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According to recent findings, Canadians are piling on the debt. Canadian consumers collectively owe more than $1.5 trillion, up 7.4% from $1.4 trillion a year ago. The average total debt owed on items like cars, vacations, and shopping and paying hydro now stands at $20,891. The sector that experienced the most growth was auto loans, increasing 6.8% year-over-year. That doesn’t factor in mortgage debt.

This is a significant number: for every dollar that Canadians earn, we owe roughly $1.65 to credit card companies, banks, and other lenders.

Even if Canadians rein in their spending, it doesn’t look like we’re going to get much of a break. That’s because the cost of food is going to climb as much as 2.4% in 2015; that’s faster than the rate of inflation.

For whatever reason, many Canadians find themselves overwhelmed with debt. It could be due to a lost job, unexpected expenses, overspending during the holidays, or even the rising cost of living.

On the plus side, even though debt levels are increasing, the delinquency rate (bills more than 90 days past due) is on a downward trend and stands at just 1.1%. This is due in large part to the ultra-low interest rate environment.

But that could be in jeopardy. First, debt levels can become more unmanageable should Canadians get hit with a large, unexpected bill. On top of that, an eventual uptick in interest rates could put added stress on daily finances.

The mortgage experts at Canadalend.com can help those overwhelmed with debt overcome the day-to-day financial stresses through debt consolidation. Debt consolidation is about taking out an equity home mortgage loan; by doing this, you can consolidate several debts into one easy payment.

You can also refinance a first or second mortgage into a single monthly payment with one interest rate. With interest rates near record lows, it’s still a good time to take advantage of the equity you have built up in your house.

One of the main benefits of a debt consolidation loan or first or second mortgage is that the interest rates will be significantly lower than what bank credit cards or store credit cards charge. You can choose to pay off your mortgage as quickly as possible or reduce your monthly payments and use the extra money for other expenses.

That said, no matter where interest rates are, you’re going to save money by getting a consolidation loan or home equity line of credit (HELOC).

If you’re a homeowner and struggling with debt, Canadalend.com can help you refinance your mortgage at the best rates and conditions possible. To see what kind of loan you qualify for, contact the experts at Canadalend.com today or apply online and a mortgage specialist will help you set up an appointment for a free personal consultation.

Source:

“Canadian Consumer Credit Trends, Q3 2014,” Equifax web site December 12, 2014; www.equifax.com/international/canada/documents/Equifax_Canadian_Consumer_Credit_Trends_Q3_2014.pdf.

Interest Rates Will Rise…But When?

With the Canadian economy recovering and showing signs of sustained strength, 2015 could be the year when the central bank starts to raise its key lending rate. If so, the big question is, when? And will an increase in interest rates change the way Canadians think about mortgages?

To help kick-start the economy after the global economy sputtered back in 2009, the Bank of Canada lowered its key lending rate. The lower rates made it cheaper for businesses and people to borrow money. Pegged at one percent since September 2010, many predict rates will start to creep higher in the second half of 2015.

Once rates start to climb, it will become more expensive for potential homeowners to borrow money or take out a car loan. It will also impact those looking to refinance their variable mortgages since the rate fluctuates up or down based on the prime rate. Those looking to get onto the property ladder with a fixed-rate mortgage will not feel any immediate impact from a rise in interest rates, but they could when it comes up for renewal.

Will Fixed Interest Rates Become More Popular?

In Canada, 66% of property owners have fixed rate mortgages, 26% of Canadian homeowners have opted for a variable mortgage; and eight percent have gone with a combination mortgage. As interest rates climb, those holding variable mortgages may opt for the security of low-interest, fixed mortgages.

While those looking to make big-ticket purchases like a house or car might not like the idea of higher interest rates, they do have an important upside; if interest rates stay too low for too long, bubbles start to appear.

Many potential homeowners, especially those living in Toronto, Calgary, and Vancouver, have seen housing prices outpace the rest of the country and climb out of reach. A rise in interest rates could cool Canada’s red-hot real estate market and make some areas more affordable.

Rising Interest Rates to Cool Canada’s Red-Hot Housing Market

The Canadian Real Estate Association predicts the average national price for the existing residential market (single-family detached houses, condos, and townhouses) will rise just 0.9% to $409,300 in 2015; this compares to the six percent increase in 2014.

That said, Toronto, Vancouver, and Calgary are still expected to skew the figures. The Vancouver and Toronto regions are forecast to increase three percent and four percent, respectively. Before oil prices fell, Calgary real estate was projected to rise three percent to roughly $497,500, but Calgary area real estate could feel pressure if oil prices remain low.

