Alberta boom will continue to bloom and the bust is nowhere in sight, according to a new report by the TD Bank on the province’s economic future. As a result of the boom, three of Canada’s major banks are raising residential mortgage rates. The Bank of Montreal (BMO) and the Royal Bank (RY) said last week that their posted rates will raise as much as a quarter point beginning on Thursday. TD Bank’s (TD) rate changes went into effect October 10th, 2007.
BMO’s five year rate will increase 0.25 percentage points to 7.44 per cent, Royal Bank’s five year closed term will rise 0.21 points to 7.4 per cent, and TD Bank’s five year increased 0.25 points to 7.44 percent.
The increases come as bond yields rise on speculation, the Bank of Canada continues to hold the line on its own benchmark rate and may even have to raise it to keep inflation within the acceptable target range.
If you are at all considering buying a home contact a mortgage broker today and reserve a rate. If you can get today’s mortgage rate, and tomorrow’s pricing you can minimize your monthly costs. Reserving a rate does not commit you to anything – you don’t have to buy a home, you don’t have to use that rate – but it does protect you from rising rates.
However, Bank of Canada governor David Dodge is keeping a close eye on the high price of housing in Western Canada as he determines whether to revise interest rates or not. During a news conference following a speech to the Vancouver Board of Trade, Dodge suggested the central banks interest-rate policy has unduly influenced new home prices.
“One worries about the structure of the mortgage market, that we may be actually facilitating a rise in the price of housing,” says Dodge.
The Bank of Canada boss will decide Oct. 16th whether to change or maintain the current overnight interest rate of 4.5 per cent in wake of the loonie reaching parity with the U.S. greenback for the first time in three decades.
Questions:
1.When I sell my house and terminate my existing mortgage, do I have to pay any penalty for paying off early?
2. My current house could sell for about$550,000 and the homes I am looking at (Vancouver Island)are in the $350,000 range. I owe about $270,000 with 3 years remaining at a rate of 5.2%. Should I carry my higher mortgage at the low rate or should I get a new morgage for $150,000 at the new higher rates?
Sorry if this is the wrong forum for these questions, but your post has got me into a bit of a panic.
Yes, there is generally a penalty for ending your mortgage before the end of the term unless you have an open mortgage. If your mortgage is portable you may be able to avoid the penalty by moving it to your new house. You need to contact your mortgage broker who can figure this all out for you quite easily over the phone.
i am puzzled..you are the first realtor i have heard say the truth about where real estate is truly heading…gotta give you credit man
you give good sound advice
and you are brutally honest
a refreshing change indeed
Tom, Contact your lender. They have your mortgage. It depends on whether mortgage is open or closed.
As for the panic I’d suggest a lifestyle change.
Thanks Sara, Sheldon, as for the lifestyle change, that is why I am looking at Vancouver Island.
Cheers Tom
Speaking of Vancouver Island, I am very impressed with fellow Coldwell Banker Realtor Bob Joiner’s web site.
http://www.comoxvalleyhomescb.com/
It is basically a one stop site for looking at homes in the Comox Valley. Is there any kind of deal if I list with you guys and buy with him?
Does anyone know if one can retrieve CMHC fees if they decide to pay off their mortgage entirely before you even pay your first payment?
Tom, you should get a deal as long as you have not contacted him yet. Get Sheldon/Sara to refer you to him.
It’s amazing to see that your market is doing so well, while so many major markets here in the states are suffering. I suppose the strength of the canadian currency helps a lot.
As a sidenote in regards to interest rates and mortgages in general…….there are a few here who will suggest that the easy credit and low rates are one half of the reason property values have illogically risen in the last 36 months. I am one of them.
Wifey and I own a condo in Rio de Janeiro. We bought it 6 years ago for $60K CAD equivalent and it is worth the same today. In fact…..15 years ago it was worth the same amount. Do you know why ?
Mortgages do not exist in Brasil. If you want to buy a property you have to pay cash. And, as a result, property values are stable.
Real estate is for shelter, not speculation and investment. Once we change that mindset, it will be safe to buy a property once again in Alberta.
But right now….it is not.
Carioca,
No offence it is very simplistic to say that real estate is for shelter only and I completely disagree with you. If people don’t invest then there’s no properties for renters. In 6 years you have gained 0 in equity. Wow what a great system. Not safe to buy…this is not
Brazil where the bank can have a run on money in a day. If Brazil is so great why are you here?
Your comment on buying real estate as a shelter leaves out commercial, industrial and revenue properties. It is safe to buy a home as well if you are buying for the long term.
We will be leaving for good in about 7 more years actually. ;^) I’ll be 54 and we’ll have hit our financial targets.
As to the subject of investment, I perhaps should have been more clear.
I invest for income……not for capital appreciation. That is what wealthiest people around the world have done for centuries……now I am not in that group…..by I use their ideas to the extent that I can.
That is why the people that I know here in Calgary who invest in rental apartment buildings, commercial properties, etc, also do……..invest for income.
Two of my clients some of the largest individual holders of commercial land in the city……..they have both told me first hand that they never sell, once they buy an income producing property. Why ? Well, for example, the unit I rent pays for it’s aquisition cost in 10 years at current rates…….
Residential home owners OTOH rarely, if ever, stay in one place for long. Having said that, my parents are still in the house here in town that they bought back in 1976. But, they have had almost 20 neighbours on each side of them……..
Residential ROI comes from mortgage paydown. If you get lucky and it went up a bit…..bully for you…..but to think solely that way is dangerous…..it caused this bubble.
We’ll have to disagree, since understanding the underlying market psychology is paramount to making a wise decision. And today…..it is not wise to buy due to that and market timing as it relates to peak values.