RBC study: homes will be more affordable in 2008

If the Royal Bank. is correct, this could be great news for anyone entering the housing market

Buying a house will become easier and more affordable in 2008, according to a Royal Bank of Canada report released Thursday.

Canadians in the market for a new home will likely be helped by dropping interest rates, say RBC economists. Just this week, the Bank of Canada cut its key rate by one-quarter of a percentage point Tuesday.

Derek Holt, assistant chief economist at RBC, says he expects consumers will benefit as longer-term mortgage rates come down. He added that central banks will probably lower interest rates further -- perhaps by a full percentage point -- and that should make short-term mortgages more affordable.

Potential homebuyers will also be helped by a slowing in the appreciation rate of the resale value of homes. The RBC report notes that home ownership costs -- which last year climbed steadily -- will probably be one of the biggest factors making homes easier to buy in 2008.

"Almost every house class in every province and major city saw affordability deteriorate last year," said Holt.

"Unlike the late 1980s and early 1990s when both unemployment rates and interest rates pushed into double digits and led to declining affordability, the prime culprit this time around has been a long string of house price gains that have outstripped income gains."

In late 2007, B.C. homebuyers were hardest hit as housing affordability "deteriorated to its worst level since 1985." The report states that the province should see "modest improvements in 2008."

The study notes that Alberta's red-hot housing market will also likely cool due to "a softer influx of migrants," making homes easier to buy for homebuyers who were priced out of the market last year. In Ontario, toughening economic conditions are expected to slow income growth and so will moderate housing price gains.

The RBC report predicts that Canada's overall resale house price appreciation is likely to slow to between five and seven per cent this year.

Expect Another Rate Cut In March Say The Economists

Good news for anyone needing a mortgage in the upcoming months. Canadian economists expect another 1/4% rate cut by the Bank of Canada in March.

Because of the slowdown of the US economy and the impact that has here in Canada most economists agree that in order to keep our economy stimulated the Bank of Canada will be lowering rates.

JP Morgan Chief Canadian Economist Ted Carmichael said he expects the Bank of Canada to lower its key rate by 50 basis points at each of its next two monetary policy-setting dates.

"We believe that by the next meeting, data on the U.S. economy will provide a smoking gun, showing clear signs of a sharp economic slowdown," Beata Caranci, director of economic forecasting at TD Bank, said.

"Given that economic and financial market conditions will probably continue to deteriorate between now and the next policy announcement on March 4, you can't rule out an eventual 50-pointer," Michael Gregory, senior economist at BMO Capital Markets, said.

Bank of Canada cuts rates by 25 basis points

Bank of Canada has cut it's overnight rate by 1/4 percent. We will have to see if the Canadian Banks respond and start lowering their fixed term mortgage lending rates. The Bank of Canada also indicated that we can expect further rate cuts to help deal with the drastic slowdown in the US economy.

For those interested the Bank of Canada will be publishing their full analysis on Thursday.

The Globe and Mail has what I feel is the best report on this rate decrease.

Canadian Mortgage Rate Update Jan 10, 2008

Canadian Mortgage Rate Update Jan 10, 2008

It will be interesting to see what the Bank of Canada decides to do with interest rates in the upcoming months. The Cheif Economist from Merrill Lynch has said that he expects the Bank of Canada to drop interest rates as much as 150 basis points. I find that hard to believe with the way the Canadian Economy has been going.

The Bank Prime Rate is currently 6.00%.

Best Fixed Mortgage Rates:

1 Year Fixed 6.00%
2 Year Fixed 6.10%
3 Year Fixed 6.10%
4 Year Fixed 5.95%
5 Year Fixed 5.99%
7 Year Fixed 6.25%
10 Year Fixed 6.30%

Best Variable Rate Mortgage:

Best variable rate is Prime -.60% or 5.40%

MyMortgageBC.com is a mortgage broker located in Vancouver, BC. If you would like the best mortgage rate, or have any questions regarding the mortgage process you should give us a call at 604-764-6336.

Top 2 Changes in the Mortgage Market For 2007

Looking back on 2007 there were a couple of significant changes to help people that want to either enter the housing market or build their portfolio of rental houses. In my opinion these were the top 2 changes in the Canadian mortgage market:

1. Down payment requirements being lowered from 25% down to 20% down.
   
2. 100% financing for rental units.

The reduced down payment requirements was a change in the long standing Bank Act which greatly reduces the insurance premiums people must pay to CMHC or Genworth. With housing prices increasing the way that they have over the last 30 years it's a change that only makes sense.