Reading Between the Headlines
There are so many articles everyday about the Canadian economy, interest rates, consumer debt levels, mortgage rules, yada yada yada. To be honest, sometimes I’d rather look at funny pictures of cats. But since we’re entering the busy spring market, I want to quickly summarize what’s happening in the news and how it actually applies to the average borrower in Canada.
The last Bank of Canada decision meeting was on March 6th and they left prime rate at 3%, continuing it’s 2+ year streak. At that time, there were comments made that interest rates are likely going to stay at this all-time low until 2014.
Headlines also seem to be highlighting the rate war going on between the big 5 banks which have elicited a watchful eye and warning from our Minister of Finance, Flaherty. This is kind of amusing to us mortgage brokers considering our lowest rate is 0.20% lower than the best advertised rate by a bank. Flaherty’s warning is more like a concerned parent warning a child that their behaviour could have negative consequences.
Considering what’s going on with the rest of the world, I think it’s safe to say when the next Bank of Canada Prime Rate Update & Monetary Report is released on April 17th, the comments made will likely echo the previous sentiments, indicating we’ll likely enjoy this low rate oasis until the beginning of 2014.
The Housing Market
Nationally, first time homebuyers and new-to-Canada applicants are feeling the impacts of the new mortgage rules the most. This can act like a domino effect for those hoping to benefit from the “move-up” market, ie. Selling their first home to a first-time homebuyer so they can “move-up”.
On a wider scale, Canadians are feeling the effects of a slightly slower market with both prices and sales down compared to this time last year. But those National averages are being balanced out by the activity in the smaller real estate centres Locally, properties are still selling and prices are staying steady, which is great news. Both Edmonton and Calgary remain strong attractive real estate markets to both local buyers and foreign investors.
Moral of the story is that our local real estate market is strong and steady, though it’s not winning any marathons. If you’re doing some planning for the future and depending on your home value to drastically increase, that is likely not in the cards for the next few to several years.
If you are on a tight timeline for any reason do ensure you have a back-up plan in place if you’re home doesn’t sell quick enough or you don’t have enough equity to make your plan work.
Between the Headlines
The Canadian mortgage and housing market is doing okay right now. I would compare it to a bicycle with training wheels and a steady hand on the back of the seat. The Bank of Canada is acting as the steady hand as they’ve already ensured we have stable training wheels to support us in the form of mortgage rules that are likely to decrease mortgage defaults. Now they’re about to let go of this bike and let us ride it out, but not without warning Canadians to protect their assets and stay away from unmanageable consumer debt that could cause a wipe-out worse than just a scraped knee.
As always, this article summarizes my opinion and it should not be used in lieu of advice from a professional about your particular circumstances and financial goals.