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Is Canada’s housing market overvalued or in a bubble? Despite climbing at an annual rate of 4.4%, many have been predicting a correction—but as Canadalend.com observes, it hasn’t materialized.

FitchRatings stated recently that it believes the Canadian real estate market is 20% overvalued, while rating agency Morningstar predicted that a 30% correction could happen over the next few years. Despite widespread fears that the Canadian housing market is overheated and ripe for a correction, the fact of the matter is that the broader Canadian real estate market is fairly well-balanced. And the huge month-over-month increases are being skewed in large part by three markets: Toronto, Calgary, and Vancouver. It would be more than just a little unfair to view the country’s real estate market from that limited viewpoint.

Nationally, Canadian real estate prices rose 6.9% year-over-year in June to $413,215. Of the $21.2 billion in activity for the month, roughly half can be attributed to Toronto, Calgary, and Vancouver. If you take Toronto and Vancouver out of the mix, the national average home price falls $77,000 to $336,000.

For example, the average selling price for a Toronto residence in June was up 7.1% year-over-year at $568,953. In Calgary, the average selling price jumped 5.5% to almost $467,000, while in Vancouver, the average selling price climbed 4.4% to $796,714. Finally, in Hamilton, the average price of a home increased 4.09% to $409,000.

But it’s a different story elsewhere. Regina home prices averaged $307,800 in June, a 0.4% decline year-over-year. Prices have also cooled in Halifax, where they average $275,000, and Quebec City, which averages $268,000. In Montreal, the average sales price inched up 0.9% to $332,462, while the average sales price in the nation’s capital, Ottawa, was up a modest 1.7% at $365,366.

Major price movements in Toronto, Vancouver, and Calgary are attracting all of the headlines, but the fact of the matter is that housing continues to be affordable in almost every region.

First-time home buyers looking to take advantage of low interest rates or interested in seeing just what kind of mortgage they qualify for should contact an independent, licensed agent at Canadalend.com.

Not only will a Canadalend.com agent help you find out what you can afford, but they will also get you the best mortgage possible.

The mortgage experts at Canadalend.com will help you get pre-approved for a mortgage in 24 hours or less. The pre-approval rate lasts for 120 days and protects you if interest rates rise while you’re looking for your dream home. To help you get the mortgage best suited to meet your lifestyle and financial needs, a Canadalend.com agent will draw from hundreds of banks and lenders.

Interested in seeing what kind of mortgage you qualify for?  Contact Canadalend.com or apply online and a mortgage specialist will set up an appointment with an independent, licensed Canadalend.com agent at your earliest convenience.

Source:

Marr, G., “Ratings agency Fitch calls for more government action in ‘overvalued’ Canadian housing market,” Financial Post, July 14, 2014; http://business.financialpost.com/2014/07/14/canada-housing-maket-fitch/.

McMahon, T., “Why Canada isn’t immune to a U.S.-style housing crash,” Macleans, July 10, 2014; www.macleans.ca/economy/realestateeconomy/why-canada-isnt-immune-to-a-u-s-style-housing-crash/.

“Canadian home sales edge higher in June,” The Canadian Real Estate Association web site, July 15, 2014;http://crea.ca/canadian-home-sales-edge-higher-june .

In an effort to help kick-start the Canadian economy after it dipped into a recession in 2009, the Bank of Canada artificially lowered its overnight lending rate. By lowering the lending rate, the Bank of Canada was hoping banks would lend more money to businesses and people.

And for the most part, it worked, according to the experts at Canadalend.com ; Canada avoided the same kind of crippling recession to hit the United States and many other major global economies. However, the Canadian economy has not rebounded as quickly as many had hoped.

As a result, the Bank of Canada has held its key interest rate at one percent since September 2010; Canadian interest rates have actually been at or near zero for 68 months. The central bank signalled it wouldn’t start to raise rates until the Canadian economy was on sustainable footing.

Most didn’t think that would happen until mid-2015. This is good news for first-time home buyers or those looking to take out a second or third mortgage because the overnight lending rate impacts the rate banks offer to borrowers for loans, mortgages, and savings.

