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Canadalend.com knows better than anyone that it’s been a tough winter. A misery index tracked by the U.S. National Weather Service shows that the winter of 2014 is one of the most miserable on record. The cold weather is also being blamed for many of the economic challenges facing the U.S., including weak February housing data.

This isn’t so in the Great White North, where the winter has been even more brutal. Toronto, which is still in the grips of the second coldest winter in 25 years, saw the average housing sale price in February climb 8.6% year-over-year—and five percent month-over-month—to $553,193.1

Real estate prices get hotter the further west you travel. In Calgary, the price of a single family home rose 9.1% year-over-year to $482,800. In Vancouver, the sale price for all types of residential properties climbed 3.2% year-over-year to $609,100; if you want a single-family detached home in Vancouver, the average price is an eye-watering $1.36 million.

With that in mind, it shouldn’t be a total surprise to learn that Canada is home to six of the 20 most expensive cities for real estate in all of North America: Vancouver came in at #1, followed by Toronto (#4), and Calgary (#8). Ottawa, Edmonton, and Montreal were not far behind, placing in the bottom half of the list, but not too far down; it’s still cheaper to buy a home in Denver, Miami, Chicago, Houston, Dallas, Orlando, and Cleveland.2

But is Canada’s housing market overvalued? It depends on who you ask. Not surprisingly, most real estate agents don’t think so, though many concede that even though the Canadian housing market is not in a bubble, it will experience a soft landing, meaning that Canadian housing prices may not rise as quickly as before.

Pimco, the world’s largest manager of bond funds, believes Canadian home prices will start to dip later this year and then fall by 10% to 20% over the next three to five years. The group also believes mortgage rates will rise later this year, softening prices.

The Deutsche Bank said it thinks Canadian home prices are 60% too high and states unequivocally that Canada is the most overvalued housing market in the world. The Canadian banks and the Organisation for Economic Co-operation and Development (OECD) also think prices are too high, but by a much smaller margin.

In an effort to release the steam in rising Canadian housing prices, finance minister Jim Flaherty initiated a number of tighter lending rules, including reducing the maximum amortization period for a government-insured mortgage from 40 years to 25 years and reducing the upper limit that Canadians can borrow against their home equity to 80%.

While these efforts made it more difficult for some first-time home buyers to enter the market, it didn’t really do anything to curb the increase in home sales.

That said, the Bank of Canada has kept its overnight lending rate at one percent since late 2010. The overnight lending rate is the benchmark rate retail banks borrow money at and impacts the prime rate—what variable mortgages, lines of credit, and student loans are based on.

With Canadian housing at record highs, many first-time home buyers are wondering what kind of mortgage is best for them. Five-year fixed mortgage rates are hovering near three percent and floating rate mortgages are as low as 2.35%. While consumers can be lured by deals, there’s more to consider when getting a mortgage than just interest rates.

For example, a floating (variable) interest rate might sound like a deal, but if you aren’t prepared for a sudden rise in interest rates, it might not be. At the same time, 82% of home buyers in 2013 went with a fixed rate mortgage.3

To lock in or not to lock in? That’s where Canadalend.com comes in. Low mortgage rates mean 2014 will continue to be a great year to buy a home, but not all mortgages are created equally. Your independent, licensed Canadalend.com agent will search hundreds of banks and lenders to find the mortgage that will help you get and stay in your dream home, and in most cases, they’ll get you pre-approved in 24 hours or less.

Sources:

1. Perkins, T., “Canadian home sales defy expectations,” The Globe and Mail, March 5, 2014; www.theglobeandmail.com/report-on-business/economy/housing/toronto-home-prices-jump-nearly-9-per-cent/article17311961/.

2. “North America’s top 20 housing markets: Vancouver, Toronto, Calgary among most expensive on continent,” Financial Post, March 5, 2014; http://business.financialpost.com/2014/03/05/north-americas-top-20-housing-markets-vancouver-the-most-expensive-on-continent-while-toronto-calgary-beat-new-york-city/.

3. Marr, G., “How lower interest rates are making variable mortgages more tempting,” Financial Post, March 4, 2014; http://business.financialpost.com/2014/03/04/how-lower-interest-rates-are-making-variable-mortgages-more-tempting/.

It might not look or feel like it, but spring is officially here. And while the cold weather is expected to continue to grip large parts of the country well into April, the spring real estate housing season is already heating up, according to the experts at Canadalend.com.

