by Kristine Owram, THE CANADIAN PRESS Thursday, November 19, 2009
provided by
TORONTO - The Canadian housing market has seen a stronger and faster rebound from the recession than any other segment of the economy, due in large part to enticingly low mortgage rates.
But rates this low - 5.59 per cent for a five-year fixed-rate mortgage and 2.25 per cent for a five-year variable-rate mortgage at one bank - can't last forever, and experts are advising borrowers to prepare for higher rates within the next 12 months.
"We have to realize those are emergency interest rates," said CIBC economist Benjamin Tal.
"Interest rates will rise - it's just a question of time, it's not a question of if. And if that's the case, we have to make sure that when we borrow this money we can afford the same mortgage 200 or 300 basis points higher. That's the key responsibility now of borrowers and lenders, to make sure that what we do, we do it in a prudent way."
Depending on whether they are fixed or floating-rate, mortgages are tied to either the bond market or the Bank of Canada's key lending rate, which are closely related. The central bank's rate has been sitting at a record low of 0.25 per cent since the spring and it has said it will keep it steady until at least next June to help stimulate the ailing economy.
On Wednesday, three of Canada's biggest banks - Royal Bank (TSX:RY), Bank of Montreal (TSX:BMO) and TD Bank (TSX:TD) - announced that they will cut posted rates for fixed-rate mortgages by up to 0.25 percentage points. On Thursday, CIBC (TSX:CM), Laurentian Bank (TSX:LB) and Scotiabank (TSX:BNS) followed suit by cutting their five-year mortgages by 0.25 per cent to 5.59 per cent, in the case of CIBC and Scotiabank, and 5.6 per cent at Laurentian.
But mortgage lenders agree that rates are nearing the bottom and will begin to rise again in 2010.
"The only sort of assurance that you hear in the marketplace is the Bank of Canada's going to try to maintain that rate until June. But past that, there are already warnings that if there need to be adjustments, the adjustments could be a little more abrupt than we've been used to in the past," said Martin Beaudry, vice-president of retail lending at ING Direct.
CIBC's Tal said that with rates this low, "it's almost a crime not to take a mortgage out," but warned that consumers need to be prepared for higher interest rates later on and what this could mean for their personal finances.
For example, a $200,000 mortgage with a term of 25 years and an interest rate of 2.25 per cent has monthly payments of $876.26. For the same mortgage with an interest rate of five per cent, the monthly payments become $1,169.18.
And this doesn't only apply to variable-rate mortgages, but to fixed-rate mortgages that are coming up for renewal, Tal said.
"It's not just variable rates, because five years from now the rates will be much higher, so you don't want to find yourself in a situation five years from now where you can't afford the house," he said.
"It's important to be extremely prudent and not to be totally blinded by those rates."
Both John Turner, director of mortgages at BMO, and ING's Beaudry said they've seen an increase in the number of people opting for fixed-rate mortgages to ensure some certainty when interest rates begin to rise again.
"In the first six months (of 2009), we saw well over 60 per cent of our applications being for variable-rate mortgages, and in particular in our case five-year variable-rate mortgages," Beaudry said.
"Towards the latter part of the summer, until now, the trend has reversed to where we're seeing about 70 to 80 per cent of our applications going for five-year fixed-rate mortgages."
Turner agreed, saying 60 to 70 per cent of BMO's customers were opting for variable-rate mortgages in the past, but lately "there's been a slight shift to fixed."
The key is finding a monthly payment you feel comfortable with and then thinking ahead - if you have a variable-rate mortgage, or a fixed-rate mortgage that's coming up for renewal soon, will you be able to afford to continue to make your payments if interest rates go up?
Turner said now is the time to begin making more frequent payments, while interest rates are still low, if you can afford it. This will reduce your principal more quickly and will mean lower payments down the road when interest rates are higher.
"For example, if you have a $200,000 mortgage and you opt to pay biweekly (instead of monthly), you knock four years off your mortgage and save about $47,000 in interest just by doing that," he said.
As well, if you have a variable-rate mortgage, it's important to keep an eye on interest rates and lock in if you feel they're getting too high, said Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, or CAAMP.
The association also recommends that homeowners renew their mortgages before the scheduled renewal dates given the current low level of interest rates.
However, Murphy predicted that when interest rates do start to go up it will be a gradual climb, and Canadians shouldn't worry about a sudden jump in the number of people who are forced to default on their mortgages.
"I think people are predicting that rates will start to increase in 2010 at some point in time, but it'll be more of a slow, measured increase as it goes up, and most Canadians who have variable products will have the ability to lock in," Murphy said.
CAAMP says the volumes of residential mortgage credit outstanding is forecast to grow by seven per cent between 2009 and 2011, and is predicted to pass $1 trillion in 2010. The average mortgage interest rate was 4.55 per cent as of October, down from 5.41 per cent a year ago.