But recent economic data suggests the Canadian economy is struggling more than people thought, and it’s quite possible the Bank of Canada will not raise interest rates until mid-2016.

In July, Statistics Canada tallied the addition of just 200 jobs to the economy, far fewer than predicted; analysts were expecting a gain of 25,400 after posting a loss of 9,400 in June. The poor hiring numbers mean the Bank of Canada have little choice but to keep ultra-low borrowing costs near record lows deep into next year—and according to some, maybe even beyond. (Source: Carmichael, K., “Surprisingly negative jobs report supports low-rate stance,” The Globe and Mail ,August 8, 2014; www.theglobeandmail.com/report-on-business/economy/unemployment-rate-falls-to-7-per-cent-despite-minor-jobs-gain/article19967683/.)

When it comes to getting buying your first home, the ultra-low interest rate environment is welcome news. That’s because the more your mortgage costs, the less affordable it is to buy a home. Lower interest rates also free up capital that can be put to better use elsewhere.

Today, five-year fixed-rate mortgages are available in the 2.99% range. Five-year variable-rate mortgages are available in the 2.40% range.

The recent jobs data continues to point to a struggling economy. For potential home buyers, it looks like fixed and variable interest rates are going to stay low for the foreseeable future.

If you’re interested in seeing what kind of mortgage you qualify for, contact the independent, licensed mortgage experts at Canadalend.com. Not only will we help you get pre-approved in 24-hours or less, but we’ll also draw from hundreds of banks and lenders to ensure you get the mortgage best suited to meet all your needs.

Autumn, the second busiest buying and selling season for Canadian real estate, is just around the corner and Canadalend.com observes that Canada’s big banks are doing everything in their power to lure in first-time home buyers.

The Bank of Montreal has once again lowered its five-year fixed mortgage rate to 2.99%, from 3.29%, a move that, in the past, has forced a rate war with the Canada’s other big banks. (Source: Marr, G., “Bank of Montreal lowers five-year fixed mortgage to 2.99%,” The Financial Post , September 9, 2014; http://business.financialpost.com/2014/09/09/bank-of-montreal-lowers-five-year-fixed-mortgage-to-2-99/.)

The move comes on the heels of lowering bond prices, which directly impact mortgage rates. At the beginning of the year, many economists were predicting that the five-year fixed rate would inch higher as the economy improved. That hasn’t happened; in fact, rates have been on the decline.

The yields on five-year government of Canada bonds ended 2013 at 1.95% and are currently hovering around 1.60%—the same level they were at in June. Five-year mortgage rates are driven by five-year government bond yields, with roughly 66% of all Canadian mortgages having a five-year term.

The lower interest rates are also in response to weak economic data coming out of Ottawa. In August, the Canadian economy unexpectedly lost 11,000 jobs, and on top of that, Canada’s fourth-quarter hiring outlook hit a four-year low. While the unemployment rate is steady near seven percent, the Canadian economy remains tepid. (Source: Evans, P., “Canada loses 11,000 jobs in August,” CBC web site, September 5, 2104; www.cbc.ca/news/business/canada-loses-11-000-jobs-in-august-1.2756655.)

The Bank of Canada has kept the overnight rate at one percent since September 2010 and hinted it wouldn’t raise it until the Canadian economy showed more signs of sustained growth. That said, the recent economic data suggests the Bank of Canada will continue to keep interest rates low well into 2015.

This is great news for first-time home buyers or those looking for a second or third mortgage. Keep in mind, however, that not all mortgages are created equal; there’s more to consider than just numbers, though that information may be hard to pull from the banks.

For example, the Bank of Montreal’s 2.99% financial product comes with strings. It has a prepayment option of 10% of the mortgage each year, as opposed to 20%, which is common on comparable products at other financial institutions. But there’s more! The Bank of Montreal will only hold the 2.99% rate for 90 days, compared to 120 days with most lenders.

