Record Sales in Q1

3 05 2010

Residential sales in the GTA have risen at an incredible rate for the first 3 months of the year. With multiple offers happening on every listing as if it were goin out of style, the low interest rates have people on a bidding frenzy. Is this a good time to buy? That depends, you might be able to afford something now with such low interest rates, but what about when the rates go up? (They’ve gone up slightly already, but it still hasn’t stopped many from still buying) Will you still be able to afford your house at higher rates?

With low inventory and low interest rates, people wanting to get their first home or locked into low rates, its a recipe for record level sales. Now the market will cool down a little bit as people find their feet after being swept up in all the hype. With more inventory on the market and a slight increase of interest rates, people will be more reasonable when they’re looking for a home.

So with the market overheating for the past quarter, the government has stepped-in (so we don’t become like the great U.S. of A.) in hopes to help people control themselves by implementing some restrictions on obtaining home ownership. First, the government now requires a minimum of 20% downpayment on non owner-occupied (investment) properties. One of the main demise of the US economy was that people would keep upgrading their homes by buying a bigger house with no money down, carrying huge mortgages and living above their means. When the economy crashed, people couldn’t keep up with their payments and foreclosure signs were coming up more than dandelions in the spring. So this is more or less like a speed governor on a car (the car doesn’t allow you to go faster than a set speed, the engine will just shut off after a certain point), the government is making sure that if you want to buy an investment property, that you can afford it. So the second requirement the government is making people do to qualify for the mortgage, is that they must meet the standards required to qualify for a 5-year fixed-rate mortgage even if they are taking out a lower interest rate mortgage and/or a shorter term. This is just to make sure that even if the rates go up, you can still afford to pay off your home. The third change the government implemented was that refinancing mortgages are limited to only 90% of the value of the home as opposed to 95%. This is done to limit people from drawing equity from their home like a big bank machine.

How has your experience been with the government implementing the new mortgage rules?

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