The Bank of Canada (BOC) met again yesterday and as has been the pattern for the last while now, there was no change in rates. Rates are not expected to increase until at least the end of June 2010. When they will start to go up and by how much remains to be seen (if you ask 5 analysts, you’ll likely get 5 different answers). If I had to speculate when this will be, I would tell you that rates will go up by some amount and will start to go up at some point between July 2010 and February 2011! Does that clear things up for you??!!
Fixed rates did jump up after my last update, but within a couple of days they came right back down to where they were in the beginning of December. We are seeing most major lenders offering in and around 3.99% for a 5 year fixed term.
There has been much speculation in the newspapers that has said that the BOC should raise rates sooner than June to slow down a housing bubble that may be starting to grow in the GTA. The BOC has come out and said they have no intention of raising rates to slow down the housing market. This job would be best left to the finance minister. The BOC’s primary job is to combat inflation and that is why they do not want to raise rates and slow down the economy just as it is starting to improve.
We may however see the government introduce new legislation in the coming months that may impact how one qualifies for a mortgage. Whether that is lowering the maximum amortization from 35 years to some lower time period, or lowering the debt ratios the lenders currently use to determine affordability, or changing the interest rate that is used to actually “qualify” the deal are a few of the options being thrown around at this time.
Currently if you were getting a 5 year fixed rate at 3.99% that is the rate that the lender will use to determine if you qualify for the mortgage. They may end up using some fictitious rate that is much higher to make it more difficult for people to obtain the big mortgages that we are seeing in Toronto at this time. With a higher interest rate being used, it would drastically increase the payment, which means that borrowers would qualify for less money than they would be able to obtain today.
Nothing is finalized yet, but I’m pretty sure we will see some rule changes in the coming months from our government and when this happens I will let you know what was decided by our government and how it will impact you.
I could bore you with economic numbers now, but I will not this time as there really hasn’t been much change in the numbers I have given you in previous updates. All I will say is that growth in Canada is expected to continue to improve throughout this year and the BOC expects the economy to be running at full steam by the 3rd quarter of 2011.
(Mortgage update provided by Lucas Preston, Mortgage Agent, Invis)