WITH all the financial issues in the U.S and Europe, there has been unfounded fear regarding the situation in Canada.
The European situation is definitely a crisis, but the impact on Canada is different than in the U.S. The Americans have a much deeper hole to climb out of, and every one of their trading partners makes that climb steeper. Given that Europe represents 12 per cent of the U.S. economy, the EU crisis hurts the U.S. recovery.
As we know, the U.S. housing crisis was caused by reckless lending practices. This hasn't happened in Canada and it won't. The Canadian banking system is still rated the best in the world.
The U.S. has entered into numerous spending and incentive programs and, although these may provide some stimulus for the economy, they will do nothing to help balance the budget. In Canada, we appear to have those factors under control. Although we bemoan the fact the government has halted the Home Renovation Tax Credit and the Eco Energy grants, what these may really mean is the government doesn't feel we need them anymore to bolster our economy.
Four out of 10 homeowners in Canada have more than 30-per-cent equity in their homes. That makes for a tremendous downpayment towards a new home. There is concern about rising interest rates, but many look at this increase incorrectly. We look at where interest rates were at their absolute lowest, at a time when the government was artificially keeping rates down to stimulate a weak economy.
This increase is simply a return to normalcy. Most Canadians lock into a five-year mortgage. So, don't look at interest rates from last year; look at them five years ago. That's the figure by which you will be comparing future mortgage payments to past payments. Using that logic, we see that even with projected hikes, interest rates will only be about .3 per cent higher than what you were previously paying. All in all, mortgage rates are and will continue to be extremely new-housing friendly.
All signs of the Canadian economy and, in particular, the Manitoba economy, point towards a perfect time to purchase a new home. Our hesitation in 2009 may have been based on sound cautionary measures, but now it's time to take the step we've been considering for the past few years.
