Canada Real Estate Is Good & Dandy

Looks like the real estate rendezvous is good and dandy … Mortgage rates are going down !

Why no rate hike means variable mortgages are safe again

A signal from the Bank of Canada that it is not raising its key lending rate any time soon, coupled with the likelihood of falling mortgage rates, could be enough to keep the latest housing rally going.

There have been signs the housing market is in recovery mode with year-over-year sales rising in many markets, albeit generally below 10-year averages. Analysts have called it a short-term blip caused by consumers rushing to buy to  take advantage of pre-approved mortgages signed 120 days ago when long-term rates were lower.

But with the Bank of Canada signaling Wednesday it won’t be raising rates — its neutral stance could even mean lower rates — consumers can safely slide back into variable mortgages tied to prime which tracks the central bank rate.

The short-term rate option and the possibility long-term rates will follow has people worried the market may be recovering too fast for the taste of Ottawa, leaving Finance Minister Jim Flaherty with no choice but to tighten lending rules again.

“It’s possible interest rates will go down,” said CIBC deputy chief economist Benjamin Tal, adding there’s a huge amount of mortgage debt already in the pipeline that was created when people took advantage of rates they were pre-approved for in the summer. “I’ve seen what is in the pipeline in mortgage activity and you won’t believe the numbers when it is official.”

With no panic to buy, the question is whether people will be encouraged to continue to take on more debt or slow down their spending if the economy slows?

Read More @ http://business.financialpost.com/

BUT,

Falling rates, BoC’s stand puts housing spotlight on Flaherty

Jim Flaherty’s balancing act is getting harder.

For the past few years, the Finance Minister has been trying to prevent Canadian house prices and consumer debts from rising too quickly – without causing a major slump in the real estate market that would hurt the economy. Four times, he has changed Ottawa’s rules governing mortgages to reel in overheated home prices.

It was expected that higher interest rates would do the rest of the work. But that’s now in question, after the Bank of Canada pushed out the timeline for raising short-term rates. Longer-term rates are falling too: The yield on five-year government bonds has fallen from 1.9 per cent to 1.72 per cent in the past 10 days.

If that trend continues, mortgage rates will eventually fall, giving yet another push to a housing market that already has a lot of momentum. The average price of houses that sold over the Multiple Listing Service in September was $385,906 nationally, up 8.8 per cent from a year ago, in large part because pricey cities, such as Toronto and Vancouver, are rebounding from steep sales declines a year ago.

So will Mr. Flaherty be forced to intervene for a fifth time? “While we continue to monitor the housing market, we have no plans for further action at this time,” he said Thursday.

Read More @ http://www.theglobeandmail.com/