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Interest Rates and Mortgage Borrowing Power in Canada /

15 Aug 2017

This decline resulted in a Rising average family income coupled with 52.9 percent increase in the mortgage borrow- decreasing interest rates resulted in a pro- ing power (maximum eligible mortgage size) of nounced increase in the ability of potential potential home buyers. [...] Like most goods, housing The link between interest rates, prices reflect the complex interaction of sup- borrowing, and home prices ply and demand and are driven by the innu- Before analyzing the link between interest rates merable motivations of buyers and sellers. [...] This calculation es- ing prices.3 timates the maximum amount of lending avail- able to a family earning the national average The effect of lower interest rates on income in 2000 at different interest rates.6 mortgage borrowing power Figure 1 shows both the prevailing interest rate7 To estimate how interest rates influence mort- for each year and the maximum amount of eli- gage borrowing power, we [...] Calgary 76.8% (25.4% in real terms) Toronto 35.2% (1.6% in real terms) How rising incomes amplify the effect of Montreal 45.5% (13.0% in real terms) lower interest rates Canada 53.0% (18.5% in real terms) The previous section examined the effect of interest rates on mortgage borrowing power Source: Statistics Canada, 2017b and 2017c. [...] The variation power by major metropolitan region between in the mortgage amounts is driven entirely by 2000 and 2014 based on both the change in av- the differences in average family income be- erage family income and the falling interest rate tween the four cities in 2000: $51,572 in Van- (from 7.0 percent to 3.0 percent).
economy credit finance interest rate banking debt financial services interest investments loans mortgages prices loan balance sheet mortgage demand for money housing markets lending loan market economy, business and finance mortgage loan lenders credit and debt financial and business service debts down payment mortgage borrowing
Pages
10
Published in
Vancouver, BC, CA

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