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Is this correct time to buy home in Canada? - Need experts advise

Discussion in 'Housing' started by moksheeth7397, Oct 20, 2015.

  1. Hi Experts,

    Could you please clear my below concern?

    Is this correct time to buy home in Canada? Prices are almost 50% overvalued & interest rates are low at this time.

    And what are the chances of interest rates will increase in future? I am not able to take any decision on these. Can any real estate expert comment on this ?
     
  2. Correct time to buy is when you are ready, if prices are high now due to low interest rates then in the future prices may be low and interest rate very high. Whatever you save on principle will be towards interest. So most importantly whenever you are ready
     
  3. Good Answer :)

    Actually my Concern here is in future if the bank interest prices will be high. what ever the loan i took now, EMI is going to be increase.

    Coud you help me to understand how banks decides to increase the interest rates & what all conditions it depends?
     
  4. There are a lot of things bank looks at that determine how much interest you'll be paying:

    1. your credit score
    2. down payment
    3. income
    4. stable job
    5. bank statement
     
  5. I was referring about the interest rates based on market level.
     
  6. The bank interest rates are determined based on the Bank of Canada rate (a government organization). You can read some examples of what makes the Bank of Canada rate rise and fall here:

    http://www.cba.ca/en/consumer-information/40-banking-basics/52-understanding-interest-rates
     
  7. The interest rates that banks charge is largely determined by the bond markets. If banks have to pay more to borrow money in the markets, they will correspondingly pass on the higher costs to consumers.

    Most people believe that bank mortgage rates are set to the Bank of Canada rates; however, this is incorrect. As we have seen with the last few rate cuts, banks haven't always moved in lockstep with the BoC.

    I believe that rates will likely stay flat for the remainder of this year, but will definitely increase next year. However, a 25 basis point rate increase will not cost you nearly as much as buying at inflated prices and then going through a market softening.

    As for whether prices will rise or fall, I believe that house prices in major cities in Canada are due for a correction. Said correction has already started in certain markets (Calgary, Edmonton, etc.) and as we continue to see more layoffs and softening economic conditions across the country, this trend will likely spread to other markets as well.
     
  8. Hi moksheeth7397 here are the facts I have been a relator for 12 years 13 in December.
    When I bought my first home 16 years ago I paid 7.5% interest rate my neighbor was paying 13%.
    Many people complaint about the prices going up but if you compare Canada with Countries like Australia or England we are not so expensive.
    Don't forget is people like us immigrants that move this beautiful land and you know better than I do that the immigration program is open for tens of thousands of new immigrants every year that have to live somewhere.Eventually these new immigrants purchase their first home.
    Please take a look at the links from TREB and make your own opinion based on facts.

    If live in the gta I will be happy to help you visit my site for more info about the process itself alrivas. com


    http://www.torontorealestateboard.com/market_news/market_watch/2015/mw1509.pdf
    http://www.torontorealestateboard.com/market_news/market_watch/historic_stats/pdf/Historic_1509.pdf
     
  9. Definitely form your own opinion, but perhaps look at data from sources that don't have such a clear bias towards skewing numbers. And, never look at historical performance as an indicator of future performance. Rather, look at metrics such as the fundamentals of the economy, overall unemployment rate growth, existing levels of consumer debt, etc. And finally, if you need third party data, read the statement from CMHC yesterday where they are predicting flat prices next year, at best.
     
  10. I am a mortgage broker in Toronto area. I can help answer this question.

    1) Currently interest rates on mortgages is below 2% (variable rates), that means it changes with the federal government policy changes.
    2) Current 5 year fixed rate is about 2.5%, it will stay constant for 5 years regardless of federal policies. It was closer to 5% 10 years ago. So there is significant saving compare to a decade ago.

    Regarding if it is best time to buy: There are the things that no one can control. If you qualify for a mortgage and can afford a house, it is always a good time.

    BTW, this question has been asked for past 5 years, and prices have gone up 20-30% since that time. I know a few people that decided to wait.... and now they ended up buying a smaller place.

    And based on how the economy is doing, I don't except a rate increase in near future. So I would recommend you to buy, if you can afford it.
     
  11. I'm amused at how someone who says the economy is not strong would still encourage others to buy. Sounds like someone has a vested interest to see prices continue to rise. If the economy isn't strong enough to support higher rates, then perhaps there is a likelihood of prices falling? There have been scores of layoffs across the country in the last 6 months and we are just starting to see the ramifications of those job losses on the housing market now.
     
  12. As a mortgage broker, you should know that variable mortgage rates fluctuate with the Prime rate independently set by banks, and NOT with "federal government policy changes". Also, fixed rates fluctuate with bond yields, and will NOT stay the same for the next five years unless you lock in a mortgage today.
     
  13. And how does prime rate get set?? Does it have any dependence on fed policy?? What do you think will happen if Bank of Canada decides to increase rates? I was just trying to give current picture, without getting into technicalities.

    Ofcourse variable rate mortgage will be VARIABLE in nature. I am not sure what are you trying to get at with this argument??
     
  14. Prices are up 10% since your post.. and I am amused by the limited knowledge you have about how things work.

    Yes, economy is not as strong as it once was, so BoC (Bank of Canada), decrease interest rates to increase liquidity and economic activity. But as a side effect, housing market goes up. That is happening for past 5+ years now. Given the economy is still weak, that means there is still time for interest rates to stay low, means we still have some time before price increase stop.

    And yes, with any investment, you have risk.


    do you have a house in Canada? If yes, I think you would also like the prices to increase. But I guess you don't so are annoyed.

    All this is beyond what the general market is doing at the moment.

    If you genuinely believe Canada will go bust, then perhaps, you should short the market.
     
  15. There has not been any recent decrease in interest rates by the BoC as you claim, and there will likely not be one either. If you believe otherwise, please provide a link.

    As for your claim that prices are up 10%, again, please specify which market you are talking about. If it's Vnacouver, then yes the speculation has driven prices higher; however, there are plenty of Canadian markets where prices are down more than 30%.

    I have multiple properties in Canada, but they were purchased some time ago before this price rise and are being held for yield rather than capital gains.

    Finally, if you can show me a way to short the housing market, please do. As an investment banker with decades of experience, I have not yet found a security that allows you to do this, but perhaps you have discovered something that no one else has as of yet.
     

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