{"id":8415,"date":"2018-03-02T11:11:29","date_gmt":"2018-03-02T19:11:29","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=8415"},"modified":"2018-03-03T10:45:53","modified_gmt":"2018-03-03T18:45:53","slug":"home-buyers-worry-rising-interest-rates","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2018\/03\/home-buyers-worry-rising-interest-rates\/","title":{"rendered":"Should Home Buyers Worry About Rising Interest Rates?"},"content":{"rendered":"<p style=\"text-align: justify;\">If you\u2019re an aspiring first-time home buyer in Toronto, we get it: It seems like everything from government intervention, rising home prices, and increasing mortgage rates are conspiring against your jump into the housing market. While it\u2019s true that it\u2019s now harder to qualify and afford a home than perhaps it ever has been in the past \u2013 at least in Toronto \u2013 we\u2019re here to tell you it\u2019s not as bad as it may seem.<\/p>\n<p style=\"text-align: justify;\">Sure, regulations are tight and there are no signs of loosening. And home prices have been on a seemingly endless trajectory.<\/p>\n<p style=\"text-align: justify;\">However, it\u2019s not as dire as it might seem. At least in terms of mortgage rates (yeah, that stress test and average Toronto home price are still tough pills to swallow).<\/p>\n<p style=\"text-align: justify;\"><strong>Mortgage Rates : A Brief History<\/strong><\/p>\n<p style=\"text-align: justify;\">First, let\u2019s talk about today\u2019s mortgage rates. Sure, they\u2019re on the rise; the Bank of Canada has made three increases to its overnight rate target three times over that period. It increased the rate from 0.5% to 0.75% July 12, 2017. Then, on September 6, the BoC acted once again by increasing the rate to 1 per cent. Most recently, at the end of January, the Bank increased its target by 25 basis points to 1.25%.<\/p>\n<p style=\"text-align: justify;\">Mortgage rates have correspondingly increased with each of those policy moves. Most recently, the best five-year fixed mortgage rate jumped from 2.79% on Jan. 15 to 2.94% a day later. Mere days after that it was up to 2.99%, which is the current best five-year fixed rate mortgage rate offered in Toronto.<\/p>\n<p style=\"text-align: justify;\">Are these increases really worth fretting about?<\/p>\n<p style=\"text-align: justify;\">Let\u2019s take a look back at some previous eras to put today\u2019s mortgage rates into perspective.<\/p>\n<p style=\"text-align: justify;\"><strong>Not Your Parents\u2019 Mortgage<\/strong><\/p>\n<p style=\"text-align: justify;\">You\u2019ve heard stories that start something like this : \u201cBack in my day our homes cost us next to nothing.\u201d<\/p>\n<p style=\"text-align: justify;\">While that may be true \u2013 the average Toronto home price sold for $90,203 in 1981, for example \u2013 buyers in that era paid much higher mortgage interest rates.<\/p>\n<p style=\"text-align: justify;\">The Bank of Canada\u2019s five-year fixed rate was priced at 21.75% at its peak in August 1981.<\/p>\n<p style=\"text-align: justify;\">Assuming a homebuyer paid the posted rate on the average home at the time, and was able to scrounge 20% as a down payment, the monthly mortgage payment would have been $1,260 amortized over 25 years, according to Ratehub\u2019s mortgage calculator.<\/p>\n<p style=\"text-align: justify;\">You may be sitting there thinking, what an affordable mortgage! Sure, a $1,200 mortgage seems like next-to-nothing. In 2018, at least.<\/p>\n<p style=\"text-align: justify;\">However, we haven\u2019t considered inflation yet.<\/p>\n<p style=\"text-align: justify;\">According to the Bank of Canada\u2019s inflation calculator, that mortgage in 1981 would cost $3,181.62 per month in today\u2019s dollars. Of course, 1981 was a long time ago. So, let\u2019s look at a more recent example.<\/p>\n<p style=\"text-align: justify;\"><strong>A Decade Ago<\/strong><\/p>\n<p style=\"text-align: justify;\">Back in 2008 (can you believe that\u2019s already 10 years ago?) the average Toronto home sale price was $379,347. Not bad. The best discounted five-year mortgage rate, meanwhile, was 5.89%. So, what would it have cost to own a home back then?<\/p>\n<p style=\"text-align: justify;\">According to Ratehub.ca\u2019s mortgage calculator, it would have cost $1,922 per month (again, assuming a 20% down payment amortized over 25 years) or $2,264 in today\u2019s dollars.<\/p>\n<p style=\"text-align: justify;\"><strong>Today\u2019s Comparison<\/strong><\/p>\n<p style=\"text-align: justify;\">The average home sold in Toronto went for $736,783 in January, according to the Toronto Real Estate Board. Assuming, once again, 20 per cent down an average home would cost $2,786 per month at today\u2019s best rate. That\u2019s not an insignificant increase from 2008\u2019s cost, admittedly.<\/p>\n<p style=\"text-align: justify;\">But that just means buyers today will have to temper their expectations.<\/p>\n<p style=\"text-align: justify;\">Perhaps a condo may be the right move. At an average selling price of $507,492, a typical Toronto condo could cost $1,919 per month at 2.99%.<\/p>\n<p style=\"text-align: justify;\">There are also plenty of properties available below that price in Toronto \u2013 a real estate agent can help you find more affordable pockets within the city.<\/p>\n<p style=\"text-align: justify;\">For some, though, today\u2019s reality may mean having to look outside the city.<\/p>\n<p style=\"text-align: justify;\">Either way, if history shows us anything it\u2019s that mortgage rates are still historically low and a little creativity and open-mindedness can still land you in a home of your dreams.<\/p>\n<p><a href=\"https:\/\/www.zoocasa.com\/blog\/should-home-buyers-worry-about-rising-interest-rates\/\" target=\"_blank\" rel=\"noopener\">Should Home Buyers Worry About Rising Interest Rates?<\/a> by Justin da Rosa | zoocasa<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re an aspiring first-time home buyer in Toronto, we get it: It seems like everything from government intervention, rising home prices, and increasing mortgage rates are conspiring against your &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2018\/03\/home-buyers-worry-rising-interest-rates\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-8415","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Should Home Buyers Worry About Rising Interest Rates? 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