Mortgage & Market Update – July 27, 2010

I hope this finds you well & enjoying our fabulous weather!

Since my last update we have seen bonds yields, which control fixed rates, continue to yo-yo up & down. The recent economic news of better than expected job growth in Canada followed by mixed earnings and lower than expected  consumer confidence in the US has continued to contribute to volatility in our capital markets as investors jockey for position.

As expected, the Bank of Canada raised its overnight rate by 0.25% last week which increased the Prime lending rate to 2.75%. Variable and Adjustable rate mortgages will increase by 0.25% at their next reset/adjustment date.  With lingering debt issues in Europe and a slower than expected recovery in the US the Bank of Canada may pause on further rate increases to assess the effect of their 2 recent increases when they next meet September 8th.

At this stage longer term fixed rates remain unchanged with more lenders now at, or just below the 4% threshold for a 5 year fixed term OAC. The Bank of Canada confirmed in its report that the global economy is recovering slower than originally forecast. