Friday Mortgage Round Up: July 13th, 2012

Although the recent CMHC changes aren’t news to many (I hope) and I feel like I’m starting to sound like a broken record… a survey conducted by BMO found that a whopping 49 per cent of Canadians are not familiar with the new mortgage rules that came into play this past Monday!  This leads me to believe that 49 per cent of Canadians live under a rock, mortgage free and without cable.  If you are one of the 49 per cent, please check out the new rules and help tip the “in the know” side of the scale.

BMO’s Consumer Survey

This survey found that less than half (the aforementioned 45 per cent) knew about the decrease in the maximum amortization to 25 years, and 26 per cent still thought the maximum amortization was at 30 plus.  14 per cent of the 1000 surveyed had said that they are less likely to buy in the next 5 years as a result of the mortgage changes, while 41 per cent who still expect to buy in the next 5 years said that they will spend less now and work on saving.  Wait a minute… Canadians saving?!  Did I hear that right? Well it sounds like the master plan is working … but is it, really?  Check out some tips on saving and where the best place is to park your money!

Too Little, Too Late

Brad Lamb (President of Lamb Development Corporation) doesn’t think that the new rules are going to bring about major change.  He feels as though there is more of a natural/cyclical slowdown that we are experiencing which has little to do with the changes made to CMHC insurance requirements.  Lamb feels that the banks have made it too easy to buy in Canada and says as a result we’ve gotten “a little bit ahead of ourselves in some marketplaces where prices have risen a bit too far too fast.” Like all good things, after 12 to 14 years of phenomenal real estate in Toronto, the growth cycle has perhaps come to an end.

Canada’s Number One Hot Spot Number: Van City

The new rules came into play this week, but take a look at how Vancouver’s market has been changing.  Earlier this month, REBGV (Real Estate Board of Greater Vancouver) reported that the number of residential property sales hit a 10-year low in June while prices remained fairly steady.  In fact, the sales for detached, attached and apartment properties declined by 27.6 per cent since June 2011 and dropped 17.2 per cent since May 2012!  Vancouver has been slowing down for a few months now and their market balance is shifting to favour buyers.  A correction has begun and prices are likely to follow suit.

Canada’s Number Two Hot Spot: The GTA

Toronto has also experienced a downturn in sales.  The Toronto Real Estate Board reported that June 2012 sales in the GTA were down 5.4 per cent from June 2011.  June usually reports the highest level of sales, but this June saw the lowest sales recorded since 2000.

Sales are down across the board in the 416 and the largest drop hit the condo apartment market with an 18 per cent decrease in sales over the last year.  However the condo market is not doing any better in the 905, where year over year sales have dropped a whopping 20 per cent!  The only progressive numbers that the GTA has put up over the last year is in the 905 across the detached, semi-detached and townhouse categories.  Interestingly enough, the average price has increased across all categories over the last year which leads me to believe that if this trend continues, the GTA market could see a decrease in pricing and a gradual slowdown for the next few years.

Forecast for the Market, Pricing and Rates

Markets:  The summer months have been hot, hot, hot and so have the real estate and mortgage markets; so what’s next?  It seems as though Vancouver has been a leading indicator for what’s to come in the market.  It was the first to really take off and is now experiencing a cooling effect with Toronto trending to follow suit.

Pricing:  The June numbers for new listings in Vancouver have dropped over the last year and the average home price increased while sales have dropped.  New listings for June in the GTA were up from last year along with average prices, but sales were down.  As the market moves to favouring buyers in both markets, we should see prices adjust and slowly come down.

Rates:  The Bank of Canada is scheduled to meet on July 17th to discuss any changes to the overnight lending rate.  In a nutshell, the Canadian economy cannot afford to take off from the U.S. by raising rates and the overall health of the European economy has not seen an improvement either.  Due to the overall health of the global market, the prime lending rate and thus variable rates are forecasted to remain unchanged.  Due to the changes in the bond yields (see chart below), fixed rates could actually drop a little as well – however they are trading in a pretty tight range.

By the way – our monthly  Mortgage Rate Outlook Panel has weighed in on this activity and shared their take on upcoming mortgage rates. Take a look at what they’re projecting for July.

RateSupermarket.ca Week in Review

The “rate changes” (if you can even call them that) to the best mortgage rates page over the last week are not really changes at all.  Everything has held quite steady with the 5 year fixed closed and the 10 year fixed closed only dropping each by 1 basis point.

Do you want the inside edge when best mortgage rates change? Be the first to know and sign up for RateAlert. RateSupermarket.ca will e-mail you a daily digest of the mortgage rates that have changed in your area!

Each week I give you the low down on the most popular rates that are searched on RateSupermarket.ca.  This week, the most popular rates searched were the 5 year fixed and 5 year variable rates, while stepping into 3rd position – and kicking the 10 year fixed rate out – is the 3 year fixed rate, gaining popularity with 5 per cent of visitors viewing these rates.

Related Topics

Mortgage News / Mortgage Rate Outlook Panel / Mortgages

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