Today we’re going to talk about five reasons why recent interest rate increases may hurt you and a few tips on what you can do about it a lot of you are asking yourselves a question of whether we were or still are in a real estate bubble and my simplistic and intuitive definition of a bubble would be if we had increases in housing prices that were in double digits over an extended period of time followed by a very sharp decline over a few months then yes Most likely that would be a bubble to me looking back at the events of 2017 they fit my simple definition of a housing bubble very well so my opinion is that yes we were in a housing bubble and it’s now burst as many of you may know in 2009 the Bank of Canada decided to drop interest rates to below one percent and that started with the economic crisis the United States nearly brought world economies to a screeching halt what followed in Canada and special in G.T.A.
Is that housing prices started growing at a tremendous pace far outstripping average household income the current rate increase is from to on the surface it seems insignificant in fact it should be almost negligible but when you look at the effect on the psyche of the market participants it’s quite dramatic prices for real estate in some pockets in the G.T.A. Have dropped by as much as 25% to 30% so let’s talk about those five reasons that are promised if you guys own a house and depending on the type of a mortgage you have whether you’re on a fixed or variable situation would be different if you’re on a fixed you have obviously nothing to worry about for the term of the mortgage if you’re in the variable most likely a monthly payments will not change in that year ratio of payments to words or contributions rather towards the principle in the interest may change but the payment will remain the same for those of you on a different contract which is less likely or you will encounter less often is that the monthly outlay.
May actually go up a little bit number two if you have a lot of debt and not a lot of savings what a lot of people believe is that the announcement in July was the beginning of a series of interest rate increases in this is correct that over the next few years we’ll see interest rates of a much higher mark than they are right now so what that will mean is that it will make it more difficult for you to make your mortgage payments if you have other debt. so get rid of it if you can for the next year or two. Now I want to address the younger generation for the younger generation this is really the only reality that they’ve known in the last seven to eight years in that the money was almost free and the housing prices were out of control look back at what happened in the G.T.A. In the last ten, twenty and thirty years and you can calm yourself things will change in the years to come first all real real estate prices always go up over time and this pattern has been evident over the last forty to fifty years so take a look at it there’s nothing to worry about.
Things will change and things will change for the better next point student loans if you guys carrying a student loan again depending on whether it’s fixed a variable. Your situation will be different for fixed you have nothing to worry about the variable variable your monthly payments will go up unsubstantially but that will go up and lastly I want to say that try and keep your credit score as high as possible in respect to what’s happening with the economy with a real is the point that you will afford yourselves best the best rates whether with the five Canadian chartered banks if your credit rating is above seven hundred keep it at the mark or above if you can that’s it that’s all the material I wanted to pass on to you thank you and as always we transform dreams into reality through strategic homeownership and real estate investment .
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