June 2023 Update

Date: June 30, 2023

As you can see, my crystal ball is broken due to overuse!

It’s been a rough year for many of us, with the increased cost of housing, grocery bills, and overall cost of living, so it pains me to say that my opinion (I hope I’m wrong) is that we will see an increase in July.

I’ve come to think of the BOC as the strict parent doing all the wrong things for all the right reasons. The BOC is doing what they feel is best to control inflation, and the last .25% increase seemed to slow things down considerably; this is why I”m leaning towards another increase as a strong possibility in July.

The Good News!

The May inflation numbers are down 1%, taking inflation to 3.4%

However, we are one step closer to the 2% target at the cost of the worst housing cost inflation in history, running at 29% year over year.

The question on everyone’s mind is, “What will the BOC do on July 12, 2023?”

The Bad News!

There is not much talk about the current fixed rates and the fact that the fixed rates have increased from about .50% to 1% over the last month.

Perspective!

It’s evident that things are not great for many, as I mentioned in my opening paragraph; however, I want to keep things in perspective.

Let’s compare where things were just six months ago.

Let’s compare Nov 2022 to June 2023

When I write things down, it helps me make sense of it, and as you can see from the above, things are not much different when we look at the bond and fixed rates.

Yes, there is a 1% increase in prime; however, we also had an average $117,000 increase in home prices.

As you can see, there is no predictability to these numbers; however, if you are a current homeowner, your pocketbook may be screaming at you, but your home equity and market appreciation are making up for it, let me explain.

Here are some numbers:
Based on a home valued at $1,079,000 (from above) I worked out some numbers.

With a 1% increase in prime from 6 months ago, your payments would have increased $687 per month and so over 6 months that would be $4,122 in payments.

But I took it a little further. In June 2022 the prime rate was at 3.20% and in June 2023 it’s sitting at 6.95%

The same house valued at $1,079,000 would have seen an increase of $2,420 monthly to their mortgage payment with the prime rate difference.

$2,420 over twelve months equals $29,040 in additional payments, which I realize is not a small number for anyone however I’m focusing here on the fact that this home increased by $117,000 in one year and if your payments increased by $29, 090 then the bright side is that you have made $87,960 in market appreciation and equity.

If you are currently a homeowner, you are still winning with the market appreciation. I don’t think you can find an investment that can make you $87,960 as quickly as your home.

For those of you struggling with these numbers, lets connect and see what other solutions you have other than selling the home that is making you money.

Bottom line:

The jury’s out on what the BOC will do in July, but my guess is another increase.
Fixed rates are currently higher than a month ago but in line with where they were six months ago.
You have two choices if your monthly payments are now uncomfortable for your household. 1. Lock in your rate with your current lender. 2. Move to another lender if they offer a lower rate – that’s where we come in.
The June inflation will be released on July 18, just days after the BOC announcement on July 12, 2023

Mortgages can be complicated; we are here to help you make “cents” of it.

We focus on Mortgage Solutions, Period!

To learn more connect with Ana Cruz 905.870.0513 or email at ana@askanacruz.ca