Despite numerous reports that the housing market is overbuilt and overvalued, the Conference Board maintains that the Canadian housing market is neither. In fact, the Conference Board argues that housing starts over the last three years are in line with the 20-year average.

Even in Toronto, there is only a borderline case that it could be overbuilt. As a result, the Conference Board believes that only some Canadian market segments are due for a modest correction at best.

Overall, if there is some sort of price action, chances are good that it will result in a soft landing, not a hard one. A soft landing means housing prices across the country will rise, but not as quickly as they have historically; a hard landing, on the other hand, would mean the bursting of a housing bubble and a major correction in housing prices.

One major reason why the Canadian housing market will not experience a hard landing is because of a lack of supply; while there is increased demand, there is little supply. For example, the average selling price on Toronto’s multiple listing service (MLS) in February was $553,193, an 8.6% year-over-year increase, while house sales were up just 2.1%.

It’s even tougher in Vancouver. According to the Real Estate Board of Greater Vancouver, 2,530 homes were sold in February, a 40.8% increase from a year ago. At the same time, the Greater Vancouver Area experienced a 9.3% year-over-year decline in the number of homes listed for sale.

It’s not just potential home buyers in Toronto and Vancouver that are facing higher prices and fewer choices; it’s coast-to-coast. For home owners, it’s the perfect combination for getting multiple offers: low interest rates, low supply, and increased demand.

And for home buyers, it means a bidding war. And many are prepared for the battle: one in three Canadians are willing to get into a bidding war and a third of first-time home buyers will spend more than they expect to for the right home.

It’s tough to now get too emotional when it comes to buying a home. Many people have already purchased the welcome mat and mentally moved in before even signing on the dotted line.

The experts at Canadalend.com understand that buying a house can be exhilarating, but it can also be stressful. Even under the most ideal conditions, it can be difficult to navigate the often-confusing process of applying for a mortgage and buying a house.

If you’re looking to move into your dream home this year, contact an independent, licensed Canadalend.com agent. A Canadalend.com agent can get you pre-approved in 24 hours or less and help you find the mortgage best suited to your needs.

Is it better to get a fixed or variable mortgage? And what lender is best for you? After all, there’s a big difference between getting a mortgage rate of six percent and three percent. Whether you’re buying an existing home or looking at purchasing a new build, a Canadalend.com agent can help you save time and money and reduce risk.

Sources:

Perkins, T., “Canadian home sales defy expectations,” The Globe and Mail, March 5, 2014; http://www.theglobeandmail.com/report-on-business/economy/housing/toronto-home-prices-jump-nearly-9-per-cent/article17311961

“Vancouver and Calgary home sales still climbing with prices up,” Financial Post, March 4, 2014; http://business.financialpost.com/2014/03/04/vancouver-calgary-home-sales-prices-february

With the spring real estate market heating up, more and more of Canada’s big banks are ratcheting up their efforts to attract first-time home buyers. Falling bond yields, which impact long-term fixed rates, have allowed big banks to slash their five-year fixed mortgage rates, like the Bank of Montreal’s reduction to 2.99%.

While a 2.99% five-year fixed mortgage sounds enticing and may even get some potential home buyers to step onto the property ladder, Canadalend.com warns that there’s more to this than meets the eye. In fact, there are a few things home buyers chasing low mortgage rates need to be aware of.

For starters, the ultra-low interest rates being offered by the Bank of Montreal is only open until April 17, and even then, it comes with some pretty unconventional terms. For example, you can’t break this particular 2.99% mortgage before it comes up for renewal in five years unless you sell the property, refinance with the Bank of Montreal, or renew with another Bank of Montreal product. This means that if you sign with the Bank of Montreal, you’re stuck dealing with them.

In addition, the Bank of Montreal will only hold the 2.99% rate for 90 days, compared to the 120 days with most lenders. Normally, homeowners can prepay 20% of the mortgage annually without penalty and increase their payments by 20% a year. Sign on the dotted line with Bank of Montreal, however, and you’re stranded with just 10% on both types of payments.

The fact of the matter is, Canada’s big banks aside, home buyers can do better than 2.99% if they want. Unfortunately, Canada’s big banks aren’t really all that objective and will only point you toward their own lending products, whether they’re suited for your lifestyle and financial needs or not.

