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With 2012 coming to a close, I want to sincerely thank you for your continued support throughout the year. Please accept my warmest wishes to you and your family over the holiday season and the coming New Year!
(FINAL 2012) MARKET SUMMARY
Though many external factors still loom, growth in the Canadian economy is expected to pick up over the course of next year. Headlines we are watching closely include: Canadian household debt and real estate levels, uncertainty over the US “fiscal cliff”, and the euro-area debt crisis.
– Canada’s gross domestic product is forecasted to grow just below 2% next year and accelerate to about 2.3 per cent in 2014.
– Concerns on household debt seem to be easing. On an annual basis, debt growth is at its slowest pace seen since 2002, and half the pace seen during the 2004-08 period.
– Canada’s housing market is showing great staying power in the face of the global economic slowdown. Mark Carney has said recently that a combination of new mortgage rules introduced by the federal government, as well as a clear tightening bias from the central bank, are working successfully together to cool Canada’s red hot housing market. Major markets are cooling as a more sustainable housing situation in Canada is within sight.
– Markets appear generally optimistic that there will be a positive result in negotiations to avoid the fiscal cliff in the United States. (http://www.theglobeandmail.com/report-on-business/economy/canada-faces-near-recession-if-us-plunges-over-cliff-carney-warns/article6198955/)
– A worsening european crisis could effect Canada through tighter financial conditions and waning confidence. A weaker global demand would negatively impact Canadian exports and commodity prices.
– Interest rates should increase (gradually) starting late next year as economic activity revs up.
RATE SUMMARY
Much debate has risen over the “Variable vs. Fixed” question in the latter part of 2012. Given that variable rate discounts are a thing of the past, accessing a fixed rate on a new mortgage today is a must. For those considering locking in, here are some key points of mention:
– We currently have access to some of the lowest fixed rate offers in history (you will often access a lower option using a broker than you would dealing with a lender directly)
– It’s not a question of whether rates will go up or not, it’s when, and by how much?
– History has shown that it is more costly for variable-rate borrowers to wait for the first increase in prime rate before locking in. Fixed rates have often risen 50 bps or more leading up to initial rate hikes. Waiting for the 2nd increase in prime is even more costly.
– In the past 20 years there have been four instances where multiple 50+ bps rate hikes occurred over spans of six months or less (ie. In 2005, prime jumped 175 bps in 9 months).
– For those with deep discounted variable rate mortgages, you have benefitted greatly from a low interest environment and received incredible savings. We should likely connect in the New Year and explore a plan to capture an unbelievably low fixed offer while we still can.
*Even lower “quick close” offers may be available. Rates subject to change without notice.
| Variable (insured) |
2.65% (Prime-.35%) |
| 2 year fixed |
2.69% |
| 5 year fixed |
2.99% |
| 10 year fixed |
3.89% |
The remainder of this month’s edition looks at the latest research report on the state of Canada’s residential mortgage market, as well as suggests some home maintenance, repair and security tips. Please let me know if you have any questions or feedback regarding anything outlined below.
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Thanks again for your continued support and Happy Holidays!
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