Home prices to increase in 2013

Canada Mortgage and Housing Corporation is forecasting a stable housing market for British Columbia with light upticks in sales numbers, average prices and housing starts in 2013.

“Factors in 2013 driving the housing market are expected to be a little bit stronger,” Carol Frketich, B.C. regional economist for CMHC said. “There is expected to be a bit of a pick up in job growth next year, economic growth and demographic growth as well.”

Average prices, which are down about five per cent in Vancouver this year from last year, are expected to climb about 2.6 per cent by 2013, both in Vancouver and across B.C.

Please click here to read the complete Vancouver Sun article. 

Bank of Canada holds on interest rate

As expected the Bank of Canada is holding its benchmark, overnight rate at 1% for the 15th consecutive setting. In the accompanying policy statement the bank said the decision was made in light of the current global economic situation. It also downgraded this year’s economic growth projection from 2.4% to 2.1%.

A growing number of analysts have been backing up the time line for an interest rate hike by the Bank of Canada. Through the last quarter of 2011 and the first quarter of this year the call was for a 25 to 50 basis point hike by late 2012 or early next year. Now that’s being rolled back to the middle of 2013.

Mortgage ratees continue to stay low

Canadian fixed mortgage rates continue to stay at record lows.  The bank of Canada was forced to keep its overnight rate at 1% (bank prime 3%) on the last announcement June 5th.  It acknowledged the European debt crisis has caused a sharp deterioration in the global sector.  The BoC has not increased rates since September 2010 and is clearly in a holding pattern.

Economists are now speculating it could be some time before rates increase and some are even calling for a possible decrease if the Global crisis don't improve.  Either way this is good news for Canadians who want to borrow money.

When interest rates are low it effects all aspects of credit, from car loans, lines of credit, and the biggest of all mortgages.

With 5 year fixed rates as low as 2.99% many people are refinancing their current mortgages into lower rates and to consolidate higher credit card debt, allowing them to save thousands of dollars in interest.

Bank of Canada looks trapped on interest rate

Looks like the BoC will be forced to keep interest rates at 1% (bank rate 3%) next Tuesday June 5th.  Negative Growth in the global economy as well as well as lower than expected GDP growth of 1.5% compared to the forecast of 2.5% are key factors.

With the CDN dollar still overvalued, and the US federal reserve looking to keep it interest rate on hold until 2014, combined with the ongoing European mess continue to give good reason the Bank of Canada's best options will be to continue to exercise its wait and see approach. 

This is good new for borrowers looking to purchase/upgrade on property or refinance an existing mortgage as rates are at all time lows once again with a 5 year fixed rate of 3.09%. 

Click here to read the complete Globe and Mail article

Its not just about the intererst rate

Finding a good mortgage rate online is a cinch. Anyone who has ever looked for rate comparison sites knows the Internet is packed with them.

But determining the best mortgage term – the length of the mortgage contract – is trickier because up-to-date term comparisons are hard to find.

Although mortgage terms are often overshadowed by the intense focus on mortgage rates, it pays to put a lot of thought into term selection. It’s the No 1 factor in determining how much interest you’ll fork over to a lender.

If you pick a closed mortgage with the wrong term, you’re stuck with that rate until maturity, unless you cough up a penalty to break the mortgage. Worse yet, if you choose a “no-frills” mortgage – one with lower rates in exchange for more restrictions – you’re often barred from leaving your lender for the duration of the term, unless you sell the property.

Click here to read the complete Globe and Mail article

The Bank of Canada left its main interest rate untouched at 1% Tuesday   while
painting a brighter economic outlook and hinting for the first time since last
summer that it’s beginning to look for an opportunity to raise borrowing costs.

The decision to stand pat for a 13th consecutive meeting was expected. But
after weeks of sunnier rhetoric from Governor Mark Carney amid a strengthening
domestic recovery, Bay Street analysts had been debating how far he would go in
trying to reshape expectations that he may be on hold until late next year.

The statement on Tuesday’s decision was vague about timing, saying only that it
may become necessary to increase rates, but that this would depend on “domestic
and global economic developments.” But, just by saying so, Carney is clearly
starting to lay the groundwork for rate hikes if the Canadian economy and the
global backdrop continue to improve. Significantly, he boosted his 2012 growth
forecast for Canada by four tenths of a percentage point, to 2.4%. And though
he cut his 2013 forecast by the same amount, to 2.4%, the slack in the economy
is now projected to be chewed up in the first half of 2013 instead of in the
third quarter of next year, so possibly six months earlier.

Flaherty anounces budget. No changes to mortgage rules

Finance Minister rejected calls to tinker with mortgage insurance rules, offering a budget that leaves the maximum amortization cap at 30 years and the minimum down payment at 5 per cent.

With the budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.

Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.