Unpredictable Economy Places Premium on Expert Advice

The relative uncertainty with respect to growth and inflation rates in the short to medium term has spilled over to housing decisions. Recently, lower than expected growth and inflation rates led Bank of Canada chairman Mark Carney to put off an interest rate hike for at least six weeks. In all likelihood, a rate hike will not happen until late 2011 or early 2012. The frequency of these hikes is unknown, but the general feeling is that the prime rate (currently sitting at a very low 1%) will be at 3% by 2013.
The current low rate has allowed many consumers to enter the housing market in a period where prices have been rising steadily and are now 13% above pre-recession levels. A rising interest rate will make it difficult for some to afford their monthly payments. In fact, Canada’s mortgage delinquency rate (while very low compared to the US) has been inching up over the last couple years.
The picture is not completely doom and gloom. Canadian Real Estate Association’s chief economist, Gregory Klump, has said that while rates will increase they will still be “within short reach of current levels”. Instead, the emphasis going forward should be on careful calculation of your own finances and consideration of the different possible economic outcomes we might see over the next few years. A great tool one can use to ensure that you do not become part of the delinquency rate is a consultation with a mortgage broker, an expert at understanding the many different mortgage options and helping you choose the one that’s right for you.