Canada’s big banks also won’t tell you that you can get lower rates on a five-year fixed mortgage somewhere else and with better terms. As a first-time home buyer, you might be more interested in a variable mortgage, as they are trading well below 2.99%. If the potential for rising interest rates doesn’t make you nervous, a variable mortgage is a great way to help chip away at the overall cost of a house.

Go to a big bank simply because of the low rates and you could end up paying huge penalties should something unexpected happen, because banks penalize their clients if they break a mortgage before it comes up for review. Why? Because big banks have to somehow recoup the interest payments it loses out on when you break a mortgage contract.

The mortgage experts at Canadalend.com know that because buying a home is one of your biggest investments, it’s important to not just get the best rate, but also get the best conditions; after all, there are a lot of non-big-bank lenders who offer better variable and fixed rates with better conditions, including softer penalties for breaking a mortgage.

Canada’s big banks are not unlike Vegas; no matter how good an offer looks, it always benefits the house. Whereas the big banks only push their own products, the independent, licensed agents at Canadalend.com search out hundreds of banks and lenders and help you get the best overall mortgage possible.

The Canadian real estate market is one of the more discussed markets in North America, and for very good reason; between Toronto, Vancouver, and Calgary, you are dealing with some of the most expensive housing markets on the entire continent. One bank even insisted that Canada has the most overvalued housing market in the entire world. And with Toronto reaching a milestone this quarter of seeing their average cost of single-family homes escalate over $1.0 million, the experts atCanadalend.com advise that some first-time home buyers looking to get on the property ladder may have to take a different route.

With condos in Toronto averaging a third of the cost of a single-family home—approximately $376,000—first-time buyers are almost forced into considering a condo as their initial purchase instead of a house. It’s a tough pill to swallow, especially for those buyers who are looking to start or already have a family, but as the housing market continues to soar, condos are becoming the most affordable option.

Seventy percent of all Canadian first quarter condo transactions took place in Toronto, comprising the majority of the 9% year-over-year increase in sales. And while the average price of a condo within Toronto is also up 5.6%, it still seems to be the more affordable route for first-time homeowners.

Another option for first-time home buyers is to wait, but with the current interest rates remaining as low as they are, that may not be the most intelligent decision. In addition, first-time buyers are typically in the market because they need a home right away and waiting just isn’t an option. This may be because they are having their first child, about to get married, or have settled into jobs that allow them the stability and finances they need to take that step.

While Vancouver still remains the most expensive city in North America to buy a home, Toronto and Calgary are both in the top 10. With those being three of the major cities in the country, it’s difficult for first-time buyers to do anything but consider purchasing condo units.

The high cost of living doesn’t seem to be affecting homeowners in general; Vancouver in particular saw a 40% year-to-date sales increase despite a three-percent rise in prices. Low interest rates may be a factor in that stat—a variable that experts are saying won’t last much longer.

It’s important for first-time home buyers to visit Canadalend.com to determine their financial reality. Canadalend.com will find a suitable lender and then establish a mortgage rate that works best for you. For first-time home buyers in particular, Canadalend.com is a great asset because we take all of the initial work off your hands.

We’ll search our databases and get you approved by a lender within 24 hours; then you can decide what type of housing is affordable for you and whether or not living in one of the major Canadian cities is worth the cost.

The high cost of living in any of these cities should not deter first-time home buyers. Overall, there is an abundance of homes, and with some patience, finding the right one at the right cost is definitely possible. Affordable homes are also available not far outside each of these major cities, and usually at much better rates. As the purchaser, it’s up to you to determine what is most important to you when buying your first home; start by visiting Canadalend.com to get the absolute best mortgage rate that works for you.

Sources:

“North America’s top 20 housing markets: Vancouver, Toronto, Calgary among most expensive on continent,” The National Post , March 5, 2014; http://business.financialpost.com/2014/03/05/north-americas-top-20-housing-markets-vancouver-the-most-expensive-on-continent-while-toronto-calgary-beat-new-york-city/ .

Tencer, D., “Average Price for a Single-Family Home in Toronto Passes $1 Million,” Huffington Post , April 18, 2014; http://www.huffingtonpost.ca/2014/04/18/house-prices-toronto_n_5174437.html .

Pigg, S., “Condo sales, prices up—but rents starting to ease,” The Toronto Star , April 15, 2014; http://www.thestar.com/business/real_estate/2014/04/15/condo_sales_prices_up_but_rents_starting_to_ease