Economic news and downturns in key areas can affect the money banks pay in both Canada and the There are many variables that can influence the rates on long-term debt instruments, but an understanding of key economic indicators can provide clues to the future direction of interest rates in both Canada and the US.
A higher-than-expected CPI or increasing trend is considered inflationary, and can cause bond prices to fall and yields and interest rates to rise. Likewise, a lower-than-expected CPI cause yields and interest rates to fall. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a fixed market basket of consumer goods and services. The CPI is considered the most important measure of inflation.
The government’s employment report provides employment, hours and earnings estimates based on payroll records of business establishments. The payroll employment is the most significant indicator of current economic trends each month, together with the unemployment rate. Economists use payroll employment data to predict other economic indicators (the Personal Income, Industrial Production, and Index of Leading Economic Indicators). Consumer credit data tracks debt levels for auto financing and commercial banking credit and are considered a fairly good indicator of consumer spending. Consumer credit report is generally considered to have little impact on interest rates.
A bankruptcy makes a major impact on your credit score and makes it much more difficult to qualify for a home mortgage. First, you can expect a drop of 100 or more points. That immediately takes you from excellent to poor. Then a record of the bankruptcy stays on your credit history for 10 years. A foreclosure stays on for seven years. Other negative information such as a late payment stays on for three years.
Want to strengthen your bargaining position? Get prequalified. Want your offer to stand out in a case of multiple offers for the same house? Get prequalified. Look at it from the seller’s perspective. If you had 2 offers on the table for your house, one from a fully prequalified buyer and the other from an “I’ll get around to that soon” buyer–to which offer would you devote the most attention? Even if the prequalified buyer’s offer was $1000 less, would you take the chance on the buyer that perhaps may not be qualified? When it comes to a seller evaluating offers, “a bird in the hand…” definitely applies.
The amount you can spend on a house depends on your income, the amount of cash you can allocate to the transaction, and the mortgage terms available in the market at the time you are shopping. These include interest rates, points, term, down payment requirements, and the maximum allowable ratio of housing expense to income. In addition, affordability may be affected by your existing indebtedness if this is higher than the indebtedness that lenders are willing to accept, and by closing costs which vary from one part of the country to another.
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