Mortgage Rates Could Rise 2% by Early 2019

Robert Burton says mortgage rates will likely not skyrocket in next few years like in the early 80’s (peaking at just over 21 percent in the second half of 1981) but points to a recent report which states the borrowers should expect rates to rise near 5 percent by early 2019.

According to Economists Desjardins

“An extensive rise in interest rates will possibly take place in the coming years if the economic expansion continues in North America,” warns Desjardins Senior Economist Mathieu D’Anjou in an Economic report.

A Short Break in Their Rising Trend

From the viewpoint of Robert Burton, he cites that the reports suggest that the general trend for interest rates will primarily reflect vibration in the next few years.

Growing geopolitical pressures and uncertainty over elections led many European investors to favor safe haven securities. Usually, geopolitical concerns do not have a long-lasting impression on the markets.

Signals reflect stronger global growth in 2017 and 2018 as compared to previous years. On the other hand, if the U.S. government fails to go ahead with the growth rate of public debt, the Feds could continue to gradually tighten its monetary policy and other central banks, including the Bank of Canada, could do the same. A gradual rise in North American bond yields could result.

Canadian Mortgage Rates – Impact

There are no signs that Canadian interest rates will unexpectedly jump back up to the levels as seen in the early 2000s, or, worse, in the early 1980s. However, people need to be prepared for rising rates in the next few years according to Robert Burton. Especially borrowers who need to renew their mortgages during the amortization period.

In Canada, variable-rate mortgages are the most important. The variable rate is directly tied to Canada’s monetary policy based on the prime rate offered by financial institutions. You can expect the variable rate to closely follow the Canadian overnight rate in the coming years – to go up.

On the other hand, a closed 5-year mortgage plays a different hand. The rate for closed 5‑year mortgages will reflect the financing costs of Canadian financial institutions, which closely reflect changes in 5-year federal yields under normal circumstances.

 

Robert Burton

An Extensive Economic Expansion, Leading to Higher Interest Rates

To Canadian borrowers, interest rates seem to be reassuring. However it’s difficult to forecast turnarounds in the economic cycle, the economists are suggesting monetary tightening cycle could be extended in Canada. The Bank of Canada could increase its rates by 0.50% per year from 2019 to 2021, or rise about 2.50%. In this climate, the Canadian 5-year rate could increase to approximately 3.10%. In a medium-term horizon, variable rates and 5-year mortgage rates could thus rise by approximately 2%.

The Bottom Line

Obviously, one can expect plenty of other scenarios affecting mortgage rates rise and fall. In the present climate, our current scenario indicates a minor increase in mortgage rates is most likely. To ensure safety, mortgage borrower’s need to be prepared for an alternative realistic scenario says, Robert Burton. For example, borrowers shouldn’t be caught off-guard in five years. Mortgage rates of less than 3% currently being obtained by some borrowers have a high predictability of being replaced with rates closer to 5%.

 

What $1,000 a Month in Rent Gets You – Robert Burton`s Analysis

When considering a new job or a place to move to find one, you have to consider rent and probably can`t afford to pay more than $1,000 in rent. All across Canada, there is a huge variation in the rental market. Cities like Toronto and Vancouver tend to cost the most due to their hot market and increase in the number of young professionals. It’s a dilemma because if you choose a smaller city there may not be as many employment opportunities.

To help in choosing a destination to for your new job and home, a quick scan of the country’s rental market using Canada’s classifieds site Kijiji.ca find some variation shared by Robert Burton as follows:

Toronto

Finding anything less than $1,000 is extremely challenging. But the advantage is you`re extremely accessible to downtown. The normal rent of single bedroom in the downtown core it closer to $1,800. For a bachelor or a studio apartment, $1,300 and $1,500. But, you might get something below the market rate if you do some hard and quick leg work.

Robert Burton Has Shared Something New Here: Open House In The Cove

Calgary

Some places under $1,000 if you`re planning to live in the downtown core and drive. Whereas if you choose to live in the heart of the city, you can find an affordable single bedroom for around $1,200. Calgary’s rental economy has eased a bit since Alberta’s oil recession hit back in mid-2014. Rents have gone down. You might get a comfortable bright, modern single bedroom for about $900 per month.

Edmonton

Within $1,000 budget, there are plenty of options to choose in the West part of the city. Being motivated by the fact that vacancy rates (the number of unoccupied dwellings in a city) are above average 7% (vs national average 4%). For the sake of comparisons, Toronto’s vacancy rate is hovering at 1%. At around $1,000, you can rent a spacious one bedroom in downtown Edmonton.

Montreal

Montreal2bed robert burton

You have some choice in Montreal within a budget of $1,000. You’ll actually find a one bedroom apartment on a budget of $700. The best thing about the city is that it has many vibrant neighborhoods and it’s well connected to public transit so you can get a charming space within 20 minutes of the downtown core at a reasonable price.

Vancouver

As Per Robert Burton, for a $1,000 budget, the downtown core of Vancouver is tough. Vancouver is in a rental crisis. Vancouver’s vacancy rate is 0.7 percent. With some hard and fast work, you may find one bedroom bachelor and studio apartments near downtown. If you’re willing to live outside of Vancouver a little, like in Coquitlam, you will find something bigger.

Winnipeg

Winnipeg’s rental market is very similar to Edmonton – there are bedroom apartments for under $1,000. Rents on two bedroom apartments in Winnipeg have gone up mildly in the last two years. And as compared to other cities, living in the downtown area of Winnipeg is more expensive.

St. John’s

One can find a nice small home close to $1000 – $1200 close to downtown St. John’s and find a one bedroom apartment downtown for approximately $700.