Here’s a couple of news items that you might find interesting…
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A study reported in The Financial Post implies that Canadian home owners are better equipped to cope with the increases in mortgage interest rates than they were a decade ago.
In the report, conditioned by RE/MAX Canada, a key metric called LTV Ratio — LT V stands for loan-to-value – has declined by six per cent since 2012. What does it mean? The LTV Ratio measures the size of the mortgage relative to the value of a home, and a drop gives the homeowner more equity in his or her home, and less debt.
The LTV Ratio is now 57 per cent across the country, and 50 per cent in Vancouver. Homeowners with 50 per cent equity are better able to withstand lower home values, and unlikely to be caught “underwater” by carrying loans that exceed the value of their homes when their mortgages come up for renewals.
Vancouver’s LTV ratio is among the lowest in Canada, where the housing market has a reputation for stability relative to other international markets.
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Not so fast, says Tiff Macklem. After raising the interest rate by .25 per cent and saying on January 25 there would be a “pause” on increases, the Bank of Canada’s governor was hearing that analysts were then interpreting no more increases in the foreseeable future with decreases likely to start by the middle of the year.
He read enough to issue this clarification during a speech this month in Quebec City:
“I want to be very clear: we are pausing interest rate hikes to assess whether we raised interest rates enough to get inflation all the way back to target,” Macklem told reporters after the speech. “Monetary policy works with the lag. We’ve raised rates rapidly. We’re seeing the effects. We know there’s more to come. It makes sense to pause and assess whether we’ve done enough.
“If new evidence begins to accumulate that inflation is not declining in line with our forecast, we are prepared to raise our policy rate further.”