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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.

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

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/.

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.