The past few years have proven challenging for would-be homebuyers, as home prices have surged beyond affordability in many markets. Amid steeper savings timelines, bidding war tactics, and fears of property overvaluation, the saving grace for buyers has been the recent historically cheap cost of borrowing.
A mix of central bank caution and investor confidence has led banks and brokers alike to price both fixed and variable mortgage rates at record lows in the typically competitive summer months – and this year is proving to be no exception, with the best five-year term options available at well below 3 per cent.
And the discounts show no sign of slowing down; according to RateSupermarket.ca’s expert Mortgage Rate Outlook Panel, warm-weather buyers are in store for a few months of discounts.
Nothing Lukewarm About These Fixed Rate Options
The panel, which is made up of mortgage industry experts, brokers and economists, point to growing competition among lenders as the number of buyers decline; new mortgage restrictions implemented this year and last have effectively knocked some would-be buyers out of the market. That means attracting a shrinking buyer pool with lower rates combined with greater feature flexibility. And it’s not just brokers and credit unions slashing prices. Already, we’ve seen BMO re-introduce their original 2.99 five-year fixed headline maker, Scotiabank bring out a 2.97 per cent stunner, and TD roll out 2.99 per cent pricing as well.
“Canadian home buyers are currently enjoying a competitively priced mortgage market, as lenders duke it out for spring season market share,” says panelist and RateSupermarket.ca President Kelvin Mangaroo. “It is worth noting the discounting trend is growing among the Big 5.”
This price-cutting trend has also been supported by Canada’s economic factors – bond yields have remained consistently low as investors remain confident in our nation’s post-recession recovery.
The Bank of Canada Holds Its Breath on Variable Rates
Those with variable-rate mortgages can expect to enjoy their low payments for months, even years, to come as the Bank of Canada left central rates untouched once again this month. The Central Rate, which determines the country’s cost of borrowing, hasn’t been altered since September 2010, in efforts to stimulate spending and economic growth post-recession. While the situation is improving, the BoC isn’t quite ready to take the training wheels off, according to panelist and CAAMP economist Will Dunning. “The inflation rate has increased in Canada, reaching 2.0 per cent as of April, versus less than 1 per cent just six months ago. But, this is unlikely to alter the expectations of the Bank of Canada about future inflation rates,” he says.
“The recent bump in the inflation rate is due to the weakening of our dollar, which raises the costs for most of the goods we import from the rest of the world. The Bank of Canada is likely to view this as a temporary event that does not justify any change in the base interest rates that it controls.”
Are you planning to buy a home this summer? Do you expect to get a bargain mortgage rate?
Penelope Graham is the Editor of RateSupermarket.ca’s Money Wise, the personal finance resource that “Makes sense of it all”. In addition to providing a daily breakdown of current economic news for everyday Canadians, Graham has also provided commentary to publications such as the Globe and Mail, The Toronto Star, and MSN Money.
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