when the interest rates rise, this will only deepen the correction. According to a report by CMHC titled “fall housing outlook” the rise in interest rates is expected to begin in 2016 and this will result in the housing market’s slowdown.
The report by CMHC adds that the interest rates for mortgages will be 2.6 percent to 3.3 percent but the 5 years rate is expected to be 4.10% to 5.2%. While analysts suggest that the Bank of Canada will put in place measures to cap the interest rates hike, they say that the increase will lead to decreased sales by between 10 and 15 %. Experts also add that as at now, the housing inventory has also increased. Therefore, this is without doubt the best time to buy a home in Calgary.