If you’re thinking of buying a home or refinancing, Canadalend.com can help you figure out which kind of mortgage is best suited to your lifestyle needs. Because the licensed agents at Canadalend.com are independent, they have access to hundreds of different lenders; that means you get the best rates with the best conditions.

To see what kind of loan you qualify for, contact the experts at Canadalend.com today or apply online and a mortgage specialist will help you set up an appointment for a free, personal consultation.

Sources:

“Fixed rate mortgages trump variables, report says,” CBC web site, March 13, 2014; www.cbc.ca/news/business/fixed-rate-mortgages-trump-variables-report-says-1.2570911.

“Get Ready For Interest Rate Shock In 2015,” Huffington Post , January 5, 2015.

Federal Government Takes Action to Help Economy

Between early 2006, when U.S. housing prices peaked, and early 2012, when the market bottomed, U.S. housing prices plunged 33%; that was greater than the 31% decline U.S. housing prices experienced during the Great Depression. Many were faced with paying off mortgages worth more than the value of their homes and more yet defaulted on their loans and lost their properties.

To help Canada navigate a recession and avoid a similar collapse, the federal government implemented a number of new measures. First, it initiated a number of tighter lending rules and guidelines that affect how people qualify for government-backed insured mortgages.

And second, to help kick-start the economy, the Bank of Canada lowered its key lending rate; the lending rate impacts short- and long-term interest rate loans like mortgages. Lower interest rates make it cheaper for businesses and people to borrow money from the country’s many lending institutions.

Bank of Canada Lowers Lending Rate

In April 2009, the Bank of Canada lowered its key lending rate a quarter percentage point to 0.25%. By late 2010, against the backdrop of a gradually improving economy, the Bank of Canada had raised it to one percent, where it was pegged until January 2015.

With the North American economy getting stronger, most economists expected the key rate to start creeping higher in the second half of 2015. That didn’t happen; the recent drop in oil prices and slower economic growth forced the Bank of Canada to cut its key lending rate by a quarter of a percentage point to 0.75%. Prolonged low oil prices could force the Bank of Canada to cut the key rate again when it next meets in March.

Near-record-low interest rates are used to help keep the Canadian economy moving. The ultra-low interest rate environment also makes home buying more attractive, as the average five-year mortgage rate in Canada is at a record-low 4.79%.

Government Introduces New Lending Rules & Guidelines

Since 2008, the federal government has made several changes to the rules for government-backed insured mortgages. These rules affect home buyers with less than a 20% down payment.

Some of the biggest changes included reducing the maximum amortization period for a government-insured mortgage from 40 years to 25 years. Home buyers must also have a down payment of at least five percent of the purchase price; previously, Canadians could purchase a home with no down payment. For an investment property (non-owner occupied), a minimum down payment of at least 20% is now mandatory.

The Bank of Canada also reduced the upper limit that Canadians can borrow against their home equity to 80%. Previously, homeowners could borrow as much as 95% of the value of their homes when refinancing.

These initiatives were put in place to make the Canadian housing market more stable, but because larger down payments and shorter amortization periods are now the norm, fewer people could qualify for insured mortgages in Canada.

Some feared that borrowers would end up postponing the purchase of a home or buying one that is less expensive. But the fact of the matter is that many potential home buyers have taken advantage of the low-interest-rate environment to pay off their debts and save for a home.

A survey conducted since the unexpected rate cut was announced found that approximately 15% say cheaper mortgage rates will allow them to get onto the property ladder sooner than expected. In addition, nearly half of respondents expect to buy a home in the next five years.

Canadalend.com Helps Homebuyers Find the Right Mortgage

While the new lending rules make Canada’s housing market more secure, the truth is that Canadians have always been prudent when it comes to borrowing. In fact, only less than half of one percent of all mortgages (0.28%) are in arrears.

No matter where interest rates are at, the licensed agents at Canadalend.com will help you find the most competitive mortgage products. We don’t just look at mortgage rates; we look for one that fits your long-term financial and lifestyle needs.

Unlike Canada’s big banks, which only promote their own lending products, Canadalend.com agents are independent. That means they have your best interest in mind in addition to their access to hundreds of different lends.

To see what kind of loan you qualify for, contact the mortgage experts at Canadalend.com today or apply online and one of our lending specialists will help you set up an appointment for a free, personal consultation.

Sources:

“Bank of Canada lowers overnight rate target by 1/4 percentage point to 1/4 per cent and, conditional on the inflation outlook, commits to hold current policy rate until the end of the second quarter of 2010,” Bank of Canada web site, April 21, 2009; http://www.bankofcanada.ca/2009/04/fad-press-release-2009-04-21/.

