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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.

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.

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 .

Canadian housing prices have been on a tear. In June, the average price of a home in Canada increased by more than seven percent year-over-year to $416,584. The coast-to-coast increase was buoyed, in part, by pent-up demand from the winter, improving economic conditions, and tight supply.

According to one report, Canada’s housing market is expected to stay robust for the remainder of the year, with home prices expected to rise an average of five to six percent on low interest rates and increased demand.

Canadalend.com observes that two recently released leading economic indicators suggest that the Canadian real estate market might actually be getting more affordable for some, particularly in regards to Canada’s rising inflation rate and the surge in building permits.

In May, Canada’s consumer price index, which measures inflation, climbed 2.3%, the first time in more than two years that the figure has been above two percent. The stronger-than-expected results lifted the Canadian dollar and increased speculation about a hike in interest rates.

To help fight a weak economy, the Bank of Canada has kept its overnight lending rate, which impacts loans and mortgages, at one percent since late 2010. The Bank of Canada has hinted that it will not raise the lending rate until the economy can sustain itself; many take this to mean an inflation rate of two percent.

Canadalend.com explains that while most economists believe a rate hike will not happen until mid-2015, a few more strong inflation reports like the one released in May might change all of that. Many believe the low-interest-rate environment is helping fuel record-high housing prices. An unexpected rate hike could cool down housing prices, as well as make qualifying for a mortgage more difficult.

May was also a strong month for Canadian building permits. Canadian municipalities issued building permits worth $6.9 billion in May. That represents a 13.8% month-over-month increase and the fastest pace in 10 months; economists had predicted an increase of just two percent.

Building permits for residential dwellings were up 9.5% in May to $4.1 billion—the third consecutive monthly increase. In addition, the value non-residential permits soared 20.8% to $2.8 billion, the biggest monthly gain since July 2013. A lack of supply has been partially blamed for the rising cost of a home in Canada.

For first-time home buyers, the improved outlook for the economy, jobs, and incomes, coupled with increased supply and a gradual increase in fixed and variable mortgage interest rates, should benefit real estate markets. At least those housing markets where sales are currently softer but prices remain more affordable.

Unfortunately, housing prices in less affordable markets like Toronto, Vancouver, and Calgary will be more sensitive to rising interest rates for first-time home buyers. That comes as a result of higher mortgage payments or qualifying for a mortgage based on the posted five-year mortgage interest rate.

Canadalend.com suggests that an increase in the supply of houses could make real estate more affordable for some first-time home buyers. And while mortgage rates are expected to remain near historic lows for the time being, that could change if the rate of inflation continues to climb.

Potential home buyers interested in stepping onto the property ladder or those considering a second or third mortgage should contact a licensed agent at Canadalend.com. For starters, they’ll help you get pre-approved for a mortgage in 24 hours or less. The pre-approval lasts for 120 days and is locked in from the day the process starts.

Because Canadalend.com agents are independent, they work for you and not the big banks. In an effort to get you the best fixed or variable mortgage, your Canadalend.com agent will draw from hundreds of banks and lenders.

If you’re curious to see what kind of mortgage you qualify 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.

Source:

“Quarterly Regional Housing Report,” TD Bank web site, July 3, 2014; www.td.com/document/PDF/economics/special/QuarterlyRegionalHousing_July2014.pdf.

Evans, P., “Canada’s inflation rate jumps to 2.3% in May,” CBC web site, June 20, 2014; www.cbc.ca/news/business/canada-s-inflation-rate-jumps-to-2-3-in-may-1.2682011.

“Building permits, May 2014,” Statistics Canada web site, July 7, 2014; www.statcan.gc.ca/daily-quotidien/140707/dq140707a-eng.htm?HPA .