Impending Crash?

Here we go again.............suddenly the real estate market in Toronto is going to crash! With all the doom and gloom that has been printed lately, you would think that we are headed for disaster.

Interest rates for long term mortgages (5 years +) have increased in the last few weeks, several times and I think this has caught a lot of people by surprise. A few weeks ago, you could have locked into a 5 year term for 5.09% but now you can count on at least 6%!

On a $300,000 mortgage, that would mean an increase of $159 a month!

Not a huge amount but it could be the difference between someone entering the real esatate market or not.

Will rising interest rates have an immediate impact on Toronto's housing boom - probably but not as significant an impact as some would suggest. Remember, tomorrow there could be an announcement that mortgage rates have come down. That being said.......Toronto's real estate market is overheated and could use a bit of cooling. Especially for those buyers who are always in bidding wars - they might find less competition!

So what's likely to occur is lower year over year increases in homes as long as interests are rising. Rates could stay at these levels and we'll see what the impact is.

In the fall of 2005 - a 5 year mortgage was at 4.3%. Shortly afterwards, rates rose making a 5 year mortgage hover around 5% and the same drama unfolded then as it is now. We survived then as I am sure we will survive now!

So let's all take a deep breath - impending crash? Well not anytime soon!

Sam