Life After 2.99%

Affordability-and-RatesFalling mortgage rates have been one of the biggest single factors escalating home prices. So as rates reverse higher—assuming it’s a sustained increase—values will feel the pressure of deteriorating affordability.

But there’s a contingent that feel rates and home prices could march higher together, indefinitely. Some believe we may not see 2.99% 5-year fixed rates again for several years.

Is that a bad bet to make? Have people over-reacted by calling for the end of low mortgage rates? Does it matter when it comes to timing a home purchase? Those are some topics in this week’s Globe column.

And on Thursday Sept. 12, we’ll poke at this issue even further in a live Globe and Mail chat at noon ET. Click here to join in.

  1. The strength of the Canadian economy and those economies most closely associated with us, will determine where interest rates are headed.
    There have been many false starts to the “recovery” and perhaps it has begun. Even still, economic growth will be slow and any rise in interest rates will reflect that reality going forward.
    The real estate market, especially in the GTA, still requires a shock (recession or big leap in interest rates) of some kind to derail it. The chances of that scenario are becoming more remote each passing month.
    The current real estate market is in fact so Canadian…boring and resilient. Thankfully.

  2. I think there’s no recovery, it’s all speculation.
    Rates up is sustainable. There’s room for more increase. now close to 4%, I believe even at 5% for 5 yr fixed, housing market will be alive and home evaluations will raise gradually as before.
    Middle class will become “poorer” in the process.

  3. The middle class will only become “poorer” due to high mortgage rates if they choose to get a mortgage. Not a choice that anyone is forcing them into, I don’t think. The reality is that, just like anything else, the market will determine the price of home values. If people can afford it (especially as rules become tighter forcing only qualified buyers to apply) then they’ll continue buying and homeowners will benefit from rising values. If buyers can’t afford it, they won’t buy and prices will come down. I think it actually has more to do with the market mindset than it does rates. And by the way, it’s only those who can’t see outside the GTA market that aren’t seeing a recovery.

  4. what’s so strong about an economy where enormous debt service loads are built into prices?
    Look around, go to the liquor store, for instance, and you’ll see how Price Management works.
    Real Estate is not much different. .. meanwhile Men keep dropping out of the workforce.. it’s down to 65% from over 95% during the early 1950’s
    Perhaps I should do a few calculations? 65% and 95% are the first two sigma’s.. and when something hits 61.8%.. there tends to be a ‘correction’

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