Today the Government of Ontario formally launched its latest assault on homeowners, purchasers and sellers with the introduction of Bill 218, the Ontario Tax Plan for More Jobs and Growth Act, 2009, says the Ontario Real Estate Association.
Effective July 1, 2010, home buyers and sellers will pay 8 per cent more on legal fees, appraisals, real estate commissions, home inspection fees, and moving costs, adding about $1,500 in new taxes to the average residential real estate transaction in Ontario.
FOR MORE INFORMATION AND CALL TO ACTION: click here
It's a healthy way of life: No bags and filters means no dust or odors. Just plug the hose into the nearest inlet, and you're on your way to a cleaner home. Dirt is swept through a network of tubing and deposited into the removable dirt canister. Fine dust particles and exhaust odors are vented outdoors.
It's Powerful: Sustained Cleaning Power is the ability to maintain Maximum Cleaning Power over time. The very first time you vacuum with a traditional system that has a bag or filter, there will be a measurable decrease in suction power and airflow as dirt and dust begin to accumulate. Central Vac Units typically provide Sustained Cleaning Power by separating the dirt from the airflow--without bags or filters. In fact, 96-98% of all dirt swept into the system is deposited into the dirt canister. The remaining fine dust particles are exhausted outside. The powerful performance of a central vac system does not decrease as dirt accumulates in the dirt canister.
It's Convenient: No big, heavy equipment to lug around. A lightweight flexible hose, the wands, and the attachments are all you need. Just plug the hose into the nearest inlet for easy and convenient cleaning.
It's Cost efficient: For about the same price as a premium upright or canister, you can have all the conveniences and advantages of a central cleaning system in your home! Plus, an installed central vac system adds to the resale value of your home. Built-In Central Vacuum: It's cleaner, more powerful and easier to use.
Improved Indoor Air Quality: With a central vacuum system, you have the power and versatility to make your home healthy for you and your family. According to the Environmental Protection Agency, "the air inside your home can be even more polluted than the outside air of most industrialized cities." Since people spend an average of 90% of their time indoors, indoor air quality becomes a large issue, especially if you or anyone in your family suffers from allergies or asthma. One way to combat this problem and attack the harmful allergens and irritants is with a central vacuum system.
With 20% of the population affected by allergies or asthma, it is important that you rid your home of these harmful irritants.1 Dustmites, pet dander, dust, mold, and pollen are the leading cause of indoor allergies. Keeping your carpets dry and cleaning your home with a central vacuum system will help rid you of these allergens.
A study conducted by the University of California-Davis School of Medicine states that use of a central vacuum system can greatly reduce allergy and asthma symptoms: Nasal symptoms 47% improvement Sleep symptoms 44% improvement Eye symptoms 61% improvement
Protect Investments While Adding Value to Your Home: Don't waste time and money on other vacuum cleaners when you can have a central vacuum system easily installed in your new or existing home with no heavy construction or remodeling. Not only does a central vacuum system add value, but it's your first line of defense in protecting your investment in your home's floor covering: rugs, carpet, stone, tile, wood, etc. A central vacuum system is a surprisingly economical investment that adds permanent value to your home. It is built to last, making it an excellent selling feature when reselling your home.
Powerful Vacuum:
With 3-5 times more cleaning power than most portable vacuum cleaners, you get a superior cleaning in less time. Since the central vacuum power unit is located in a closet, the garage or basement and you aren't having to carry it around while you clean, it can have larger, more powerful motor. The central vacuum allows you to pick up more debris with less hassle than a portable. The 5.1" motors are the largest motors you will find in most portable vacuums. Normally they are quite smaller.
Large Dirt Collection: The large dimensions of the dirt canisters allow the vacuum to pick up a lot of debris before it needs to be emptied. The dirt canisters hold gallons of debris. With all of this space for dirt collection it could be months before your dirt canister needs emptying. Depending on how often you clean and how much you vacuum up with your central vac system will determine the length of time before you need to empty the canister.
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Save up to $1,350 on home improvements purchased before February 1, 2010.
The Home Renovation Tax Credit applies to eligible expenses of more than $1,000, but not more than $10,000, resulting in a maximum non-refundable tax credit of $1,350 [($10,000 - $1000) x 15%].
You can claim a non-refundable tax credit on your 2009 income tax return. This tax credit is based on eligible expenses incurred for work performed or goods acquired after January 27, 2009 and before February 1, 2010. Only agreements entered into after January 27, 2009 and related to a qualified dwelling are eligible.
As we celebrate that the Canadian economy is beginning to heal, consider the fact that the sale of a single home can boost the economy substantially.
