What the Bank of Canada Rate Increase to 1.5% Means for Canadian Home Owners and Home Buyers + MORE Jul 17th
Millennials looking to purchase new property across Canada this year are going to have to settle for less. The average peak millennial’s purchasing power in Canada is 16.5 per cent lower than it was at this time last year, meaning they qualify for a mortgage of about $40,000 less than before.
The finding comes from Royal LePage, which put out a study last week looking at how purchase power for millennials took a hit after the recently introduced OSFI stress test regulations. For the purpose of this study, Royal LePage focused on “peak millennials” – a term used to describe the largest cohort of millennials, born between 1987 and 1993, and their potential purchasing power.
“For peak millennials, the group which makes up the bulk of our first-time homebuyers, the path to property ownership has been a challenging one. In our largest cities, it is difficult for young people to purchase a home on a single household income,” said Phil Soper, president and CEO of Royal LePage…
Much has been written about last week’s Posted rate hikes by TD and RBC. Don’t panic! This is just their posted rate – it’s not the actual rate they give to clients.
I do, however, think we’ll see a minimal rate hike in the coming weeks due to five-year Government of Canada bond yields increasing slightly. Fixed rates are priced closely to bond yields.
Here’s another piece of info the banks don’t want advertised: Last week, I published an article about Inflated Mortgage Penalties and how the BIG SIX BANKS use an unfair formula to calculate your penalty.
Good timing. The next day, these two banks did what I reported. They’re registering a larger rate discount, which will end up costing you a higher penalty if you need to break your mortgage early!
I’ve been advising my clients to go variable – especially if you’re with a BIG SIX BANK. Your penalty will always be capped at three-months’ interest, which is much better than a potential, 10, 12 or even 14-months’ penalty! Yup, that’s right, banks have charged many borrowers outrageous penalties that have cost $10,000, $20,000, $30,000 or more…