The End of Summer
Summer certainly went by quickly this year. It is hard to believe that the end of the season is just around the corner.
The market has been very busy. I want to thank everyone for their business support over the past months. It has been a time of refinancing homes and drawing out the big equity available, buying rental and recreational properties and investing in raw land.
The long term rates have come down slightly and the future will really be determined on the effects of the war efforts in the East. The articles in the News Letter will outline some of what has happened in the market, as well as some predictions.
I sincerely hope that you have enjoyed your summer!
Economic Indicators from CIBC World Markets.
- Canada's GDP growth rate was 3.8 in Q1 of 2006. The forecast is for a 2.2 growth rate in Q1 of 2007.
- US GDP growth rate was a heated 5.6 in Q1 of 2006. The forecast is for a 2.0 growth rate in Q1 of 2007.
These two key forecasts are what leads CIBC World Markets to believe we'll see a 75 bp reduction in both Canada's Bank of Canada rate and the US Fed Funds rate by June 2007. While Canada is no longer in it's tightening mode as evident by moving to the sidelines in the latest meeting, the forecast remains for the US to hike the Fed Funds rate one more time to 5.50% before moving to the sidelines themselves for a short time before reducing rates in 2007.
In Canada the combination of a slowing US economy and a strong CDN Dollar will result in the cooling of the Canadian economy in 2007.
The bond market forecasts continue to be strong, with a prediction of nearly 50 bp reduction in the 10 year Gov't bond yield which should lead to lower long term fixed rate mortgages in 2007.
Other articles in this month's report discuss the US inflation rate, which includes rental markets. Because rates have increased in the US, many more Americans cannot afford home ownership and have moved to the rental market, which has caused it to tighten and resulted in higher rental rates and reduced vacancies. While the prediction is for core inflation to rise in the near future, a reduction is forecasted in 2007 as the economy cools back down to 2004/2005 levels of around 2.0%.
Canadian Mortgage Market
Two weeks ago, the Bank of Canada bucked the trend it had set during the first half of this year which featured seven consecutive increases in the overnight rate, with the most recent increase to 4.25% taking effect in late May. This last increase sent the Prime Rate to 6.00%. The Bank left the rate unchanged as it determined that the current rate was sufficient to hold inflation within the target range of 2% annually as the outlook for economic growth and inflation has not changed materially from the Bank's last update in April, 2006.
In its analysis, the Bank judged that the Canadian economy continues to perform slightly above its production capacity. This would usually signal the need for more rates tightening in order to hold inflation in check, but the Bank anticipated medium term weakness in US consumer consumption and further depreciation of the US dollar. This forecast, together with the lagged effects of a higher Canadian dollar, lead the bank to hold firm on its overnight rate.
What does this mean for the Canadian mortgage market?
Have we reached the end of increases in the Prime Rate for now? What we can conclude, however, is that the recent decision and commentary from the Bank may renew consumer demand for variable rate, Prime based mortgage products. When Prime Rate reached 6.00%, the spread between the five year fixed mortgage rate and variable rate mortgages reached its lowest point in more than five years. The reduction in significant interest savings from the increases in the Prime rate during the first half of this year led many consumers to choose the security of a fixed rate over the uncertainty of a variable rate in their mortgage product selection. With the Bank of Canada holding steady on the overnight rate and with most Canadian investment dealers predicting no further Bank rate increases for the remainder of this year, consumer preference may shift back to Prime based, variable rate mortgage products.
Steve's Rates
| Mortgage Term | Steve's Rates | Bank Rates |
|---|---|---|
| Variable Rate | 3.25% | 5.50% |
| 6 Month Closed | 5.75% | 5.55% |
| 1 Year Closed | 5.25% | 5.75% |
| 2 Year Closed | 5.35% | 5.90% |
| 3 Year Closed | 5.39% | 6.00% |
| 4 Year Closed | 5.36% | 6.15% |
| 5 Year Closed | 5.44% | 6.30% |
| 7 Year Closed | 5.43% | 6.95% |
| 10 Year Closed | 5.64% | 7.40% |
| 15 Year Closed | 5.99% | n/a |
| 18 Year Closed | 6.07% | n/a |
| 25 Year Closed | 6.18% | n/a |
Rates are subject to constant change, for the best rates call 667-9816.
Resources
Business Supporting Business — Thank You:
Insurance
Canyon Insurance covers all your needs, ask for Harry Mason
hmason@canyoninsurance.ca
Musician
claytoni@telus.net
Senotrini Spa & Wellness
www.scentorinispa.com
FCm Travel Solutions
wes.flanagan@fcmtravel.ca
Two Amigos Moving
www.twoamigos.com
Friends Supporting Friends — Thank You:
Evan William's Group
www.evanwilliamsgroup.com
otis & huckleberry
www.otishuck.com
For your Recreational Investments — www.buycanadaproperty.com
WFG SECURITIES OF CANADA
George Negrette
Mutal Fund Representative
P:403-809-7885
E: gnegrette@shaw.ca
A Quote to Note:
I was in control of my day until I left my home. After that, I have to trust the whole world.
- Donald Sutherland
Contact
At Prolink Mortgage Inc., I have over 30 lending financial mortgage institutions in Canada. With Steve Faux sourcing the best rates and the best products to suit your needs!
Direct Line — 403.667.9816
Direct Fax — 403.509.1007
Email — steve@yourmortgages.ca
Visit www.yourmortgages.ca for more resources.
Even Apply Online →