The ripple effect set off by the sale of each house is far-reaching, as indicated by a new report for The Canadian Real Estate Association. It found that between 2006 and 2008, about $46,400 in ancillary spending (on items other than the house and land) was generated by the average housing transaction in Canada. Per transaction ancillary spending varied somewhat by region, ranging from $28,925 per home purchase in Atlantic Canada, to $60,200 per home purchase in BC.
Considering the average of 480,120 home sales processed annually through MLS® during the period of 2006 to 2008, ancillary spending attributable to moving house totaled more than $22.3 billion per year across Canada. (Nearly half of these spin-off benefits were generated in Ontario alone where home buyers contributed $9.3 billion to the economy.)
The pattern of ancillary consumer spending generated by residential real estate transactions has tracked upwards in recent years:
Direct and indirect employment resulting from housing sales is also significant. Some 202,750 jobs are estimated to have been generated by average annual MLS® resale housing activity in Canada between 2006 and 2008, according to the study conducted by Altus Group Economic Consulting.
Jobs created or maintained by the sale of homes include:
realtors
mortgage brokers
lawyers
house appraisers
surveyors
home inspectors
energy auditors
movers
renovators
The next time you buy or sell a home, congratulate yourself for helping the Canadian economy.
It's great to be involved in the Canadian real estate industry as we watch the market start to rebound, showing some of the best numbers in a while.
The number of Canadian homes sold went up 18%- the biggest year-over-year increase since early 2002, and the most homes sold countrywide - ever - in the third quarter of a year (July to September).
The Canadian Real Estate Association has just reported that 135,182 homes were sold countrywide in the third quarter, up 18 per cent from a year earlier and the most ever for the period.
Seasonally-adjusted national MLS home sales are at 127,941 homes in the third quarter, which sits at 45% above the low reached in the fourth quarter of 2008.
More than two-thirds of housing markets across Canada experienced as much as 34% increased activity in the third quarter over the second quarter of 2009 (April to June).
And there's been an increase in the short supply of homes on the market this past quarter, after a decline in house inventories from July 2008 to July 2009. But it hasn't been a big enough increase to send home prices spiking; there's only been a increase of 9.3% in average prices for MLS residential listings from spring 2009 to fall 2009.
These are encouraging statistics, to say the least. Rebounding consumer confidence as a result of an improving overall economic security, as well as continuing low interest rates, are responsible for the rebound in home sales.
It appears that the "bottom" of the real estate market in Canada has come and gone - and we are all rising up as the economy heals.
Americans Think of their Home as an ATM
Century21 Canada President Don Lawby was interviewed a few days ago by The Financial Post about how Canada's housing market is booming, while foreclosures still drag on the US.
Several reasons for this difference were examined, with the running theme of how much more conservative Canadian banks are when it comes to lending money, and how much more conservative Canadian consumers are when it comes to debt and living beyond their means. Americans see the value of their home more as an ATM than Canadians do.
Canada has benefited from having a more structured housing market. Don gives the banks in Canada a lot of credit for not creating products with low-interest payments upfront that give way to balloon payments. No-money-down loans have been banned by Ottawa for government-insured mortgages, and interest-only loans are rare in Canada.
How is the improving market affecting your decision to buy or sell a home? Let me know.
Purple Bars represent 2009 Blue Bars represent 2008
The average sale price for a house in Oakville sits at it's highest level in the last 2 years at ($602,770), up from $465,651 last October and up from $568,494 last month (Sept.).
This is an excellent sign that the housing market is back on track and that house prices have completely rebounded from the dip they took in the beginning of the year.
The number of units sold in Oakville remained steady in October at 298, remaining on par with the 301 that sold last month, and up heavily from the 169 that sold last October. Again, this is a sign that our market is strong and very healthy.
MILTON REAL ESTATE MARKET STATS
Milton stats remain strong. The Average sale price for all of Milton was $353,042 for the month of October, down slightly from $368,174 last month and up slightly from $345,734 last October.
We have definitely seenMilton House prices rebound from the beginning of the year as well.
Number of units sold in Milton for October sit at 150. Up slightly from last month but up sharply from last October when only 78 units sold. Another sign that the market is hot and it is a great time to buy a house.
BURLINGTON REAL ESTATE MARKET STATS
Average sale prices in Burlington sit at $373,944, down slightly from last month at $390,380 but still at their third highest levels in the last 2 years! The average sale price for October '09 is up from last October at $322,088.
The number of unist sold in Burlington was 283. Down slightly from last month at 298 but up sharply from October last year at 217.
These are all signs of a market that has recovered!
If you have any questions about these stats or if you are thinking of buying or selling in the near future please give me a call and we can talk about how I can help you!
What does it take to sell a home in today's market?
It isn't as easy as planting a yard sign and putting an ad in the local newspaper anymore.
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Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
The ripple effect set off by the sale of each house is far-reaching, as indicated by a new 
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