The Great Fall of Canada House Prices: Canadian Mortgage Rates Hike & Stress test 2.0(+ Predictions)

The Great Fall of Canada House Prices: Canadian Mortgage Rates Hike & Stress test 2.0(+ Predictions)

Hi, did you know a storm is coming? That is right folks, a real estate storm is headed our way.
Hi, welcome to another segment of A plus trends. Today topic is on the perfect real estate storm that is brewing in the housing market, that will lead to further decline in house prices.
Governor of the Bank of Canada Stephen S. Poloz eliminated any doubt about the Bank of Canada’s plans on interest rate. During an interview on CNBC he said that the two 0.25% overnight-rate cuts that the Bank made in 2015 in response to the oil-price shock have “done their job” and he expressed confidence that our economy’s “surprisingly” strong first-quarter growth rebound would continue.
The futures market raised the odds of a Bank of Canada rate rise at its July meeting to better than 50% and the Loonie soared against the US dollar, reaching a nine-month high. Government of Canada bond yields surged higher and mortgage lenders wasted no time, quickly raising their fixed rates, which are priced on Government of Canada bond yields, in response. This also mean banks are raising their mortgage lending rate prior in preparation to the increase of overnight rate which bank borrow at.
Mark the date on your calendar. July 12, Bank of Canada will announce its interest rate, and the signals from governor Stephen Poloz are strong enough that economists are nearly unanimous in predicting the rate will rise, likely by 0.25 per cent.
It would mark the first increase in seven years. This in turn will increase bank’s mortgage lending rate, leading to higher borrowing cost. With higher borrowing cost, we here at A plus trends predicts a further decrease house prices.
And that is just the first part of it folks. Tougher mortgage guidelines are in the wood works. Last year a stress test was introduce to reduce the amount of money people with high ratio mortgage can borrow. Meaning people with less than 20% down payment on the house can borrow significantly less than people with 20% or more down payment. Canada’s banking regulator (OSFI) is proposing that anyone who gets a mortgage at a bank-funded lender or bank prove they can afford a rate that is at least 2% higher than their actual rate. Meaning this will reduce the borrow power of even the highest bidder for a house because they can borrow significantly less than they use too. We here at A plus trends predicts with Tougher mortgage guidelines and higher borrowing cost it’s not a question of whether the housing decline will continue but how severe the housing crash will be.
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