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CMHC Chief Economist forecasts a rebound in 2010

Good news release ….CMHC’s Chief Economist, Bob Dugan, says new housing starts for 2010 will be around 172,250…. and 175,150 in 2011…. this is much higher than 2009’s 140,081….

The strong resale market is not expected to continue it’s record setting pace…. Existing home sales are forecast to total 486,700 in 2010 and taper off to 469,950 in 2011. But this is a good thing.. we really don’t want to see a red hot market as this always leads to a sharp decline…. slow and steady.. that’s always a better trend.

CIBC says..a hike in Bank Prime rate coming…and new mortgage rules won’t affect most of us.

Just released….

BANK PRIME RATE FORECAST

The CIBC’s Senior Economist, Ben Tal, says Bank Prime rate will start to increase this summer… but only by 0.50% to 0.75% by end of the year… and then will pause in 2011 to see where the U.S. rates are headed….  click here Feb 26 2010 CIBC Forecast.

Mr. Tal thinks this is “risk move” pointing to similar Bank of Canada action in 1992 and 2002 when the Bank hiked rates only to reverse the decision a few months later…

Mr. Tal also points out that real inflation is around 1.5% and will continue to remain low into 2011.

Does this mean we should lock in our variable rate mortgages?  For most of us, probably not… but if you aren’t sure, then speak with your Mortgage Broker.

NEW MORTGAGE RULES EFFECT

Mr. Tal sees the new mortgage rules having little effect on most of us.  Here are his calculations…

  • Increase down payment requirement for refinancing: 7%-8%
  • Increase down payment requirement for non-primary residence: 2%-3%
  • Increase qualifying rate on variable mortgages: 5%-6%

This is the first outlook I have seen…and it’s really not bad at all…   Enjoy the weekend… and GO CANADA GO!

Tips to paying your mortgage off sooner

These tips from the UK’s MSN.com might sound familiar but there some subtle differences….. First, here are the 4 tips.

1. Overpay when possible (make prepayments)
2. Get the best possible mortgage deal.
3. Check out an offset mortgage (All in One mortgage in Canada)
4. Switch to a better deal when your Capital increases….(shop for a better deal as your pay down your mortgage)

    Nothing earth shattering…. simple but good advice.    Now here is my additional advice ….  #2 suggests we get the best deal…and we all want to pay the least amount of money…but being in the right product is just as important as going for the lowest rate…a good example is today’s variable rate mortgage of 1.95%… it’s the lowest rate available.. but is it the right product for everyone?  Probably not…

    #3 was also interesting… the All in One mortgages are becoming more popular and there are a few different lenders offering these now….these products are also known as Australian Mortgages…

    #4 is great advice… when your mortgage comes up for renewal…shop around… speak to a broker… most financial institutions won’t offer you their absolute very best rate at renewal… this is a fact… and we understand… after all, it is a business and Banks want to make a profit.  But let’s not contribute too much to the lender’s bottom line.

    January Home prices up…sales down…really?

    January stats are in… According to a report in CBC News, the average price of a home sold in Canada on MLS was $328,537.   This is up by 19.6% from January 2009.  But sales seemed to taper off from December’s record high by declining 2.8%.    The supply of homes for sale is also down around 18% with 170,000 homes listed for sale on MLS.

    It’s amazing how statistics can be tossed around and can be manipulated or misunderstood…  If you look deeper, you will see that 2009 started off very rough for house sales as the U.S. Mortgage crisis was just starting to take it’s effect… but then as we approached May and June, interest rates dropped and house sales started to increase….  A sort of pent-up demand was being fulfilled.

    Watch for a traditional Spring market with good resale figures as buyers take action to benefit from record low interest rates and before the new HST comes in effect this summer.

    Tighter Mortgage rules become a reality on April 19, 2010….

    As we reported last week, the speculation about possible Mortgage Rules changing has become a reality…. the  Federal government is going ahead with changes in Mortgage lending policies…..and these will come into effect April 19, 2010.   Here are the 3 changes as reported on CBC.ca:

    1. all borrowers will now have to qualify using a 5 year fixed rate even if they choose a shorter term or a variable rate mortgage. (3 years fixed was the standard qualifying rates)
    2. refinancing your mortgage is now capped at 90% of the value of the home instead of 95%.
    3. investment properties will now require a 20% down payment instead of the current 5% down.

    This last change will probably have the greatest impact in my opinion…  It’s designed to discourage buying condos and houses for speculation purposes.  However, ask anyone how their RRSPs are doing lately… the answer will probably not be good…  A great many Canadians starting turning to real estate as means of buying a safe, long term investment… this could be done with as little as 5% down… but no more.

    Early reaction is that these rule changes  will create a small surge in house sales and then we should see a cooling off in the market…. only time will tell if these measures will have the desired effect or if they will simple force Canadians to get back into the Mutual Fund and Stock Market….  stay tuned as we follow this story..

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