When you pair falling housing prices with record low interest rates, both variable and fixed, many financial experts have deemed a home purchase in this market "a no-brainer."
Even though the financial experts have labelled a home purchase a "no brainer", consumers' fear is keeping them from taking advantage of the great opportunities out on the market today. As prices for most consumer goods, cars and homes decline - in some cases plunge - and the cost of borrowing falls, Canadians are still hesitant to buy.
The Bank of Canada did its part this week to lure consumers and businesses out of their fox hole, dropping the overnight rate down to an unheard of half per cent - virtually zero. Canadian banks followed suit by lowering their prime rate to 2.5 per cent. Many mortgage brokers are now offering a low 5 year fixed for 4.19%. For more information on current Interest rates click here.
Even with rates being as low as they are, the days of easy money are over. Chartered banks are being more selective who they lend to. Also, variable rate mortgages, formerly could be had below the banks' prime rate. The prime rates have fallen, along with the Bank of Canada's moves, but now banks' variable mortgage rates are well above prime.
Job security is one of the great factors in consumers not spending and banks not lending. "The issue is confidence," economist Benjamin Tal said. "People talk about the unemployment rate going to eight and nine per cent, but the focus should be on the 91 per cent of people who are employed and are concerned about their jobs." Tal and most economists believe that Canadians will start spending again because they no longer can put off purchases. But he doesn't believe they will spend with the reckless abandon of the recent past. "After the crisis is over, consumer spending will be stronger but not like it used to be because it was artificially strong before, using borrowed money," Tal said.
That time is coming soon, at least in the housing market. Home purchasers will no longer be willing to get into bidding wars on properties and spend hundreds of thousands of dollars over list prices, as was the case in many areas in Toronto and throughout the GTA.
However, if you have job security and a decent credit rating, you should not have many worries about getting approved for a mortgage and with interest rates low and falling housing prices, now is a great time to buy.
For more information on buying or selling real estate in Burlington or Oakville, Ontario, or if you have questions about current market trends, mortgages or interest rate information, please visit me again on my website www.seansells.ca or call me at 905-220-9198 and I'd be glad to answer any questions to accommodate all of your real estate needs.