The Bank of Canada has increased its key lending rate by 0.25%, to 0.75%. The question is: do we freak out? In short, no!
Although I am not a real estate professional, like many of you, I have been thinking about the real estate market in Montreal. Depending on who you ask, we are either on the brink of a small market correction, with talks of household debt consistently rising along with the impact of rising interest rates. OR the real estate market is completely undervalued compared to Vancouver and Toronto. Who can we trust? Who do we believe, and how can we make sound decisions while surrounded by so much conflicting information?
Truth is, and I am being honest here, nobody knows! No matter how well versed, no matter how much experience or how many degrees one has; nobody can tell you with absolute certainty what will happen in the future.
SO, if you’ve been renting for a while and have been careful and diligent with regards to saving money and you’re finally approaching a time in your life where you’re looking to buy your very first home, what exactly do you do? Do you keep saving, wait it out and hope that the market will become more affordable BUT run the risk of it becoming even more un-affordable? Or…do you jump right in?
This is what my experience as a financial advisor has taught me; like most investment decisions, they must be guided by your timeline. (Not your Facebook timeline!) Meaning, if you’re buying a house and you have the intention of living there for the long term (let’s say 20 years). Then, like most sound investments, given enough time they generally increase in value. NOW. You can never rule out a short term correction in any market, however over the next 20 years I believe it is very likely that the price of real estate will increase in value.
That being said, a 0.25% rise in interest rates will have an impact on your monthly mortgage payment. If you’re considering the purchase of your first home, it’s important to sit down (or stand) and go over your budget to ensure you do not take on more debt than you can afford.
A friendly reminder that I am not a real estate professional and the views expressed here should not be considered as real estate investing advice.
Daniel Enayatzadeh is a Financial Security Advisor specializing in investment and insurance planning. He can be reached at 514-996-9400 or at firstname.lastname@example.org