Here's How the Controversial USMCA Will Affect Your Chances of Owning a Home in Brampton
It's no secret that the dream of homeownership is slipping through people's fingers as home prices in Brampton and surrounding cities remain at deeply unaffordable levels into 2019.
Persistently low inventory has increased home prices exponentially and Brampton is, according to real estate brokerage Zoocasa, officially a seller's market.
But while the news has never been good for prospective homeowners (who also have to deal with a stress test that requires them to qualify at higher interest rates than they'll ultimately be paying), it looks like the new USMCA trade agreement between Canada, the U.S. and Mexico could also complicate matters.
According to a recent Ratehub.ca guest post on Zoocasa.com, USMCA could have an impact on mortgage rates.
Need a little refresher on USMCA?
In October 2018, Canada agreed to the new United States-Mexico-Canada Agreement trade deal, which will replace NAFTA. This agreement came months after U.S. President Donald Trump launched a polarizing trade war against Canada, often threatening to scrap NAFTA altogether (NAFTA had been in place since 1994).
Ratehub points out that it's similar to NAFTA, but gives the U.S. greater access to Canada's dairy market and encourages more domestic production of motor vehicles. It also increases labour and environmental regulations and includes updated intellectual property protections.
Ratehub says that while the new deal is expected to have far-ranging implications for many industries, it has also impacted Canadian mortgage rates.
So, how will it impact mortgages?
Ratehub says climbing interest rates will ultimately affect prospective homebuyers.
"One of the big questions for aspiring first-time homebuyer is how much mortgage can I afford? There are many factors that will determine this; home prices, income, down payment amount, and interest rates," Ratehub writes.
"And the trade deal is expected to have an impact on one of those factors: Mortgage rates."
Ratehub says that prior to the latest Bank of Canada rate increase (which occurred in 2018), trade uncertainty was one of the major factors cited by the BoC for maintaining its policy rate.
That means that the BoC held off on increasing its benchmark rate - which impacts mortgage rate fluctuations - until a deal was agreed to.
Ratehub says that now that a deal has been struck, however, mortgage rates will further increase if and when the BoC decides to continue hiking its own target rate.
While this sounds concerning, homebuyers can breathe a sigh of relief.
At least for now.
The Bank of Canada (BoC) has announced that it plans to hold its trend-setting interest rate at 1.75 per cent in response to sluggish oil prices and a slower national housing market.
That said, it does not plan to refrain from hiking interest rates indefinitely—and with the negotiations officially out of the way, it can continue to hike rates as the economy grows over the next year.
In fact, the BoC says a neutral range between 2.5 - 3.5 per cent will eventually be necessary to keep inflation in check.
And while rates are holding steady now, the BoC is confident the country's economic outlook will improve this year and persist into 2020, making small but significant hikes probable going forward.
Do you plan on purchasing a home in 2019?