Interest Rates are on the Rise !!!

WARNING:  Banks are raising the interest rates this week.  If you haven’t been pre-approved and are

Saving money

thinking of buying a home, I suggest you call your mortgage broker today.

If you don’t have one, I can suggest one for you.  Hurry up, you don’t want to miss the lower rate.  They are usually good for 90 days even if the rates go up.  So make the call.  

If you need any help finding your dream home or selling it, please don’t hesitate to contact me.  I would love to assist you !   Have a super day !

IS THERE A PRIME CUT IN OUR FUTURE

This article came out in REM magazine, written by By David Larock – some interesting stuff
Is there a prime cut in the future?
Recently the Bank of Canada (BoC) met and, as expected, left its target overnight rate unchanged. More surprisingly though, the bank also eliminated its oft-repeated warning about near-term rate increases. Here is the exact wording from the announcement:
“While some modest withdrawal of monetary policy stimulus will likely be required over time, consistent with achieving a two per cent inflation target, the more muted inflation outlook and the beginnings of a more constructive evolution of the imbalances in the housing sector suggest that the timing of any such withdrawal is less imminent than previously anticipated.”
The first notable wording change was the BoC’s “more muted inflation outlook”, which was supported by the December Consumer Price Index (CPI), released by Statistics Canada. The report showed overall inflation of only 0.80 per cent over the most recent 12 months, along with core inflation of 1.10 per cent over the same period. (Reminder: core inflation strips out the more volatile inputs to the CPI like food and energy prices.)
Our inflation rates have fallen steadily over the past year and a half and are among the lowest in the world. If they remain at current levels, the BoC will have to think seriously about lowering its overnight rate, not raising it, to achieve a two-per-cent inflation target over the medium term.
Sound crazy? Let’s look at the other key wording change in the BoC’s latest statement – the “more constructive evolution of the imbalances in the housing sector”.
Our borrowing has slowed sharply of late and household credit is now expanding at a rate of only three per cent, the lowest level seen since 1999. If household credit growth, which BoC Governor Mark Carney has repeatedly called the “greatest threat to our domestic economy”, continues to stabilize, the BoC’s interest-rate policy should align more closely with the actual economic data going forward.
I say this because I have long maintained that the bank’s repeated warnings to Canadians about imminent rate increases have not actually been supported by economic data, domestic or otherwise, for some time. In fact, many analysts have long speculated that the BoC was using its higher-rate warning as a kind of moral suasion to persuade Canadians to slow their borrowing (a tactic that I would argue had little meaningful impact).
Even if you look at the BoC’s own economic forecasts, which were just updated in the latest Monetary Policy Report (MPR), there is plenty to suggest that the next move in the overnight rate could just as easily be down as up:
* The BoC cut its forecast for Canadian GDP growth from 2.40 per cent to two per cent in 2013. (Note: the bank upgraded our GDP growth forecast for 2014 from 2.40 per cent to 2.70 per cent but didn’t support this optimistic revision with a detailed explanation. And it doesn’t jibe with any of the bank’s projections for other countries in 2014, as you will see below). The bank now also expects our output gap (the gap between our actual output and our maximum potential output) to disappear in the second half of 2014, instead of by the end of 2013, as forecasted in the October MPR.
* The BoC cut its forecast for U.S. GDP growth from 2.30 per cent to 2.10 per cent in 2013 and from 3.20 per cent to 3.10 per cent in 2014. The bank now estimates that “fiscal consolidation will exert a significant drag on U.S. economic growth … (and this) will subtract roughly 1.5 percentage points from growth in both 2013 and 2014.”
* The BoC cut its euro-zone GDP growth forecast from 0.40 per cent to -0.30 per cent in 2013 and from one per cent to 0.80 per cent in 2014. The bank now believes that “the economic recovery will be slower than originally thought, in part because fiscal austerity measures and tight credit conditions are taking a greater-than-expected toll on economic activity”.
* The BoC takes note of China’s recent economic rebound but also points out that “other economic activity has slowed further in other major emerging economies.”
* On an overall basis, the report states that while “global tail risks have diminished (meaning the risk of a systemic shock to the global financial system that could be caused by an event like a sovereign debt default), the global outlook is slightly weaker than projected in October”. In other words, the global economic momentum arrow is pointing down across the board.
Variable-rate discounts are available in the prime minus 0.40-per-cent range (which works out to 2.60 per cent using today’s prime rate). While five-year variable rates only offer a small saving over their equivalent five-year fixed rates, the BoC announcements provided further reassurance that this saving should remain in place for the foreseeable future.
The bottom line: I have long argued that the BoC’s warnings about near-term higher rates would not come to fruition and the bank’s latest revisions to its interest-rate guidance confirm this view. With that question now put to rest I don’t think it’s crazy to wonder whether the next move in the overnight rate, when it eventually does come, has as much chance being a decrease as an increase. (And that’s especially true if the BoC’s latest international GDP growth forecasts are on the money.)

