Our blog

Canada’s Finance Minister, Jim Flaherty, has said interest rates, which have been artificially kept near-record lows since September 2010, are going to go up over the long term, regardless of what international central banks do.

Because the Canadian and U.S. economies and monetary policies are closely linked, Canada’s mortgage rates tend to run closely with the U.S. housing market. For example, in January 2008, before the U.S. housing market crashed, the interest rate on a Canadian five-year fixed mortgage was 5.89%; today, five-year fixed rates are being offered near 3.79%.

South of the border, in January 2008, a five-year fixed mortgage was offered at 5.45%; today, they are hovering near 3.02%. The Federal Reserve has said it will keep its federal funds rate (which mortgage rates are based on) near zero until the economy improves. That means the Fed is waiting for an unemployment rate near 6.5%; currently, 7.3% of Americans are unemployed.

That said, economists within the Federal Reserve have said they would like to see interest rates kept low until the U.S. unemployment rate drops to 5.5%. On top of that, interest rates should be kept below normal (two percent) until at least 2020.

Meanwhile, the European Central Bank unexpectedly cut its benchmark rate to a record low 0.25% recently, in an effort to prevent the eurozone from slipping back into a recession, and would do so until at least 2015.

Back here in Canada, many have become accustomed to the near-record low interest rate environment. This has helped propel Canada’s biggest housing market higher: sales in the Greater Toronto Area (GTA) jumped by more than 19% year-over-year in October, while home sales increased from 6,713 last October to 8,000 this year. Prices have also been running in step. The average sale price in the GTA was $539,058, up 7.4% from the same period in 2012.

Prices were also strong on the other end of the country. In Vancouver, sales were up 37.8% year-over-year in October and an incredible 7.2% in September. Unlike the GTA, home prices in the Greater Vancouver Area slipped 0.5% year-over-year to $600,700.

On one hand, the Canadian government said it would intervene in the housing market only if it saw bubble-like indicators, which it says are not present right now. On the other hand, the Canadian economy isn’t doing so well that the Bank of Canada can raise its interest rates.

But it will—the question is, when?

The rise in interest rates could negatively impact those who have become accustomed to a low interest rate environment. The mortgage experts at Canadalend.com think it’s important to warn Canadians to be careful when taking on debt, since the cost of borrowing it will eventually start to rise; cutting into their daily expenses.

Whether you’re a first-time home buyer looking to get on the property ladder or you’re looking for a second mortgage or loan, it’s important to work with a mortgage brokerage that has a history of helping their clients achieve both their short- and long-term financial goals.

The licensed, independent agents at Canadalend.com do everything they can to ensure their clients make the most informed decision possible when it comes to getting a mortgage or loan. Canadalend.com agents help their clients get on a stronger financial footing.

Canadian consumers are losing confidence in the economy. While consumer confidence was near an annual high at the beginning of December, it has since slipped. The weekly consumer sentiment index increased to 59.3 for the week ended December 6, up from 58.9 a week earlier. (Source: Mayeda, A., “Consumer confidence nears year high as Canadians put faith in rising house prices,” Financial Post, December 9, 2013.)

In early December, the number of people who thought real estate prices would increase over the next six months also increased from 40.0 the week earlier to 40.3—the highest level since March 2012. (Source: Ibid.)

But as we headed into the final weeks of the holiday season, consumers became less optimistic. Canadian consumer confidence levels declined for the second straight week on the heels of growing pessimism about the economy and real estate prices.

The weekly consumer confidence measure dipped to 57.8 for the week ended December 20, the lowest level in nearly two months. Canadians lost confidence in all four subjects tracked by the Bloomberg Nanos Canadian Confidence Index: personal finances, the economy, job security, and real estate. (Source: Mayeda, A., “Canada Consumer Sentiment Falls a Second Week on Housing,” Bloomberg, December 23, 2013.)

What a difference two weeks can make. On December 20, the share of respondents who thought Canadian real estate prices would rise over the next six months dropped to 34.8—the lowest level since August and a sharp drop over the 40.3 indicated just a couple weeks earlier. (Source: Ibid.)

Consumer confidence is an important economic indicator. For starters, it reflects our optimism in the state of the economy, which is echoed in the way we save and spend. When Canadians are more optimistic, they spend money; when confidence levels are retreating, Canadians spend less money, indicating unease. The more confident we feel about the stability of our incomes and jobs, the more likely we are to spend.

Despite avoiding the housing crash that decimated the U.S. market and being one of the few countries to steer clear of the Great Recession, Canada has a stubbornly high unemployment rate. In January 2013, the unemployment rate was 7.1%, and by the end of the year, it had dipped only marginally to 6.9%. (Source: Statistics Canada web site, last accessed December 31, 2013.)

