It’s no news that the big banks, headed by RBC but swiftly followed by Scotia, BMO and TD, have slashed their fixed five-year mortgage rates earlier this year, on the heels of fallen funding rates.
Now the word on the street is the growing concern about the upshot anticipated higher rates will have on home buyers who have signed up for bloated mortgages on unusually low lending rates.
Does this mean Canadians without deep pockets, that is mostly everyone, will soon be better off renting than buying?
How close are we to this boiling point?
As of now Bank of Canada forecasts mortgage rates going up, but only slightly in the short-term.
More specifically, one-year interest rates are expected to hover at 3.24% in the first quarter of 2015 and then edge up to 3.60% in the fourth quarter.
Five-year mortgage rates are seen inching up to 5.14% in the first quarter from present 4.99%, and increase to 5.65% in the fourth quarter.
In other words, the low interest rate epoch may soon be closing in on us.
The accepted truism in our society is that we should buy real estate which, for most of us, means taking out a mortgage, in lieu of renting because it’s a meaningful investment over the long run.
But despite the historically low interest rates, the skyrocketing prices and maintenance fees – coupled with the anticipated rise in interest rates – are forcing many potential home buyers to postpone or rethink buying a home.
And don’t forget that mortgage experts generally agree you should spend no more than about 30% of your household income on housing outlays.
Bearing all this in mind, many potential home buyers might be better off renting for a while and putting their saved money into another investment that could earn more in the long run.
You might be one of them.
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