RBC posted a $1.5billion dollar profit in quarter one this year….WOW! It’s good to see Canada’s banking system so strong.. but profits this high during what some called, the worst recession in history, might leave a bad taste in your mouth…
Last November, a secret meeting between the Big Six Banks executives and Bank of Canada Governor, Mark Carney, took place.. the Banks called for tighter mortgage rules…. The Banks were concerned about rising debt levels…
Three months later, we have the new rules… but why all the concern when all the banks are reporting healthy profits? Arrears and defaults don’t seem to be an issue…
There must be a concern about loan defaults in the future… and yet the Minister of Finance repeatedly keeps saying he sees no evidence of a housing bubble…. Makes you wonder?
…..we’ll be discussing this further in future postings…
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.
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!
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 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.