Canadian Dollar Continues to Increase in Value, Effect on Mortgages
The Canadian dollar continued to go up in value, reaching 98 cents US yesterday for the first time since May. This is usually what happens when the Bank of Canada raises interest rates, as they have twice recently and are expected to possibly do again in their next rate update.
The underlying difference at this point, which is the Bank of Canada rate, could actually be a fourth factor responsible for the slowdown in the real estate markets, along with tighter mortgage lending rules, the introduction of the HST in BC and Ontario, and the traditionally slower summer real estate season. With higher variable rates and the real possibility of even higher variable rates in the next year, it is a sobering thought for many prospective homebuyers, especially in Vancouver where real estate fetches such a high premium.
The higher rates will also result in slowing down the economy, which will cause people not to have as much money and subsequently be more careful about borrowing for a home purchase.
It is usually a good time to think about buying in times like these, as the economy is slower and rates are low. When the economy picks up again and people have more money, it is going to be that much difficult and more expensive to get a home in areas like Vancouver with so many people occupying such a small area.
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