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Tuesday, January 27, 2015

Daily Market Update

RBC cuts mortgage rate, price war coming?
It was always going to happen, but while last week the big lenders were reluctant to pass on the Bank of Canada’s interest rate cut to borrowers, this week there’s talk of a price war. Royal Bank of Canada is the first of the big banks to cut mortgage rates, dropping its five-year fixed rate deal to 2.84 per cent and also cutting its other fixed products. Flexible rates are unchanged though along with other lending from the bank. Of course, these rates are the bank's published deals and brokers frequently secure better ones, but a ‘battle of the rates’ creating headlines can only help the perception that now is a great time to buy. How low those rates go is anybody’s guess, but there are already predictions of sub-two per cent mortgages.

New home plots in Calgary at 17-year low
There’s a reported shortage of building land for single-family homes in Calgary. Research carried out last fall by the Borger Group found that the number of development lots has been steadily falling and is now at a 17-year low. There were just 4,423 lots available last year; in 2003 it was almost double that. In the surrounding areas there is also lower supply with 7,769 lots available compared to more than 11,000 in 2012.

TD Bank predicts another rate cut in March, lower house prices
A further 0.25 per cent cut in interest rates is being forecast for March in a new report from TD Bank. The outlook for the economy predicts slower growth this year (two per cent compared to the 2.3 per cent predicted in December) and the continuing low oil price prompting the BoC to cut the rate to 0.5 per cent. TD economists also expect house prices to fall in eight provinces during this year with only Ontario and BC escaping the decline due to the continuing heat in Toronto and Vancouver.

Consumer optimism for property prices lower again
Canadians are increasingly pessimistic on the economy and house prices. The latest Bloomberg Nanos Canadian Confidence Index shows that on the economy as a whole the index fell last week to 18.26, from 20.12 the week before and was below the average for 2015 so far. For real estate prices there was a slight dip in the level of people who believe that prices will be higher in six months, although it is roughly at the average for the year to date. Confidence in both personal finances and job security is up though.

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Source: Canadian Real Estate Wealth 

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