Market Update

Market Update:  October 26th, 2011:

Hello again!
I hope you’ve had a great month since my last update!  The Bank of Canada (BOC) met again yesterday and as was widely expected, left rates unchanged.  This keeps the bank Prime rate at 3%. 

The spreads on variable mortgages have shrunk drastically in the last month.  As opposed to seeing Prime less 0.80% like we had a couple of months ago, the best variable mortgage on the street now is Prime less 0.10% (or 2.90%).  Fixed rates haven’t changed much and today’s best  4 year fixed terms are as low as 2.99% and 5 year fixed terms are around 3.49%.

The Global Economy has slowed and there are many risks still about, so it appears that rates should remain low for even longer than we had expected about a month ago.  Inflationary pressures should be even lower than previously expected as well, so there is no need for the BOC to raise rates any time soon!  That is great news for those in variable mortgages or in the mortgage market within the next year or so!

AND FINALLY WE ARE GETTING SOME PREDICTIONS FROM ECONOMISTS AS TO WHEN RATES COULD GO UP.
Here is a prediction from the NELSON DAILY online site that polled economists back on Sept. 27th (75 bps = 0.75%):
“For what it’s worth, here’s what the crystal ball gazers (major economists) are forecasting now:
•    2012 will see 75 bps of hikes (as per the Big 6 banks’ current published forecasts)
•    The next rate increase will occur in Q3 2012 (according to the latest Reuters dealer poll)
•    2013 will see rates rise an additional 75 bps (based on the limited number of economic forecasts stretching out that far)
Do not bet the barn that these forecasts won’t change. In fact, don’t even bet the rooster wind vane that sits on top of the barn.”

In a Reuters Poll of 40 economists and strategists released Oct.20th, no one expected the BOC to raise rates until at least the 3rd quarter of 2012.  So it appears variable rates are to stay at these levels for at least the next 8 months.  There is still an outside chance the BOC could actually lower rates, but I believe they will try to hold off on doing that if they can.  So unless there is a major crisis in the next few months, I don’t see them doing this!  Though of course, financially speaking, we’ve only had a “major crisis” weekly for the past 6 months, so I guess anything is possible!!!

It is still possible that fixed rates could go up over this same time period (there are many factors that influence fixed rates), though it seems unlikely that they could increase or decrease too much over the next 8 months or so.  So we could finally see some stability in rates going forward for the next few months.


In Toronto Real Estate News:
Toronto, October 5, 2011 – Greater Toronto REALTORS® reported 7,658 transactions through the TorontoMLS® system in September – a 25 per cent increase over September 2010. Sales during the first three quarters of 2011 amounted to 70,588, representing a 2.6 per cent increase compared to the first nine months of 2010.
“We have experienced strong growth in sales so far this year, with a much more active summer compared to 2010. However, while sales have been strong, we have continued to experience a shortage of listings, resulting in more competition between home buyers,” said Toronto Real Estate Board President Richard Silver. “Over the past few months, the listing situation has started to improve, so we expect home buyers will have more homes to choose from in the months ahead.”
With annual growth in sales (+25 per cent) outstripping annual growth in new listings (+15 per cent) in September, market conditions became tighter and the average selling price continued to grow by close to 10 per cent on a year-over-year basis.
“Strong price growth through the first nine months of the year was mitigated to a great degree by low interest rates and rising incomes,” said the Toronto Real Estate Board’s Senior Manager of Market Analysis Jason Mercer. “As buyers continue to take advantage of the affordable home ownership options in the GTA, we remain on pace for the second best year for sales under the current TREB market area.”

So this is good news for those of you looking to sell a home!  But it could mean difficulties for those of you looking to purchase a home in the near future.  We are back to bidding wars on most purchases in the GTA.  I’ve seen houses selling very quickly in the west end and suburbia west of the city as well.

That is it for this update.  No real changes to report from the previous month, but at least we are now getting some insight as to when rates may go up (though how accurate that insight will be, remains to be seen!)

The next BOC meeting is on December 6th and I will be in touch after that meeting.
Any questions or concerns, please do not hesitate to contact me.
Thanks again!
Best regards,

Lucas Preston
Mortgage Agent
Phone: 1-866-680-2020
Cell:  647-299-5136
Fax: 1-866-748-2627
lucaspreston@invis.ca
License #: M08003866
Your mortgage....Consider it done!
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Invis | 3-499 Brant Street | Burlington, Ontario L7R2G5, Canada




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