Are fixed-term mortgage rates coming down? Yep. The yield on five-year Government of Canada bonds crashed through its support level of two per cent Aug. 2, the second biggest drop in yields since March 2009. It’s dropped more since.
Largely spurred on by U.S. economic news and European debt concerns, Government of Canada Bonds are becoming very popular and that means that bond prices are rising and yields are dropping. On top of weaker U.S. economic data, the spending cuts anticipated in the debt ceiling deal have created a perfect storm of disastrous economic news. So much so, that Standard and Poor’s has downgraded its rating on U.S. government debt from AAA to AA+ for the first time since 1941.
The good news for homebuyers is that lower five-year bond yields will lead to lower five-year fixed term rates for mortgages.
Time will tell, but I expect to see a round of rate cutting over the next couple of weeks.
While lenders aren’t jumping to lower rates, Rob Regan-Pollock at Invis, a Vancouver mortgage brokerage firm, predicts that rates could come down to 3 to 3.25 per cent on five-year fixed terms. If you’re planning to buy a home, he suggests you make sure that your mortgage advisor tracks and captures the lower rates as they fall. And, if you have an existing mortgage, renew early at a lower rate. Depending on your pre-payment penalty, you could look at refinancing as well. Most mortgage brokers will hold your rate for up to four months.
This isn’t just good news for borrowers, it’s good news for sellers too, especially at the lower end of the market. Lower rates will bring back buyers who were squeezed out of the market by lack of affordability and help other buyers qualify for a slightly bigger mortgage loan. If you’re one of those buyers, remember to lock in for a few years at the lower rates. If you go for a variable mortgage, you could get hooped if rates go back up suddenly.
According to the Real Estate Board of Greater Vancouver (REBGV) last month’s total home sales were 17.3 per cent below the 10-year average for July. In spite of that, on average, houses are selling in 41 days. That’s unchanged from June this year.
Prices for residential properties are up 9.2 per cent from a year ago, but have remained relatively flat month over month. Rosario Setticasi, REBGV President, said “members tell us that homes priced competitively continue to sell at a relatively swift pace.” In other words, if you want a quick sale, don’t be greedy!
The number of homes listed for sale in Greater Vancouver increased 23.2 per cent over July last year and was 8.6 per cent higher than the 10-year average.
If you’re buying a house or apartment, you’ve had more listings to choose from each month since the beginning of the year. And the sales to listings ratio, a measure of market stability, is at 50 per cent, a sign that the market is balanced.
As a result, there are less multiple offer situations than there have been in recent months. If you’re a buyer, the market is offering you more homes to choose from and more time to do due diligence while you make one of the biggest financial decisions of your life.
Deb Abbey is a real estate agent at Royal LePage City Centre in Vancouver. She is the author of two best-selling books on Sustainable Investment. You can contact Abbey through her website: www.abbeypartners.ca or e-mail any questions or comments to firstname.lastname@example.org.