More pressure is piling on first time buyers’ as other major banks in Canada are also following the footsteps of the Toronto Dominion Bank by also increasing on their mortgage rates. This leaves firt-time buyers’ to ponder on when all this misery will come to an end for them.
Despite the fact that the tax refund which was made for first time home buyers has little to do with an increase of mortgage rates from other banks, the present economic status of the country does little to help first time buyers.
On Tuesday, the Royal Bank announced that it will be increasing its rate to 2.94%, an increase of 30 basis points. This raise will come into effect on Thursday, two weeks after Toronto Dominion bank increased it rates from 2.7% to 2.85%.
The raise made by the Royal Bank came as a result of chaos in the bond markets after the U.S election, but according to Jason Friesen of Verico Premiere Mortgage Centre, its still uncertain if the bond market will go back to normal.
“It’s going to be a delicate situation which was not even anticipated by economists,” he added.
However a new solution which is expected to make home buying more affordable is to complement on the land transfer tax from $2,000 to $4,000 on home prices which are above $368,000. This will significantly help first-time buyers in achieving their home buying dreams.
Furthermore, for a Toronto home priced $800,000, the land transfer tax will be reduced from $24,200 to $16,475 for first-time buyers’. This means that buyers will now have to make a 5% down payment for the first $500,000 and 10% on anything above that. With the new mortgage rules however, the least down payment would be $55,000.
Hence a buyer saving the land transfer tax could be able to afford a home. This reduces some amount of stress off their shoulder.
Bill Whyte, senior vice-president at Meridian Credit Union highlighted that although every little amount is important, the land transfer tax is only beneficial when buying a house but does not help first time buyers cover other expenses after purchasing a home.
Whyte suggest that the province should consider reducing on other bills such as, utility bills or home taxes so that home buyers will be able to save or take care of other expenses.Regardless mortgage rates continue to remain low even with new bank rates.
Toronto agents are doubtful on whether the tax refund will make much different as the home prices in Toronto are considerable high, and Chris Cansick of Boslye Real Estate warns that the government should be mindful not to add more problems to the already existing so called housing bubble.
For Blair Mackey, an Oakville-based Royal LePage agent, the tax refund is just a gesticulation of little effect in the hot Toronto market.
According to the Liberal government’s estimate, half of Ontario first-time home buyers will get to benefit from the land transfer tax.