Mortgage rates on the way up?

[taylor192]

Scotiabank is predicting prime rates will rise sooner than expected: http://www.financialpost.com/news-se...tml?id=1662276

[taylor192]

The BoC bond yields: http://www.bankofcanada.ca/en/rates/bonds.html

Look at how they have spiked in Q2 of 2009 and are headed back to levels during 2008. Remember that 5 yr fixed rates were > 6% only a year ago!

[johny]

THE BoC said yestereday their prime will stay at 0.25% untill next june.

can they change this durring the year after they have said they won't? surly they couldn't legaly do this.

[Carl Johnson]

^
BOC is exercising verbal policy here. One way to look at it is that BOC probably see us still in pretty deep recession and recovery will be slow and painful. But you know the worst nightmare of any central bank? Inflation. By keeping rate low for a long period of time will plant seed for future inflation which will drive housing prices back up again like any other asset classes. You can already see this in the financial markets today as investor braced themselves for inflation.

[scheng924]

this thread is very educational and informing, i LIKE IT!! lol
actually learning something on RS

[taylor192]

Originally Posted by johny

THE BoC said yestereday their prime will stay at 0.25% untill next june.

can they change this durring the year after they have said they won't? surly they couldn't legaly do this.

They can do whatever they want, there's lots of times they have said one thing and done another.

[taylor192]

Fixed rates went up another 0.4% last night.

[johny]

Thats gay. why are fixed rates going up when the BOC and bank prime isn't?. the fixed rates droped way less then BOC and bank prime rates. fixed rates should still be going down not up.

oh well. I locked in a rate a couple weeks ago for 120 days. but with no raise, and lots of layoffs at work. I won't be buying anything this summer as I had thought about.

unless I'm lucky and interest rates go to 15% within the next month, causing house prices to drop 50%. then I'll I have 3 months to go look / buy at the low rate

[taylor192]

Originally Posted by johny

Thats gay. why are fixed rates going up when the BOC and bank prime isn't?. the fixed rates droped way less then BOC and bank prime rates. fixed rates should still be going down not up.

Fixed rates are based on the long-term, while prime rates are based on the short-term.

This is very simplified:
The economy still sucks, so short-term rates must stay low to keep the economy chugging along. Yet investors are seeing hope for a recovery, so long-term rates are increasing to entice investors to keep buying bonds instead of switching to stocks now that they are having better returns.

Originally Posted by johny

oh well. I locked in a rate a couple weeks ago for 120 days. but with no raise, and lots of layoffs at work. I won't be buying anything this summer as I had thought about.

unless I'm lucky and interest rates go to 15% within the next month, causing house prices to drop 50%. then I'll I have 3 months to go look / buy at the low rate

I think this is a dead-cat bounce, no way oil should have gone up this much this quickly. So what you're seeing a temporary spike in prices that will fall and hopefully bring rates down again by year-end.

If I were you I would wait till next fall to buy. Rents are cheap compared to purchasing right now, use the money you save renting to put down a bigger downpayment.

Property values drop after the Olympics, I cannot find a single Olympic city where this did not happen. Add to that:
- Vacancy rates are up in Vancouver
- There's more unsold inventory now than at the height of the bubble. Weird, since usually people hold onto properties when they go down in value to ride out the decrease till the next gain.
- There's LOTS of developments speculated to finish in early 2010, adding more unsold inventory to the already increased number.
- Unemployment just spiked
- Lots of construction projects will finish by 2010, adding more people to the unemployment line.
- Mortgages rates are going up, so that'll knock even more of the decreasing number new buyers out of the market.

[blkgsr]

you're saying wait till fall 2010?

that's what my cousin told me too

unfortunately i can't wait that long 1) my dad wants me out but is being patient 2) i finally want to move out and buy a house, i need my own space

what do you feel is going to happen to houses?

you mentioned they are a pretty fixed amount and that it's condo's that really have the vaste up and downs in pricing

my current pre-approval is up early Sept at 5 year %3.69...i'm going to start looking alot more in July and August

[taylor192]

Originally Posted by blkgsr

you're saying wait till fall 2010?
that's what my cousin told me too

2 reasons:

1. Olympics
2. Fall/winter is always the best time to buy a house. January is actually the best month, since most people want quick sales to settle holiday bills. Prices always go up in the spring.

Originally Posted by blkgsr

unfortunately i can't wait that long 1) my dad wants me out but is being patient 2) i finally want to move out and buy a house, i need my own space

RENT.

Example:
2bd 2bath condo in yaletown: $2200/mn rent

vs

condo price: $600K
mortgage payments (20% down, $480K mortgage @ 4%): $2500/mn
condo fees: $300/mn
taxes (0.6% of $600K): $300/mn
==
owning condo in yaletown: $3100/mn

Originally Posted by blkgsr

what do you feel is going to happen to houses?

you mentioned they are a pretty fixed amount and that it's condo's that really have the vaste up and downs in pricing

Its anyone's guess. My GF's $1.2M home in Kits is now < $1M.
That's inline with the 18% drop in values in Kits.

Homes may hold their value better, yet those selling right now are finding it hard to find buyers. Not a lot of people with $1M to buy a crappy small house.

Ultimately I think they will hold their value better, yet only cause there's fewer of them and fewer people will sell.

Originally Posted by blkgsr

my current pre-approval is up early Sept at 5 year %3.69...i'm going to start looking alot more in July and August

Good luck. I'd advise against it, even with the low rates, there'll be better deals to be had next year.

[blkgsr]

ok well a couple things to clarify...again i'm not looking at a condo

i'm looking at a house sub $460K, in the Burnaby/New West/Coq/Port Moody ares

of course your numbers could be adjusted to those areas but if i move out it's to buy

sure maybe i wait another year and save what? $5-10K?

i've got other reasons to try to act sooner that may very well save me that money in other areas such as home renos

[77civic1200]

Where did you get 5year at 3.69%?

Damnit, I have an offer on a place, subjects need to be off by monday, and my realtor has been no help/dragging his ass. I could only get the inspection done monday morning, and I still need to clarify a mortgage. I did get a pre-approval from my bank (TD) but was quoted 4.05% I thought I may be able to get better than that, maybe through a broker? but then rates keep going up. I have no clue what I should do.

[Chuck Norris]

^ Don't buy.

If a rate hike of 2% is going to make the difference you're buying something that is over your budget.

Prices here are significantly overvalued. Many people will tell you otherwise but the average incomes do not support the prices.

[Carl Johnson]

The Vancouver housing prices are high on absolute term and could probably drop 5 - 10% in a couple years but I see too many people are hoping to see the kind of drop we are seeing in United States. Yes we have some overhang of supplies in the market. However, we don't have to deal with foreclosures, most of our big banks are rated at the top of scale by international standard. Unemployment (lagging indicator btw) is high but so is immigration and population growth. If you are hoping house prices will drop back to 2003 - 2004 level, it simply won't happen.

[winks]

Originally Posted by 77civic1200

Where did you get 5year at 3.69%?

coast capital savings was offering 3.69% on a 5 year fixed term last Saturday (June 6)

[Westcoast67]

Fixed rate mortgages jumped 0.6% recently. The lowest 5 year we hit (with manager approval) was 3.59%. You'll now be looking in the 3.8x% range if the bank will chisel it for you.

[taylor192]

Originally Posted by blkgsr

ok well a couple things to clarify...again i'm not looking at a condo

i'm looking at a house sub $460K, in the Burnaby/New West/Coq/Port Moody ares

Lookup 5 yr gains in those areas. Even with a 20% drop the 5 year gain is still >50%, and > 60% in some areas.

Housing historically gains at 5%/yr, or 28% over 5 years.

Originally Posted by blkgsr

but if i move out it's to buy

Why? That seems like a pretty stubborn argument from someone looking for financial advice. If you want a home for personal reasons, then go ahead, many people buy homes without considering the financial aspect cause its a home, not an investment.

Originally Posted by blkgsr

sure maybe i wait another year and save what? $5-10K?

I think it'll be 5-10% which would be $20-40K.

I will agree that prices are near bottom and will stay there for a long time, so buy anytime you wish.

Originally Posted by blkgsr

i've got other reasons to try to act sooner that may very well save me that money in other areas such as home renos

Home renos never "save" you money unless you're buying a POS and upgrading it... then its actually costing you money upfront you won't recover till you sell.

[taylor192]

Originally Posted by winks

coast capital savings was offering 3.69% on a 5 year fixed term last Saturday (June 6)

Yes, but that was probably a closed mortgage (not transferable, no early termination) which for anyone that might move in 5 years would be a very bad thing.

rates have jumped 0.2% last Mon and another 0.4% this week.

[taylor192]

Originally Posted by Westcoast67

Fixed rate mortgages jumped 0.6% recently. The lowest 5 year we hit (with manager approval) was 3.59%. You'll now be looking in the 3.8x% range if the bank will chisel it for you.

Stay away from any broker that will buy your mortgage down with points. This means they are screwing other mortgage holders out of lower rates and using the points to buy down rates for customers only shopping around for the lowest rate.

Would you want to buy from someone who would screw a trusted customer to give a deal to a bargain hunter? No thanks.

[taylor192]

Originally Posted by 77civic1200

Where did you get 5year at 3.69%?

Damnit, I have an offer on a place, subjects need to be off by monday, and my realtor has been no help/dragging his ass. I could only get the inspection done monday morning, and I still need to clarify a mortgage. I did get a pre-approval from my bank (TD) but was quoted 4.05% I thought I may be able to get better than that, maybe through a broker? but then rates keep going up. I have no clue what I should do.

A broker is always best.

If you were pre-approved with TD at 4.05% you got screwed out of 0.4%, many banks were offering much better rates when you got pre-approved (probably 30-90 days ago).

[taylor192]

Originally Posted by Carl Johnson

The Vancouver housing prices are high on absolute term and could probably drop 5 - 10% in a couple years but I see too many people are hoping to see the kind of drop we are seeing in United States. Yes we have some overhang of supplies in the market. However, we don't have to deal with foreclosures, most of our big banks are rated at the top of scale by international standard. Unemployment (lagging indicator btw) is high but so is immigration and population growth. If you are hoping house prices will drop back to 2003 - 2004 level, it simply won't happen.

Immigration and emigration growth in BC are dependent on the unemployment rate. Look at the last time BC had high unemployment and people were leaving cause jobs were elsewhere and cost of living too high here.

BC has few company headquarters, so when tough times hit, jobs disappear. Most of the jobs created have been due to construction and tourism, both slated to have a big downturn after the Olympics. Name another industry that has seen huge employment growth in BC if you disagree.

Canada won't sure the foreclosure problem the US is, yet we will suffer similar to Toronto's condo problem earlier this decade. Over building, high prices, and a recession caused prices to fall dramatically.

I don't expect prices to fall back to 2003 levels, yet they have already fallen back to near 2005 levels and possibly have more room to fall.

Its crazy that areas like Coq, PoCo and NW have 69% 5 years gains even after 20% declines this year. That's not sustainable, especially since those areas need gentrification, and new development was leading genetrification, yet that is now stalled for maybe 5-10 years due to over-building.

Look at Calgary for what happens when rates go up too much and the industry supporting them disappears, they come crashing down. You could buy houses in Calgary for $1 after the last oil crash in the 80s. Tell me, what industry will keep Vancouver chugging along, especially in areas like NW, Coq, PoCo without many places to work?

I'm banking on another 10-20% by this time next year, yet its only an educated guess.

I'm focused more on the West End/FC, where there's about 1000 units for sale and another 1000 about to be added when completion of several projects finishes in time for the Olympics.
- You can argue these might be renters about to move in to places they bought, if so vacancy rates should spike and rents drop, dropping housing accordingly.
- You can argue these are investment properties, yet even at 2003-4 prices most investors could not make money (and would lose money) renting the units if they do not sell.
- You could argue that Vancouver can sustain adding more units due to population growth, yet every Olympic city has seen a downturn as construction stops, tourism dwindles, so I don't agree.
- I would argue that many of these units about to be finished are undersized and over-finished. I'd rather spend less for a 10yr old condo that is 300 sqft larger in the same area... and guess what? there's lots of availability!
- You could argue that there's more first-time buyers out there ready to jump onto deals, yet that just wouldn't be true, especially if rates go up and vacancy rates jump (and vacancy rates have risen 1% in the past year).

[Westcoast67]

Originally Posted by taylor192

A broker is always best.

I beat broker rates all day long, so I wouldn't go that far. You need the right banker, that's it.

[Carl Johnson]

http://www.cmhc-schl.gc.ca/odpub/esu...0_2009_Q02.pdf

If you go to page 30 the MLS average price for Vancouver is we went from 593,767 in 2008 to 516,000 in this year. But look at the drop from 2009 to 2010 only from 516,000 to 504,000 the rate of decline is slowing. The same can be about the average residential resale value on page 25 the decline in housing prices for BC is slowing down and actually predict to trend up in 2010.

Canadian economy will recover, business activities & personal income will pick up again. We came into this recession on budget surpluses and the government has put forward a timely fiscal stimulus which mainly focus on job creation and long term growth prospect. Once people's outlook on the economy starts to change the demand will come back to the market.

[taylor192]

Originally Posted by Westcoast67

I beat broker rates all day long, so I wouldn't go that far. You need the right banker, that's it.

Which bank are you with? I've tried Scotia, TD, RBC, CIBC and none could beat the independent banks serviced through brokers.