Unfortunately, weak consumer confidence and high unemployment are not the best ingredients for an economy that generates roughly 60% of its gross domestic product from consumer spending. (Source: “Household final consumption expenditure, etc. (% of GDP),” The World Bank web site, last accessed December 31, 2013.)

In spite of waning consumer confidence, the fact of the matter is that the Canadian economy is getting stronger, with demand in the Canadian housing market expected to remain robust across most provinces in 2014.

The Canadian Real Estate Association has projected that resales in 2014 will come in at 475,000 homes nationally, up from a previous 2014 forecast of 465,600. On top of that, it expects the national price for a home to rise to $391,100 from $382,200 in 2013. (Source: “Canadian Real Estate Association predicts a strong year in 2014,” December 16, 2013, Toronto Star.)

In an effort to help shore up the economy and prevent a housing market crash and recession (like the one experienced in the U.S.), the Bank of Canada has held the overnight lending rate at an artificially low one percent since late 2010. The low interest rate environment is supposed to make it easier for consumers and businesses to borrow.

In fact, thanks to the Bank of Canada keeping its policy rate at one percent (which impacts variable mortgage rates), more and more potential homebuyers are able to get mortgages. And the Bank of Canada has hinted interest rates will remain low for at least a couple more years.

So in spite of declining consumer confidence, the Canadian housing market remains robust. And with artificially low interest rates expected to stay put for the foreseeable future, 2014 will continue to be an excellent environment for potential homeowners.

First-time homeowners looking to take advantage of low mortgage rates or those looking to access the current equity in their home with a second mortgage should contact Canadalend.com or apply online . A mortgage specialist will help set up an appointment with an independent, licensed Canadalend.com agent at your earliest convenience.

If your New Year’s resolution is to find your dream home at the best mortgage rates possible, contact Canadalend.com.

After a red-hot year, is Canada’s housing market taking a breather as we enter 2014?

According to Canadalend.com, 2013 was a pretty strong year for the Canadian housing market. In an economic environment where the Bank of Canada kept its key policy rate—which impacts variable mortgage rates—at one percent, home sales and prices have soared.

In December, home sales in Toronto increased almost 14% year-over-year, while home prices climbed 8.9%. In Calgary, home sales increased eight percent, while housing prices were up 8.6%. Out on the west coast, December home sales for Vancouver were up an eye-watering 71% from a year ago, while the benchmark for properties increased roughly two percent to $603,400.

On the heels of a strong year in housing, the Canadian Real Estate Association (CREA) predicts that the national price for a home in 2014 will rise 2.5% in 2014 to $391,100. They have also forecast that national sales activity will climb 3.7% to 475,000 units. The strong increase reflects the weak start to 2013, which, the CREA said, it did not expect a repeat of in 2014.

The CREA also predicts Alberta to post the biggest rise in average price in 2014 with 3.4%, with gains in British Columbia (2.5%), Saskatchewan (2.2%), Manitoba (2.1%), and Newfoundland and Labrador (2.2%) running just ahead of overall consumer price inflation. The average price increase for a home in Ontario will run slightly below it at 1.9%.

As for sales activity, the CREA predicts it to increase 3.7% year-over-year throughout all of Canada, with the largest gains being made in British Columbia (8.4%), followed by Saskatchewan (5.3%), Alberta (3.5%), and Ontario (three percent).

Despite the robust outlook, recent housing indicators suggest 2014 is not starting out the way the CREA had predicted. Three separate reports show the Canadian housing market is cooling, with building permits and housing starts slipping and prices levelling off in November and December of 2013.

November building permits slipped 6.7%—more than double the three percent fall that analysts were expecting. December housing starts came in at 189,672, which is significantly lower than the 196,000 forecast. And according to Statistics Canada, the nation’s New Housing Price Index was flat in November after posting a modest 0.1% rise in October.

With national home prices levelling off, Canadalend.com expects the Canadian real estate market to cool further in 2014, as weak economic growth and stubbornly high unemployment put home prices out of reach for many Canadians. Housing prices will also cool as builders slow down to let demand catch up with the supply of new projects.

The combination of a cooling market and continued low interest rates could make the property ladder that much more attainable for many well-positioned first-time home buyers. The Bank of Canada has said it won’t raise its key policy rate until the economy is on more stable footing; with the economy showing increased instability, this might not happen until 2015 at the earliest.

To see what kind of mortgage you quality for, contact Canadalend.com or apply online and a mortgage specialist will help set up an appointment with an independent, licensed Canadalend.com agent at your earliest convenience.

