Hi everyone,
These past few weeks have been extremely crazy in real estate particularly with yesterday's news that three big banks are raising interest rates on their closed rate mortgages. This rise signals the end of some of the lowest rates we have ever seen. What does this mean?
Well, consumers now have an additional dilemma, either stay flexible, hope for the best and ride out the next several months or lock in to long-term loans.
Most of the industry say that this is just the beginning of future increases that will make home ownership more expensive for the rest of 2010. .
Realtors and other experts say they expect to see a flurry of activity over the next few weeks as some homeowners and homebuyers scramble to lock in their mortgage rates before they go any higher and should further fuel this extremely hot real estate market in the GTA by motivating home buyers eager to cash in on still low mortgage rates.
For homeowners or homebuyers who are nervous about Monday's rate increases, the security of five-year, or longer, fixed loans may be the best option, say mortgage experts. "If that (rising rates) causes you discomfort then perhaps a fixed rate's where you want to be," said Robert McLister, a mortgage planner and editor of the Canadian Mortgage Trends website. "If you're closing in the next six months, I suggest people do that quickly."
The changes affect closed mortgages with terms of three, four and five years at RBC Royal Bank (TSX:RY), Laurentian Bank (TSX:LB), and TD Canada Trust (TSX:TD). Rates for mid-term mortgages like these tend to reflect the banks' borrowing costs on bond markets, where mortgage loans are financed.
Other banks are expected to follow suit.
The biggest increase announced Monday affects fiveyear mortgages. All three banks are hiking their posted rate by six-tenths of a per cent to 5.85 per cent from 5.25 per cent. That means a homeowner taking on a mortgage of $250,000 at the new posted rate of 5.85 per cent over a 25-year amortization period would pay $1,577 a month. Prior to Tuesday's hike, that mortgage would have cost $1,489 a month, or $88 less.
Many people with decent credit history who are applying for mortgages can negotiate better than posted rates.
The Bank of Canada is expected to begin raising lending rates this summer as it moves to fight growing inflationary pressures in the economy. The bank has kept its key overnight rate at a historic low of 0.25 per cent for more than a year to help stimulate the economy.
The latest increases reflect real-time market interest rates, which usually signal future central bank rate jumps months in advance.
Now is the best time to sell your home and get into a new one. Homebuyers are eagerly seeking homes in Olf Meadowvale Village, Levi Creek, Churchill Meadows, & Sheridan Homelands. Don't miss your chance to get into your dream home while you can still afford it while getting top dollar for your home.
Please visit http://www.marianogigante.com/ to learn more or follow me on my twitter for more market updates.
www.twitter.com/@marianogigante.
Happy househunting everyone!
Mariano
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