Canada’s real-estate and mortgage sectors have been booming now for years. One reason for this has been the relatively low interest rates offered by Canada’s central bank and, as an extension, the large chartered banks, as well as other lenders.
However, there is some reason to believe that this era of low interest rates might come to an end, or at least experience some degree of slowdown. In fact, there are at least two reasons to believe this. First, the federal government is initiating measures expected to cool down the housing market in general, as well as mortgages specifically.
Factors beyond Canada
Second, factors beyond Canada’s borders could also be having an effect. For example, Donald Trump’s election as president of the United States is, for now at least, largely seen as having an upward effect on interest rates. That’s because the president-elect’s plans for large infrastructure expenditures are seen to have an inflationary effect on the economy, which can lead to higher interest rates.
So, with these predictions of slowdowns in the real-estate and mortgages sectors, does this mean doom and gloom for borrows and investors in these sectors? Not necessarily.
First, people have been predicting slowdowns and bursting bubbles in these sectors for years, and such predictions have yet to bear fruit.
A proven track record
Second, despite regulatory and political pressures, Canada’s alternative mortgage sector is still a viable destination — both for borrowers looking for lower rates and better terms, and for investors looking for higher rates of return at acceptable levels of risk.
In fact, going back a few decades, the Canadian government established regulations to make investing in private mortgages more viable. As a result, the mortgages industry in Canada has experienced very good growth and stability — despite the natural variations in interest rates and economic conditions.
ASCEND MIC is a mortgage investment corporation (MIC) that specializes in alternative mortgage borrowing, investing and other services in the Greater Toronto Area and beyond. Please contact us to learn more.