Consider an upgrade- in your NOTL Home

As interest rates are lowered again, the local Real Estate market in NOTL continues to perform better then most other markets in Canada. "These low interest rates provide the perfect opportunity for home owners to consider a move up or a chance for first time buyers to get into the market away from renting" says REALTOR Gary Zalepa Jr. Broker.

He explains that with interest rates trending downwards many homeowners will be able to look at a larger home or one that better suits their needs without expanding their budget. Generally with a new home comes a larger price tag. But with the lower interest rates many owners will be able sell their existing home,  make that purchase and keep monthly carrying costs on the new home fairly close to what they are currently paying.

First time buyers who are currently renting will be surprised to learn that they could own their own home for less than they currently pay in rent. There are also incentives available to assist first time buyers with closing costs associated with the home purchase.  

The Bank of Canada lowered its benchmark overnight lending rate by half of a percentage point to 0.5 per cent at its setting on March 3rd, 2009. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, declined to a record low of 0.75 per cent.

The Bank acknowledged the global economy has continued to deteriorate since it last lowered rates in January 2009. "The nature of the U.S. recession, with very weak auto and housing sectors, is particularly challenging for Canada," said the Bank.

The Bank has repeatedly lowered its interest rate to support economic growth. Since December 2007, the Bank has cut its overnight lending rate by a total of four per cent.

"The Canadian economy is still widely expected to begin growing in the second half of 2009, as government spending and easier credit begins to lift economic growth," said CREA Chief Economist Gregory Klump. "However, the Bank acknowledged that the decline in economic activity in the first half of 2009 could be sharper than forecast in January."

The Bank reiterated its expectation that "the effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010. Once the global financial system stabilizes and global growth recovers, the underlying strength of the Canadian economy and financial sector should ensure a more rapid recovery in Canada than in most other industrialized economies."

The Bank also hinted for the first time that the recession could be longer than is currently forecast, however. Noting that there could be potential delays in stabilizing the global financial system, which it considers a precondition for the global and Canadian economic recoveries, the Bank said: "The timely implementation of ambitious plans in some major countries to address toxic assets and recapitalize financial institutions will be critical."

As such, the forecast for economic growth in 2009 in the next Monetary Policy Report, which is slated for release in late April, will likely be revised further down. It remains to be seen whether the recovery expected by the Bank will be pushed out beyond the current forecast, in the second half of 2009.

"The Bank's current forecast for economic growth and inflation, and likely further downward revisions, means it won't raise interest rates anytime this year, but credit conditions have tightened, which will mute the benefit of the Bank of Canada's recent interest rate cuts for consumers, business, and the economy," said Klump.

When the Bank cut its overnight lending rate by 0.75 percentage points in December 2008, the prime rate fell by just 0.5 percentage points. This raised the spread to 1.75 per cent from 1.5 per cent, where it had stood for over a decade. This time, however, it appears that the Chartered Banks will cut their prime rates in step with the central bank.

When the Bank cut interest rates on March 3rd, the advertised five-year conventional mortgage rate stood at 5.79 per cent. This is down 1.5 per cent from one year earlier, and 0.96 per cent below where it stood when the Bank made its previous interest rate announcement on January 20th, 2009.

If your interest rate on your current mortgage is above the current rates you maybe in a position to benefit from the lowered rates and make that home upgrade you have been waiting for.