The housing inventory in Maple Ridge is the lowest it’s been in 25 years

Letters: ‘Perfect storm is brewing’

These new rules are but one factor that will impact the housing market in the coming year.

Editor, The News:

Re: New rules to heat up housing market (The News, Dec. 18).

I was pleased to read your article about the new mortgage down payment rules. These new rules are but one factor that will impact the housing market in the coming year, and it’s important for consumers to be informed.

I was dismayed, however, to find that your article only covered part of the story, the realtors’ side. Although the housing market may be temporarily buoyed by the rush to buy homes before the new rules take effect, the ultimate effect is likely to fuel a correction in the market in the coming year and beyond.

What your article didn’t mention, but was just as significant, if not more significant, as the new down payment rules, is that the U.S. federal reserve recently hiked interest rates for the first time in nearly a decade. The Bank Of Canada rates follow the fed’s rates 90 per cent of the time.

But even if  the Bank of Canada lowers rates, even goes to negative rates (as some interpret the minister’s remarks), the fed’s hike (the first of many over the next two years) will impact Canadian bond rates, which drive mortgage rates.

The simple fact is, Canadians, including folks in Maple Ridge, will be paying higher mortgage rates in the coming year. For folks with existing mortgages that will reset in the next two years, they could be in for quite a shock: someone with a current mortgage at 2.5 per cent could be looking at a reset to 5.0 per cent in 2017. Add in the likelihood of Canada falling into a recession due to the collapse of oil prices, growing unemployment, and 2016 looks like a perfect storm for the housing bubble to pop.

You published a column a few months ago, warning that the market is overheated, and Canadians are holding record debt. I know the paper gets significant advertising revenue from the real estate and mortgage industry, but it would be a disservice to your readers to only present the realtors’ side of this important story.

There is plenty of evidence to support the growing risk that recent and current home buyers run of falling under water, where their homes will be worth less than their mortgages with just a 10-15 per cent correction in the market.

Bryan Barrow

Maple Ridge

 

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