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Financial Stress for First Time Homeowners

Financial Stress for First Time Homeowners

April 18, 2022

Two financial concerns for first-time homeowners are rising interest rates and declining house prices, writes Peter Watson.

We can learn a lot about the possible negative emotional side effects of the real estate market by connecting the dots between real estate and personal finances.

Many are new to homeownership. The same way some investors are relatively new to investing significant amounts. Those investment funds are likely to have originated from an employment severance pay or an inheritance.

Suddenly they have a large investment portfolio. Similarly, the way a new homeowner suddenly owns an asset valued at something significantly more than they could have imagined only a few years ago.

My observation is relatively new investors that have significant assets are much more aware and often nervous about their investments, particularly when the market is volatile.

It is normal after someone makes a large purchase to have post purchase doubt.

The two main risks, from a financial perspective, of home ownership have been highlighted in the news.

The Bank of Canada has been warning us that interest rates will increase because of the need to control inflation. Rising interest rates has already happened and will likely continue.

At some point mortgages come due and have to be renegotiated at the current level of interest rate. If you think mortgage payments are daunting now, what could your next mortgage payments be several years in the future?

Last week the Ontario government announced plans to stimulate new house construction. If it is successful, that new supply of housing could have a downward pressure on prices.

New homeowners have two potential areas of concern. Rising interest rates and the value of their house.

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through