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Home Mortgage Rates

Next Bank of Canada Meeting
June 5th, 2012

Special conditions apply

Mortgage Rates subject to change.

Special conditions apply
Mortgage Rates subject to change.

Current interest rates, where are they going?

Current interest rates, where are they going?

Here in British Columbia specifically; we just had one heck of a storm. Inaccurate fears of HST caused a huge rush of people trying to purchase homes before the introduction HST on July 1st, 2010. What many didn’t realize was that HST doesn’t affect existing homes; it’s only on new construction. June was one of our, if not the busiest months ever on record. So then what happened? HST slapped us across the face and the real estate market slammed its breaks. June’s shockingly cold weather changed almost immediately in July and blessed us with weather one would expect in Hawaii. Summer is already historically slow in real estate but this year something happened that I have not seen in a long time. A tumble weed rolled through my office, true story. One mortgage application came in within a two week time span. My record is eight in one day and we get one in two weeks? Anytime you transition from a Buyer’s to a Seller’s market, you get a dead-zone but with the disastrous parallel timing of HST among other things caused the perfect storm.

So now what? We expect prices to continue to decline for another three to six months before the Spring time. Yes, this is certainly a Buyer’s market now. Things are already starting to pick up nicely and we are getting a health number of people starting to shop again. The difference between now and the recent Spring, you will get a better deal on property.

Where are the mortgage interest rates going? The Bond Yield dictates the fixed rates and it has declined hard. I mean really hard. The current five year fixed should probably be about twenty basis points lower than where it is now. The Bank of Canada’s overnight lending rate dictates Prime. Prime dictates where the variable rate will go. As expect, this recently went up but only a small amount. How much higher will it go? The economy can’t hand a significant increase right now, mortgage interest rates need to raise slowly in order to avoid foreclosures and utter chaos. Likely you will see an interest rate increase of about two percent over the next two or three years. We can thank the current feeble European and American economies for keeping our floating interest rates low at present. Who knows how long their economies will stay weak?

There is a very good chance nothing will happen when the Bank of Canada meet in September to discuss a raise in the overnight lending rate. With interest rates this low and home prices dropping, it’s an excellent recipe for a good deal on property. The most important thing in Real Estate and Stock trading is to have good timing. Is there any way that you can capitalize on the current times? I am not saying you go out a buy a home but perhaps refinancing into a lower rate is a good option for you? Consolidating debt into lower interest rates and preparing yourself for a potential double dip recession isn’t a bad idea. I certainly doubt we will have a double dip recession but you never know. Refinancing your existing home to pull out down payment on a revenue property may or may not be a good idea for you. The interest portion on that top up is tax deductible by the way. If you ask me, things are looking up.

Feel free to comment below and let me know your thoughts. Please call my office if you ever have a questions at 604 628 5040.

Best regards,

Jessi Johnson