Saturday’s National Post had a column from Patricia Lovett-Reid, the senior vice-president of TD Waterhouse, discussing whether or not we’re currently experiencing a housing bubble. She writes of her daughter’s having just bought her first house (the column is under the heading “Women and Wealth”) and discusses some of the concerns that consumers, like her daughter could reasonably be having.
The long and short of her column, is that yes, we may be headed that way, but that it’s going to cool off soon. The column cites Vancouver’s market: which has appreciated by 54% in the past five years, or 9% compounded. Toronto’s rate is 5.2% compounded. She talks about how it’s difficult to find good value in certain markets, and that the current pace of activity “may not be sustainable.”
Soon, she thinks that will begin to slow down – and that time will tell whether there was a bubble or not (or where, as the case may be). Why? Several factors she mentions are:
- Mortgage insurance rule changes
- Implementation of HST in both Ontario and BC will front-load buying activity
- Federal government, Bank of Canada, and private sector are all very wary of a bubble and will fight it
- Rising interest rates on mortgages – Toronto Dominion is expecting Bank of Canada rates to be sitting at 3% by the end of 2011.
She then talks a bit about mortgage rates and what deals are out there now.
“At present, you can get a five-year fixed-rate mortgage for approximately 4.6%, and the closed five-year variable-rate mortgage is approximately 2.35%.”
And then she discusses the merits of fixed-rate mortgages versus variable ones. She concludes that if you are in a stable financial situation, then you are probably looking at a better deal via a variable mortgage, but that if you aren’t sure of your financial position – or if you simply don’t like risk – the fixed rate is the way to go.
She closes the article by recounting what she told her daughter: “Buy within your means. It isn’t worth the sleepless nights.” Solid advice that we should all be applying.
