Today the Bank of Canada announced yet another decrease in interest rates. A significant cut from 3.5% to 3.0%. The last time the Bank of Canada dropped rates by 1% in the same short time frame (6 weeks) was back in 2001. The Bank of Canada indicates that they are doing so in response to economic indicators primarily from the US economy.
From the Bank of Canada Press Release:
"The Bank is now projecting a deeper and more protracted slowdown in the U.S. economy. This has direct consequences for the Canadian economic outlook, with declining exports projected to exert a significant drag on growth in 2008. In addition, tightening credit conditions and softening sentiment are expected to moderate business investment and consumer spending. Nevertheless, domestic demand is projected to remain strong, supported by firm commodity prices, high employment levels, and the effect of cumulative easing in monetary policy."
So what does this mean to you and I?
The additional decrease means that the average home owner and purchaser will save considerably. If your mortgage is coming up for renewal you have an opportunity to reduce your mortgage payment or the amortization with the decrease in interest rates.
It also means that more buyers can qualify. It's no secret that housing costs have risen dramatically while lending rates have slowly crept up. This significant drop in interest rates allows more people to qualify than before. See the example below:
Mortgage principal of $300,000 at 6.0% interest rates your payment would be approx. $1919 when amortized over 25 years. With a 1.0% reduction the same $300,000 at 5.0%, your payment would be approx $1744. A monthly savings of $175.00.
That same $1919 at 5.% interest rate would actually increase your borrowing ability from $300,000 to $328,264. That's a 9% increase in buying power! Combine this with an increased selection and negotiating power today is a great day to be shopping for a home. For more on the bank of Canada visit: http://www.bankofcanada.ca/en/index.html
I don't think I need to remind you that Red Deer is in Central Alberta and we have all the strong economic conditions mentioned above. High commodities prices, high oil prices, strong labour market, and just announced by the provincial government more investment in the community. 2008-11 Capital Plan delivers $22.2 billion for municipalities, housing, hospitals, schools, and roads
2008-11 Capital Plan highlights:
* Overall, an increase of $3.9 billion; or 21 per cent, from Budget 2007,
* $3.3 billion for health facilities and equipment,
* $1.7 billion for schools,
* $1.5 billion for post-secondary facilities,
* $5.2 billion for provincial highways,
* $5 billion for municipalities,
* $1.1 billion for housing
More on the Alberta Provincial Budget Click here:
Whether you're buying a home as your personal residence or buying to invest in rental properties conditions are still ripe with opportunity. If you're thinking of selling now is an ideal time to be attracting buyers to your home.
Your Friend in Real Estate,