For your information - June 2008
Wow, are we spoiled. On Tuesday June 10th the Bank of Canada did not lower the prime rate by .25% as all economists had predicted. Our five-year variable rate remains at 4%… certainly nothing wrong with that! Keep in mind that by not lowering this rate the finance minister is indicating that our economy is not as weak as previously thought. So far it appears the three significant rate drops we have already had this year have been enough to keep our
economy on track. As much as consumers like more rate reductions, those reductions are an indicator the economy is not doing well and we don't want that over the long term!
According to CMHC, home sales in the GTA are expected to be strong in 2008 at about 84,000 units, while in 2007 there were 95,000 units sold. In 2009 they are expecting about 77,000 units to be sold… still very healthy numbers. Prices are expected to increase by 5% in 2008 and by 2.5% in 2009, with predictions that there will more selection of homes for buyers in 2009. The average home price in 2007 was $377,000, in 2008 it will be approximately $394,000, and in 2009 it's expected to be $404,000. So as you can see there is no "bubble" on the horizon.
Mortgage rates are expected to remain relatively low. We need to keep in perspective that rates in the 4-7% range are historically amazing. Even though food and energy prices may push rates up slightly in the short run, the long term forecast is that there is not much room for rates to go up or down significantly.
So what mortgage to pick? Variable is very attractive because it is predicated on the fact that no one can forecast rates accurately, yet we know rates must go up and down over the life of one's mortgage. Variable mortgages are similar to our mutual funds, it's the long term average we are focusing on. As long as mortgage rates are increasing and decreasing in a reasonable range, or below the horizon of fixed rates, and fundamentals of the economy our sound, then we simply leave it alone. Secondly, unlike a fixed mortgage you're not locked in. If rates drastically drop or rise in a few years then the variable mortgage allows you
to switch to a fixed term immediately without penalties. It can be problematic to be in a fixed term when there is a dramatic increase or decrease in mortgage rates and you'd like to alter your mortgage immediately but you can't until renewal.
Both variable and fixed mortgages can vary dramatically from institution to institution. So please be aware of the interest you are paying and don't obsess on
the interest rate alone. A good mortgage is a combination of rate discount, pre-payment privileges, compounding, fees, penalties, etc. If you have any doubts about what's in the fine print, let us guide you to ensure you are being prudent with your mortgage selection. That's all we do every day!
The Green House: Look to your mortgage for energy savings
Turn off the lights. Ease up on the air conditioning. Turn the thermostat down. Switch to energy-efficient appliances. We're all getting the "green" message. There are good, sound reasons for saving energy: from doing your bit at home to reduce the strain on the planet, to enjoying the bottom-line financial savings from a lower energy bill. There's also a growing list of financial grants and rebates designed to help you turn your home into a "green" house. Natural Resources Canada's ecoENERGY Retrofit program provides financial support to homeowners to help them implement energy saving projects that reduce greenhouse gases (GHGs) and air pollution. Click here to read more…