WHY HOUSING MARKET WILL STAY STRONG

Why GTA Housing Market Will Stay Strong In 2013
Great article written by Mark Weisleder.  Had to share !!!   
By Mark Weisleder | Moneyville. ca
Many economists predicted a local real estate crash this year, with prices falling by up to 25 percent. I didn’t see that prediction coming true and it didn’t. Nor do I believe it will happen in 2013.
Here’s why:
  1. Homes are more affordable
    In 1990, the average GTA home cost half of what it does today. But interest rates were 12 percent for a five-year term at the time. So, if a two-bedroom condo cost $250,000 in 1990 and you had a 20-per-cent down payment, your monthly carrying costs, including interest, taxes and common expenses, were about $2,500. The average rental for a two-bedroom condo at the time was $1,100, according to the Housing New Canadians research group. So the economics of ownership made no sense.

    Today, even with a price of $500,000, if you have a 20-per-cent down payment, with current interest rates at 3 percent, the total monthly payment is what it was in 1990. It is still $2,500 per month, including common expenses and taxes. But in downtown Toronto, the average rent paid for a two-bedroom unit is now close to $2,500 per month.

    Most tenants who can afford $2,500 a month or more in rent can probably afford to buy a home now, if they have 10 percent down payment or more.
     

  2. The lesson from 2012
    Toronto Real Estate Board statistics up until Nov. 30 show 82,200 units had sold in the GTA so far this year. In 2011, it was 84,900, and in 2010 it was 81,900. The average price on Nov. 30 was 2 percent higher than a year ago. If anything, the market has remained very stable for the past three years.
     
  3. Impact of mortgage rule changes is minor 
    The mortgage rule changes imposed in early July lowered the amortization period to 25 years if you were putting less than 20 percent down and lowered the percentage of your income that could be used for borrowing from 44 percent to 39 percent. The result was that buyers who would have purchased in late summer or fall moved up their purchasing decision to the spring. By fall, this meant many would-be first-time buyers were looking to rent instead of buy. This contributed to low vacancy rates.
     
  4. 2013 will be fine 
    Despite the doom and gloom, Toronto condo rental vacancy rates are 1.7 percent. This means that for those people who cannot sell their condos, there are plenty of renters who can cover the monthly costs.
     
  5. Debt-to-income ratio not relevant
    As our American friends like to say, “That dog won’t hunt.” Every month we are told that because the ratio of household debt to household income continues to rise — and is now at 164 percent — there is a danger of a real estate collapse.

    What this really means is that the average Canadian household has an income of $100,000 and total debt of $164,000 (of which their real estate debt constitutes-two thirds). Again, as stated earlier, with interest rates at 3 percent, this is not a dangerous problem.

    If interest rates were 12 percent, as they were in 1990, or if all your debt was on your credit cards (with interest rates averaging 18 percent), then this would be a serious problem.

    Note to readers: Pay down or eliminate your credit card debt in 2013.

    Note to government: With mortgage interest rates at 3 percent, it is almost criminal for lenders to be able to charge 18 percent on consumer credit cards.
     

  6. Interest rates may not rise until 2015
    The U.S. Federal Reserve is now saying it won’t raise rates until 2015. Our rates can’t differ much from theirs without harming our economy with a strong dollar and slower growth.
These are all things to keep in mind in the coming year. Somebody has been predicting a Canadian real estate market collapse for the past 12 years. It hasn’t happened yet and won’t happen in 2013.