|  Homeowners thinking sales as mortgage rates rise Canadian homeowners struggling to make ends meet as inflation soars and interest rates rise are increasingly eyeing an exit from the housing market, according to a new survey from Manulife. One in four Canadian homeowners said they’d be forced to sell their homes if interest rates continue to rise as monthly mortgage costs get too high to stomach. John Pasalis, president of brokerage Realosophy, told Global News that homeowners should be insulated from a rapid rise in interest rates thanks to the federal mortgage stress test — "in theory." "But for some households who are going to see their mortgage payment more than double over the next three or four years, they're not going to be in a position to handle those additional payments, combined with the fact that many of the other costs in their lives, due to inflation, have gone up," he said. And with the U.S. Federal Reserve hiking interest rates by 75 basis points this week, economists increasingly feel the Bank of Canada will follow suit in July. Read more about absorbing rising mortgage costs here.  Flair and WestJet shake up summer travel The airline industry in Canada is going through a major shakeup ahead of the busy summer travel season. WestJet said Thursday that it will soon focus its resources back in western Canada and on low-cost routes and destination vacations. One analyst who spoke to Global News said that could be a sign it’s working harder to cut costs and compete with low-cost carriers such as Flair Airlines, which recently survived a brush with regulators over whether it’s truly Canadian enough. Flair’s CEO told Global News in an interview this week that the foreign ownership concerns are behind the Edmonton-based airline, which is now focused on scaling up its fleet and meeting pent-up travel demand. Find out what analysts think of Flair’s prospects and where it still needs some work here.  What’s behind the (latest) crypto crash? Bitcoin and a number of major platforms in the cryptocurrency space have had a rough week. The popular cryptocurrency has fallen far from its peak last fall, now sporting a value nearly two-thirds lower than its all-time highs. Trading platforms including Coinbase, meanwhile, have announced layoffs and a major lender in the space, Celsius Network, sent shockwaves through the market when it froze transactions on Sunday. Experts in the space have started freely using the term “crypto winter” to describe the market — a period of dwindling values and lack of interest in cryptocurrencies and blockchain applications. Despite the coolness in crypto, many experts remain convinced Bitcoin and its contemporaries will live to rise back to their previous highs in time. Read more here. ________________________ – THE QUESTION – “My partner and I currently have a two-bedroom condo in downtown Ottawa where we pay around $2,300 a month on a fairly low mortgage rate. Our family is growing, though, and we need to upsize to a larger home. We'd love to avoid selling the condo and are considering renting it out as an income property when we buy a new home. But with interest rates rising, is it a good idea to take on a second or much larger mortgage right now? Or are we better to off-load this condo? Our current mortgage is on a fixed term but is up for renewal next year.“ — A Money123 reader “Let’s start with the question about selling the condo. If you’re considering renting it out then presumably either: (A) you don’t need its equity for a down payment on the new home, or (B) you can tap that equity if needed. The next factor is cash flow. You need to compare the potential revenue on your particular property to all expenses and add a 10-15 per cent buffer. And if you’re financing your new home, rising borrowing costs are another consideration. Fortunately for landlords, average rents across Canada are booming and that trend will likely continue for a while, thanks to high home prices, tapped-out consumers, surging interest rates and home value risk. This is becoming quite the landlord-friendly market for those investors with a long-term holding timeframe, and I stress ‘long-term.’ If the cash flow projections look good, the next question is, can you afford a 20 per cent haircut on the condo if prices dive. A 15-25 per cent selloff is very plausible given we’re staring at another 1.50 to 2.25 percentage points of rate hiking. But if you’re considering being an investor, you know that it’s a long-run game. Real estate has virtually always beat inflation over the long haul and timing the market is extremely difficult. Another consideration is renter quality. You want to do a careful background check on the renters and don’t settle for tenants with borderline qualifications (e.g., low credit scores, a short employment tenure, high debt loads, etc.). The last thing you want is an eviction nightmare. And the final question is, can you qualify for a mortgage on the new property, and carry financing on both properties. A broker or lender is best to answer this question. You also need access to enough cash for an emergency, via a rainy day fund, line of credit or worst case, liquid investments, a TFSA, etc. And of course, the ideal investor is one with minimal non-business debt, especially high-interest debt. There’s always more to consider but assuming the key points above are in check, and assuming you’re financially stable with strong credit, solid employment and a favourable five-year outlook, then starting a rental portfolio now can pay long-term dividends.“ -Robert McLister, mortgage specialist, mclister.com ___________________________ Want your money question answered by an expert? Get in touch! | 
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