Rising Interest Rates

by Darrin DeRoches July 1 - 7, 2010

Everyone is starting to write about the rising interest rates, the HST and a cooling housing market.  Before everyone goes crazy and starts another mini recession, let’s not forget that interest rates are at a historic low (the lowest in 40–plus years), so of course they have to rise.  The HST will just be a bump in the road. The government knows how to raise taxes at a time when no one is paying attention: the same weekend school finishes for the summer and the week after the G8 and G20 summits – which will no doubt still feature heavily in the news.    The housing market always slows down for the summer and around Christmas.  Everyone has to deal with family and vacations, so naturally buying or selling a home is not a priority.  The market will get back on track in mid September when everyone is back from vacations and the kids are in school.   Comparable sales are down in real estate, but once the tallies are added for this month we will see a spike since a lot of deals are being completed before July 1 to avoid the HST.  So when you look back on the year, you will still see an increase in sales of real estate.  Do not let the monthly numbers sway you in your decision to buy or sell.    The HST is here to stay so we have to get used to it.  I was reading the booklet the government sent out to explain the HST and the biggest hike in taxes is on gas.  Everyone is talking about new homes over $500,000 having HST, but I think the extra 8 per cent on your fill–up will affect everyone.  If filling your tank costs you $5000 a year, it will now cost an extra $400 in tax.  Compare that increase with the average person buying a home over $500,000.  I just love how the government makes everyone focus on housing and HST when your gas bill, hydro, water and filling up your car will cost you way more than HST on a real estate transaction.    Interest rates are going up and they will probably make a good jump in the near future.  If we look back to when the rates dropped, they drop by half a point at a time. When they rise, they will probably do so in the same fashion.  So let’s not get all caught up in the media hype about HST, interest rates and a slowing market.  This hysteria the media causes is just the government using them to divert our attention from the real issues and costs.  The government controls the interest rates and in turn controls the media. Everyone will be writing about the real estate market when we are getting nickeled and dimed at the pumps and in our homes when we pay our utility bills.  This grind will cost you way more money than real estate ever will.  Real estate will always make you money, even with costs, commissions, and now HST added on.  Gas and utilities are the real problem; maybe we should be focusing on going green! V Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.