CMHC released their housing outlook stating that housing starts were up 2.1% in 2011 and that they will moderate in 2012 before starting to increase again 2013.  The resale market remains balanced with the average MLS list price increasing year-over-year.

Many trends are affecting real estate sales but the low interest rate environment and improving employment rate are acting as the major drivers.  The Bank of Canada has indicated that there isn’t likely to be any movement in rates till 2013 and the last time they changed the overnight rate was September 8, 2010, increasing it the traditional 25 basis points.

Vacancy rates in Toronto continue to decline and stand at 1.3 percent currently.  This could indicate an increase for rental properties as the rental market is getting tighter, giving landlords the ability to charge higher rates on quality units.  With this kind of appeal, more investors could enter the market with financing rates so low.

Having said that, the lending environment for investment properties is changing.  Lenders are making it more difficult to purchase investment properties or charging higher rates.  This will help in tempering the market, keeping it somewhat balanced.

The Consumer Price Index reports this week and is used to gauge inflation, and ultimately is a large indicator of rate direction.

There are also some non-bank lenders still offering reduced 4 year rates so don’t think that you need to walk into your local branch to get the same great rates.  Speak to a mortgage broker and they would be happy to help you navigate the myriad of lenders to get you these rates, or others, that may be beneficial to you.

For example, we still have lenders offering fantastic 7 and 10 year fixed rates as low as 3.89%.  For that extra peace of mind, these are long terms rates never before seen and it is highly likely that when your 4 year rate at 2.99% comes due, these 3.89% rates will look like a great deal.  I’m not one to normally recommend a 7 or 10 year rate because of potential penalty implications, but these would be the one time I could feel good placing someone in a term this long.

As always, for the greatest selection of rates and options, coupled with professional advice and a commitment to service, one should consider dealing with a mortgage broker.  But, of course, I’m biased.

This week I sent out the inaugural edition of my newsletter.  In it you’ll find some tips on home, health and entertainment, with a little bit of humour and fun rolled in.  There’s also a contest so make sure you get your entry in fast as you could win a $100 gift card for dinner!

I’d really appreciate your feedback so please message me if you have any comments, aside from spelling mistakes.   =P

Watch for it, it should be there any day now.  Or, if you can’t wait, click here for current edition.

Happy reading!

OTTAWA — Any thoughts Bank of Canada governor Mark Carney might have had about cutting interest rates further today likely flew out the window after a recent spate of relatively good economic news.

The Bank of Canada will announce its policy setting — which influences short term interest rates — at 9 a.m., and the opinion appears virtually unanimous there will be no change from the current one per cent perch.

That should keep in force a credit landscape that has seen borrowing rates across the spectrum of terms and conditions among the most generous in memory.

In fact, last week the Bank of Montreal offered the first 2.99 per cent five-year, fixed mortgage rate in modern Canadian history, forcing other banks to follow suit with similar actions.

In essence, the market is beating the central bank to the punch with credit easing, said Derek Holt, vice-president of economics with Scotiabank.

But there are other reasons analysts — with few exceptions — believe Carney will be loathe to move off one per cent, where he’s been since September 2010.

That’s because as weak as conditions are, with Europe still at risk of plunging the world into another recession, the economic indicators have been stronger than Carney thought they would be three months ago.

Then, the bank governor projected growth in the third quarter of 2011 would come in at a weak two per cent and the fourth at a barely visible 0.8 per cent. The third quarter is already in the books at 3.5 per cent and the fourth looks closer to two per cent, however.

As well, the resilience of oil prices to the global slowdown likely means inflation in 2012 will be a little stronger than the bank had been counting on.

“The combination of perhaps upward revisions to growth and inflation forecasts … might be the thing that totally takes rate cuts off the table,” said Holt.

There are some who still believe Carney’s next move will be to trim interest rates, including Carleton University economist Nicholas Rowe, a member of the C.D. Howe Institute’s monetary policy panel, and David Madani of Capital Economics.

