Mortgage Interest Rates in Canada Are Unpredictable. So is everything else.
Are you wondering where mortgage rates are headed? So am I. Are you wondering where energy costs to operate our home are headed? Me too.
I’m beginning to wonder how long the mental health of Canadians is going to hold out. We are being bombarded with contrary information and advice at every turn making it near impossible to sort out what it is we should be thinking and doing in our life plans.
For example, we know we are reaching or have reached the dreaded PEAK OIL crossroads. Production can no longer sustain demand and hence, the price of oil should be rising. BUT yet, we’ve seen a 19% drop in energy prices over the last year. For the first time, we are in a period of negative inflation even though prices outside of energy costs went up by 2.1% from a year ago. Then there are the banks. Due to bond yields, interest rates have been climbing but now, with the new negative inflation numbers and reduced spreads, we are hearing that interest rates could go down. And then up. Ahh!!!!!!
If we look at market fundamentals and things like affordability, it would appear we are poised for continued recovery in the real estate market in Canada. RBC Economics puts out a very good quarterly report and in the July issue, they suggest that monthly payments for home ownership dropped in Canada by 17% in the first quarter of the year compared to a year ago. The logical conclusion to my mind then, is that with slowly rising house prices and potential for increased rates, affordability will begin to decline again and this rally in the market may well soften again by the end of the year.
Where does that leave you? Well, if you are a Seller, RIGHT NOW is a good time to sell. If you are a buyer, you may be tempted to wait to buy but, you’ll then either have to cope with higher interest rates (that’s what matters the most, remember?) or, potentially higher prices.
Personally, I think we’ll see a return to more normalacy in the real estate market next year instead of the wild and quickly changing cycles we’ve seen this year. What do you think?