You also can’t break this particular 2.99% mortgage before it comes up for renewal in five years unless you sell the property or refinance with another Bank of Montreal product. Take the Bank of Montreal up on their 2.99% offer and you’re stuck dealing with them and only them.

Canadalend.com notes that while the rate offered by the Bank of Montreal is the lowest among the big banks for a five-year term, it is still higher than what is being offered by discount brokers. For that matter, you may not even want a five-year fixed mortgage.

To get all the facts about getting the mortgage right for you and your lifestyle needs, contact a licensed agent at Canadalend.com. Because we’re independent, your Canadalend.com agent works for you, not a bank or lending institution. We will sit down with you and figure out what kind of mortgage you need and search out hundreds of banks and lenders to get you the best overall mortgage possible.

Canada’s housing market is bucking the global trend. In an economic climate in which many real estate markets are struggling, the Canadian housing market is strong. And it is expected to remain resilient.

For example, before 2006, Canadian and U.S. house prices tracked each other fairly closely for at least 25 years. All that changed though when the U.S. housing bubble burst in 2007. Housing prices in Canada and the U.S. have been moving in opposite directions for much of the past six years.

More broadly, Canadian home prices are up 145% since 2000, compared to 71% in the United States. Housing prices in the U.S. have risen almost 25% since bottoming in 2012, but still need to climb an additional 20% before they even reach their pre-recession levels. (Source: House Price Index, “Teranet – National Bank National Composite House Price Index,” www.housepriceindex.ca/Default.aspx, last accessed September 24, 2014.)

The Canadian housing market, on the other hand, is up just 12% over the same time period. But it’s important to remember that the Canadian housing market didn’t go through any kind of correction. According to the most recent data, the housing gap between Canada and the U.S. is more than 60%. (Source: Tencer, D., The Huffington Post Canada, “Canadian House Prices 62 Per Cent Higher Than U.S. Prices: BMO,” April 23, 2014; www.huffingtonpost.ca/2013/04/23/canada-house-prices-us_n_3139918.html.)

Despite mortgage rates being kept low, Canadian home sales continue to close in on all-time highs. Sales of existing homes have climbed for seven straight months. In August, the national average for an existing home was approximately $400,000, 5.3% higher than a year ago. August existing home sales are at their highest levels since January 2010 and just 6.0% below their record peak in February 2007. (Source: CREA “Canadian home sales climb higher in August,” September 15, 2014; http://creastats.crea.ca/natl/index.htm.)

The mortgage experts at Canadalend.com understand that the data are a little misleading; at least for most of the country. The national average price is skewed upward by activity in the Greater Toronto and Greater Vancouver Areas. If you take these two markets out of the equation, the average price for an existing home in Canada is closer to a more manageable $325,000, while the year-over-year increase drops to 3.9%.

With Canadian housing prices trending steadily higher, many first-time home buyers are concerned they won’t be able to afford to get onto the property ladder. This is compounded by the fear that the Bank of Canada will raise interest rates in the near term.

The Bank of Canada has held its key interest rate at 1.0% since September 2010 and said it won’t raise rates until the economy improves. With the economy on stable footing, many are wondering when interest rates will rise and how high.

Because the Canadian and American economies are so intertwined, most economists don’t think Canada will raise its interest rates until the U.S. does. And with the U.S. economy still fragile, it doesn’t look like the U.S. will raise its key interest rates until late 2015.

Even then, the U.S. lending rate is significantly lower than the one set by the Bank of Canada, so if the U.S. does raise it in late 2015, this doesn’t mean interest rates will move higher here. In fact, because of the gap, interest rates in Canada could remain historically low until 2016.

Going forward, according to a senior deputy at the Bank of Canada, the country’s post-recession neutral interest rate is likely going to be just 3.0% to 4.0%. That’s 1.5% below the historic norm.

Lower interest rates for the near future make for welcome news to first-time home buyers . If you’re looking to buy your dream home this autumn, now is a great time to contact a licensed, independent mortgage agent at Canadalend.com.

Your Candalend.com agent can help you get pre-approved for a mortgage in 24 hours or less and help you find the best mortgage and rates to suit your personal needs.