Madani expects Carney will take the policy rate to 0.5 per cent by the end of the year. He has a darker than most view of the economy — with growth a mere 1.5 per cent this year, and the unemployment rate rising half-a-point to eight per cent by year’s end.

“Although (the bank) … will no doubt highlight that U.S. economic activity has improved somewhat, even they would admit that a sustained recovery is far from assured, particularly considering Europe’s recession and the heightened risk of another global banking crisis,” Madani wrote in a note to clients.

But Madani also said Carney is likely to wait out at least one more policy date before making his move.

The main news coming out of Tuesday’s announcement, and Wednesday’s monetary policy review — the bank’s new forecast for the global and Canadian economies — is whether Carney sees the stronger-than-expected second half of 2011 as a precursor for 2012, or simply a blip that merely delayed the onset of weaker growth.

In the previous policy review, the central bank had predicted growth would come in at 2.1 per cent in 2011, 1.9 per cent in 2012, and 2.9 per cent in 2013.

With 2011 already in the books — although all the data points are not yet known — the expectation is that growth was more likely in the moderate 2.4 per cent range. But that may not change Carney’s view that 2012 will be even weaker, with considerable downside if Europe’s debt issues metastasize.

In past policy announcements, Carney has made it clear he views the current one-per-cent setting to be sufficiently accommodative for the current, slow-growth economy. Easy credit conditions stimulate spending and expansion in the economy.

Holt said it would likely take a European implosion for Carney to cut rates further.

• maximum 25 year amortization
• owner occupied homes only
• 10% and 10% prepayment
• can only be refinanced with BMO before the end of the 5 years
• can’t be combined with their line of credit product

If your client can qualify using a 25 year amortization and prepayment options are not important to them, then this could be a great product for them. It’s certainly losing BMO money so it’s only offered for a limited time.  But, the good news is that other lenders are starting to follow suit and reduce some of their 5 year rates — ING reduced to 3.24% today.

Any questions interested in this product, please give me a call.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“The global economy has slowed markedly as several downside risks to the projection outlined in the Bank’s July Monetary Policy Report have been realized. Financial market volatility has increased and there has been a generalized retrenchment from risk-taking across global markets. The outlook for the Canadian economy has weakened since July, with the significantly less favourable external environment affecting Canada through financial, confidence and trade channels.  Although Canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year.”

The outlook has not changed since the last announcement.… the Canadian economic growth stalled in the second quarter but the Bank continues to expect that growth will resume in the later part of this year.   Based on this repeated message and economic conditions it is anticipated that prime rate might not actually increase until well into 2012 maybe even 2013.  When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally.  Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

With the recent economic trends and projected forecast, anyone with a variable rate mortgage would do well to stay with what they have since there is no short term expectation of rate increases occurring.  This hopefully means you’re enjoying a rate of 2.25% or lower for the foreseeable future.

The next Bank of Canada rate announcement is scheduled for December 6, 2011.

The early week decline in bond yields was the result of some weaker than expected US economic data and the realization that a swift resolution to European debt troubles is off the table. Weaker economic conditions and uncertainty tend to drive yields lower.

By the middle of the week, US data such as housing starts came in a little better than expected, and at then on Friday, the rate of inflation for Canada for September was reported at levels somewhat higher than the market had expected. Rising inflation tends to push bond yields higher.

The biggest challenge in markets remains the uncertainty presented by the European debt crisis. With such a wide range of possible outcomes, capital markets are behaving in a much more cautious manner and this is likely to continue into the foreseeable future as Europe’s leaders continue to take baby steps toward a potential resolution of those problems.

In the meantime, spreads at which mortgages can be sold in the market will remain at the wider levels that have been observed since the start of September

For many, including most first time buyers, I would recommend looking at a fixed rate while the spreads are thinning.  Peace of mind is much easier at these rates.  The best variable rate still stands at prime less .65%, but this will likely be temporary.  I’d recommend that if you’re actively searching for a home or considering a refinance, you give our office a call soon so you don’t lose this opportunity or so we can discuss the rates as they pertain to your circumstances.