At Least Mortgage Rates Are Low
It can be tough to afford a home at the best of times, but with unemployment up and hours worked down, the dream of owning a home is likely more distant for many Canadians now than it was before the pandemic.
And while not every homeowner or renter is in the same boat, the current economic turmoil combined with a recovery period that looks like it will be long rather than short will stretch the finances of many households.
A bright spot amid these dark clouds is that at least mortgage rates remain low by historical standards.
The cost of borrowing to pay for a home varies widely and depends on everything from the length of the term to your credit score, but the rates posted by major financial institutions set a benchmark for these other factors.
With inflation in check and the Bank of Canada’s trendsetting rate low, the average rate for a conventional mortgage with a one-year term posted by Canada’s six major chartered banks was 3.29 per cent as of May 6. Compare this to the 21.25 per cent rate that prevailed in the fall of 1981.
The weekly posted rate for a conventional one-year mortgage in the 1980s averaged 12.6 per cent. After hitting 14.25 per cent in 1990, rates came down to an average of 8.0 per cent in the 1990s and 5.8 per cent in the first decade of the 2000s. They’ve averaged 3.3 per cent since 2010.
Homeowners still have to find a way to make their payments during these challenging times and we need to avoid a major price crash, but today’s lower interest rates make it at least less likely that we will see the huge spike in foreclosures that marked Alberta’s housing market in the 1980s.
Credit: ATB Economics - May 13, 2020