29 april 2010
You have to think very carefully about whether this is the right choice for you.”
“I think that the reason for such record home prices can be the very, very low interest rates. All you have to do is put down only 5%, and you can leverage up 19- or 20-to-one. I really don’t think it’s going to end well for the majority”.
Indeed, there are some signs that consumer buying power will take a tumble once the Bank of Canada starts tightening.
Benjamin Tal, CIBC economist, said:
“The start of the tightening cycle will show us a new consumer example: a debt-to-income ratio will approach a record-high 150%. This is 40% above the ratio seen the last time the Bank of Canada started to hike. It means that monetary policy will be very effective in slowing the consumer activity”.
You should keep it in mind if you’re planning to buy a new home, especially if it’s a bidding war time and your down payment is less than 10%.
Don’t hurry. Overpaying makes no sense, no matter how active the market is. You really don’t want to get into negative equity situation and then blame yourself.