Affordability
affordability
noun
- The extent to which something is affordable, as measured by its cost relative to the amount that the purchaser is able to pay.
The last few months our affordability has definitely taken a hit. Everything from gas, housing and food is up. There are recent news reports that people are eating less in order to save some money. Yet our pay checks have not kept up with the steady increase of the cost of everything.
In terms of housing and mortgage affordability, things are vastly different over the last 24 months. We have had a stress test for mortgage qualification, this is in order to protect us from rising rates so we will still be able to afford to make the payment. Not sure that they had this current market in mind when they came up with them.
At the start of last year our qualification rate was 4.79%. This changed last spring when the housing market went into overdrive and they increased it to 5.25%. The thought was that this increase would cool the market, in my mind there was no effect. Now there is another part of the stress test which says that the qualification rate will be either the stress test rate or the benchmark rate +2%. Now that we are in a much higher interest rate environment, it is now the latter as 5 year fixed rates are starting at 4.29%, so this makes the qualification rate now 6.29%.
With these higher qualification rates and still high housing prices, this has now priced many out of the housing market. For example people who have lived here in Halifax all their lives can not afford to buy in the neighbourhoods where they grew up. Yet there is still more talk about future interest rate increases by the Bank of Canada to help curb inflation.
So with our current inflation rate still sky high, talks of more rate increases and the Russian invasion of Ukraine still dragging on, we may have to do our best keep our spending in check until this all starts to settle down.
Patrick
p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.
p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).
p.s.s.s You can download my new mortgage app here
