Home search: Twentysomethings know that interest rates won't stay low forever
Carla Kadi is a new realtor looking to become a homeowner herself. Because of the nature of her work, the 22-year-old North Vancouver woman feels confident about making her first purchase.
“It will be an advantage in the way that I understand the process and how it works,” Kadi told the Georgia Straight in a phone interview.
She and her 25-year-old partner have been renting in the house of the young man’s parents in Lynn Valley for about a year. They’ve had many discussions about buying a place of their own.
“Finally, we feel like we’re at a place where we’re comfortable, where we can do it,” Kadi said.
In the same way that she guides clients through the course of purchasing a home, Kadi has made sure that she and her boyfriend were taking the right steps.
They’ve had themselves prequalified for a mortgage, so they know how much they can afford. They’re hoping to buy a condo in Lynn Valley and stay close to green spaces, where they take leisurely hikes with their puppy.
Kadi has also consulted a financial planner to see how she and her boyfriend can better manage their finances.
Even though they haven’t bought yet, they’re carrying on like they already have by putting away money monthly for their future mortgage payments, strata fees, property taxes, and utility bills.
With a $500,000 home, Kadi estimates that they have to have about $2,250 per month to cover everything.
Kadi is also keeping an eye on interest rates. Although the Bank of Canada left its benchmark rate of 0.5 percent unchanged in April this year, she knows that interest won’t stay low forever.
“We are concerned about that in the next five years,” she said.
An economic analysis released on May 4 by the Desjardins Group predicted that the central bank may increase its benchmark rate by 0.5 percent per year starting in 2019, bringing it to about 2.5 percent by 2021. According to the Desjardins paper, that could mean a two-percent increase in variable and five-year-fixed mortgages.
“It will make it even more unaffordable to buy a property,” Kadi said about the prospect of higher interest rates.
A home-affordability monitor by the National Bank of Canada, a commercial bank, noted that with current high home prices, owners and first-time buyers are now more vulnerable to the shock of rising mortgage rates.
According to the document released on April 25, 2017, a one-percent increase on a five-year mortgage will mean that a Vancouver-area homeowner will pay an additional $496 each month.
Despite the challenges that homeownership brings, Kadi said that she and her partner are convinced that buying is the way to go.
“It’s yours, and you’re not borrowing it,” she said. “And the rental rates are almost just as high as the mortgage payments now.”
Kadi has had her real-estate licence for more than a year, and she’s with North Vancouver–based VPG Realty. She works closely with one of the company’s realtors, Bernadette Dunnigan, from whom she seeks advice.
“I’m able to ask my boss, Bernadette, quite a few questions about what she thinks is a good investment and what the market is doing,” she said about Dunnigan, who will be her agent in her purchase.
She can also count on her VPG Realty family: “The best part about working for the team that I work for is we each can do our own research and get the information needed to know what is fair market value and what’s a good offer on a property.”
The young couple’s preapproved mortgage is good until August. They’ve been looking, and, according to Kadi, the ones they've liked so far in Lynn Valley were going for more than their $500,000 budget.
Perhaps summer is a better time, when competition and bidding are less common, because many people are on vacation.
Maybe they’ll find something outside Lynn Valley, but Kadi and her boyfriend have not given up.
“We haven’t valued what the difference is with going a little bit farther, but it’s not something we’re willing to do just yet,” Kadi said.