Drawing from hundreds of banks and lenders, your Canadalend.com agent will work closely with you to find out which kind of mortgage is best suited to meet your financial and lifestyle needs. We will also try and get you pre-approved in 24 hours or less. At Canadalend.com, our agents take the stress out of qualifying for a mortgage, giving you more time to look for your dream home

Sources:

“CREA Updates Resale Housing Forecast,” The Canadian Real Estate Association web site, December 16, 2013; http://www.crea.ca/stats/quarterly-forecasts.

Hopkins, A., “Canada housing starts, permits drop, prices flat as market cools,” Reuters web site, January 9, 2014; www.reuters.com/article/2014/01/09/canada-economy-idUSL2N0KJ12N20140109.

“New Housing Price Index, November 2013,” Statistics Canada web site, January 9, 2014; www.statcan.gc.ca/daily-quotidien/140109/dq140109c-eng.htm.

Canadian consumers are losing confidence in the economy. While consumer confidence was near an annual high at the beginning of December, it has since slipped. The weekly consumer sentiment index increased to 59.3 for the week ended December 6, up from 58.9 a week earlier. (Source: Mayeda, A., “Consumer confidence nears year high as Canadians put faith in rising house prices,” Financial Post, December 9, 2013.)

In early December, the number of people who thought real estate prices would increase over the next six months also increased from 40.0 the week earlier to 40.3—the highest level since March 2012. (Source: Ibid.)

But as we headed into the final weeks of the holiday season, consumers became less optimistic. Canadian consumer confidence levels declined for the second straight week on the heels of growing pessimism about the economy and real estate prices.

The weekly consumer confidence measure dipped to 57.8 for the week ended December 20, the lowest level in nearly two months. Canadians lost confidence in all four subjects tracked by the Bloomberg Nanos Canadian Confidence Index: personal finances, the economy, job security, and real estate. (Source: Mayeda, A., “Canada Consumer Sentiment Falls a Second Week on Housing,” Bloomberg, December 23, 2013.)

What a difference two weeks can make. On December 20, the share of respondents who thought Canadian real estate prices would rise over the next six months dropped to 34.8—the lowest level since August and a sharp drop over the 40.3 indicated just a couple weeks earlier. (Source: Ibid.)

Consumer confidence is an important economic indicator. For starters, it reflects our optimism in the state of the economy, which is echoed in the way we save and spend. When Canadians are more optimistic, they spend money; when confidence levels are retreating, Canadians spend less money, indicating unease. The more confident we feel about the stability of our incomes and jobs, the more likely we are to spend.

Despite avoiding the housing crash that decimated the U.S. market and being one of the few countries to steer clear of the Great Recession, Canada has a stubbornly high unemployment rate. In January 2013, the unemployment rate was 7.1%, and by the end of the year, it had dipped only marginally to 6.9%. (Source: Statistics Canada web site, last accessed December 31, 2013.)

Unfortunately, weak consumer confidence and high unemployment are not the best ingredients for an economy that generates roughly 60% of its gross domestic product from consumer spending. (Source: “Household final consumption expenditure, etc. (% of GDP),” The World Bank web site, last accessed December 31, 2013.)

In spite of waning consumer confidence, the fact of the matter is that the Canadian economy is getting stronger, with demand in the Canadian housing market expected to remain robust across most provinces in 2014.

The Canadian Real Estate Association has projected that resales in 2014 will come in at 475,000 homes nationally, up from a previous 2014 forecast of 465,600. On top of that, it expects the national price for a home to rise to $391,100 from $382,200 in 2013. (Source: “Canadian Real Estate Association predicts a strong year in 2014,” December 16, 2013, Toronto Star.)

In an effort to help shore up the economy and prevent a housing market crash and recession (like the one experienced in the U.S.), the Bank of Canada has held the overnight lending rate at an artificially low one percent since late 2010. The low interest rate environment is supposed to make it easier for consumers and businesses to borrow.

In fact, thanks to the Bank of Canada keeping its policy rate at one percent (which impacts variable mortgage rates), more and more potential homebuyers are able to get mortgages. And the Bank of Canada has hinted interest rates will remain low for at least a couple more years.

So in spite of declining consumer confidence, the Canadian housing market remains robust. And with artificially low interest rates expected to stay put for the foreseeable future, 2014 will continue to be an excellent environment for potential homeowners.

First-time homeowners looking to take advantage of low mortgage rates or those looking to access the current equity in their home with a second mortgage should contact Canadalend.com or apply online . A mortgage specialist will help set up an appointment with an independent, licensed Canadalend.com agent at your earliest convenience.

If your New Year’s resolution is to find your dream home at the best mortgage rates possible, contact Canadalend.com.