May
05

The Recession.

The other day we were discussing mortgages and the impact of the soon-to-be-over recession. Housing prices fell for a very brief period of time (and it was a fantastic time to buy). Since then we are up above the pre-recession peak.

All is not well, however. When the New York Times makes mention of a potential housing bubble in a March article, we’re getting the negative attention we have thus far, avoided. It can only get worse from her when almost 80% of pre-tax income is used to support a 2 bedroom bungalow in the Vancouver area.

Someone in the industry said to me “the recession was short-lived, but the real impact will be felt for a long time in house prices”. We think we’re out of the woods, but with the rapidly increasing fixed rising rates, the sudden change in mortgage rule qualification, and the jump in prime rate, the taps have tightened and the flow of money will be restricted. If we felt that the recession had any impact on house prices and the market, these new rule changes will really show us what an impact will feel like – and it won’t be pretty.

So what can you do? If you’re in variable, and haven’t been doing so, pay down your mortgage as fast as possible by increasing your mortgage payment. If in fixed – ride it out because that 5% rate that looked pretty horrible earlier this year is suddenly “the norm” again. Most important, examine your renewal options by calling us anytime to discuss. Over 80% of clients renew with their current lender – potentially a very costly decision without shopping around.

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