“Bank of Canada increases overnight rate target to 1 per cent,” Bank of Canada web site, September 8, 2010; http://www.bankofcanada.ca/2010/09/fad-press-release-2010-09-08/.

“Bank of Canada lowers overnight rate target to 3/4 per cent,” Bank of Canada web site, January 21, 2015; http://www.bankofcanada.ca/2015/01/fad-press-release-2015-01-21/.

Altstedter, A., “Mortgage rate thaw renews fears of Canadian housing bubble,” The Financial Post , January 21, 2015; http://business.financialpost.com/2015/01/21/mortgage-rate-thaw-renews-fears-of-canadian-housing-bubble/.

Fekete, J., “Ottawa tightens mortgage rules to avert household debt crisis,” The Financial Post , June 21, 2012; http://business.financialpost.com/2012/06/21/ottawa-cuts-mortgage-amortizations-to-25-years/.

“Number of Residential Mortgages in Arrears,” Canadian Bankers Association web site; http://www.cba.ca/contents/files/statistics/stat_mortgage_db050_en.pdf, last accessed February 2, 2015.

January Home Sales Down in January

While the Canadian housing market remains robust, recent data show sales activity is slowing down. This could be setting up a buyer’s market as we near the busy spring selling season.

According to the Canadian Real Estate Association, home sales activity was down 3.1% in January on a month-over-month basis. Once again, Canadian housing data shows the major discrepancies between the different regions.

January sales were down in about 60% of all local housing markets. Provincially, the largest declines were felt in Alberta and Saskatchewan. In contrast, housing trends in the Maritimes continue to improve.

On the supply side, the number of newly listed homes increased 0.7%, led by Edmonton and the Greater Toronto Area, while Greater Vancouver, Calgary, and Regina posted the largest monthly declines in new listings. The number of months of inventory is an important supply and demand metric, and at the end of January, there were 6.5 months of inventory, the highest reading since April 2013.

Despite the increase in listings, prices remain stable. For example, in Edmonton, 666 homes were sold in the month of January; the lowest number in five years. At the same time, new listing increased about 30%, a five-year high. Selling prices haven’t really budged, though.

Regional Differences in Canadian Housing

Nationally, January housing prices, which lag sales, were 5.2% higher year-over-year. Two-storey single family homes posted the biggest year-over-year price gains (6.57%), followed by townhouse/row units (5.0%) and one-storey single family homes (4.61%). Apartment units, meanwhile, saw “modest” price growth of 3.11%.

Price gains in Calgary (7.76%), Greater Toronto (7.47%), and Greater Vancouver (5.53%) continued to post the biggest annual increases. Prices were also up in Fraser Valley, Victoria, and Vancouver Island and remained stable in Saskatoon, Ottawa, and Greater Montreal. Prices declined in Regina and Greater Moncton, however.

The national average price for homes sold in January 2015 was $401,143; this represents a year-over-year increase of 3.1%; the smallest increase since April 2013. The price, however, is skewed by sales activity in Greater Toronto and Greater Vancouver; excluding these two markets, the average price is $312,280; a year-over-year decline of 0.3%.

Mortgage Rate War Heats Up

Mortgage rates have been declining since the Bank of Canada made the surprise decision to cut interest rates on January 21 by a quarter of a percentage point to 0.75%. The Bank of Canada had held its benchmark rate at one percent since September 2010.

Low oil prices are negatively impacting the Canadian economy. And with prices expected to remain low for the near future, it is quite possible the Bank of Canada will reduce interest rates again when it next meets in March.

Today, Canada’s big banks are offering five-year fixed rate mortgages for around 3.0% and some of Canada’s smaller banks are offering the same product for as low as 2.5%. Rates are even lower for variable mortgages, with the big banks offering rates near 2.85%. But again, smaller lenders are offering better rates, some as low as 1.99%.

Canadalend.com Finds the Best Rates

When it comes to getting clients the best financial products at the best rates no one comes close toCanadalend.com . The independent, licensed agents at Canadalend.com will help you find the most competitive mortgage products.

Where Canada’s big banks only promote their own financial products, your Canadalend.com agent works to help you get the best rates possible. And because we’re independent, we have access to hundreds of different lenders.

To see what kind of loan you qualify for, contact the mortgage experts at Canadalend.com today or apply online and one of our lending specialists will help you set up an appointment for a free, personal consultation.

Sources:

“Canadian home sales slip further in January,” Canadian Real Estate Association web site, February 17, 2015; http://www.crea.ca/canadian-home-sales-slip-further-january.

Mah, B., “Falling oil prices unnerve Edmonton home buyers and sellers, but little sign of major downturn yet,” The Edmonton Journal , February 22, 2015; http://www.edmontonjournal.com/