Bank of Canada DROPS Qualifying Rate
Previous Qualifying Rate: 5.04%
Current Qualifying Rate: 4.94% What Does the Rate Drop Mean for Buyers?
Increase in borrowing power for buyers
Buyers can now qualify for a higher mortgage amount - roughly 2% more than before
This may not seem like a lot, but it can help buyers on the cusp of approval push their application forward
EXAMPLE
Qualifying at previous rate of 5.04%
Income: $80,000/year
Maximum Mortgage: $400,000
Qualifying at new rate of 4.94%
Income: $80,000/year
Maximum Mortgage: $410,0000
The Effects of COVID-19 on Canadian Homes Sales
Canadian Home Sales and Listings have Seen Record Lows in April 2020
National home sales have dipped 56.8% in April 2020 compared to April of last year (and 57.9% in the Greater Vancouver Area)
However, the MLS Home Price Index has only seen prices drop an average of 0.6%, the first drop since May of 2019
This suggests that although sales have decreased, demand has also decreased accordingly, keeping prices relatively stable
What Does this Mean for the Canadian Housing Market and Economy?
In spite of April's numbers, preliminary May numbers suggest that sales have already started to pick up
Realtors have already started to find creative ways to manoeuvre the new landscape with virtual tours and other technological advances
With everything taken into consideration, the residential market appears to remain afloat
However, we may see an increase in mortgage arrears in the following years
*The information above is taken from Sherry Cooper [Chief Economist of DLC]
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