Many prospective homeowners understand this is necessary pain to restore affordability to the housing market
This likely won’t be the last hike this year, either. The Consumer Price Index hit 7.7 per cent in May and the central bank projects it will hover around 8.0 per cent for the next few months — the highest inflation seen in 40 years. This may finally be the peak, but with the BoC’s less-than-stellar prediction track record as of late, I wouldn’t bet any of your increasingly devalued currency on it.
Those with variable rate mortgages will see larger shares of their payments go to interest and potentially an increase in monthly payments. They should have been stress-tested for this and, frankly, they should have expected it given the unlikelihood that rates would remain near zero in the long term.
Will this eat into household budgets and derail some financial plans? In some cases, yes. Will it mean diverting more income to mortgage payments? Again, sometimes yes. Will it cause some anxiety and discomfort? Also yes. But this is what younger generations of renters have lived with for years, with things set to get even worse in the near future.Article content
However, many prospective homeowners understand this is necessary pain. In order to restore any semblance of balance and affordability to the housing market, the low-interest-rate and QE-induced froth of the past two years must go. This means higher interest rates.Disconcertingly, politicians on both the left and right either don’t understand this basic fact or are choosing to ignore it in order to pander to both anxious homeowners and the less economically savvy.
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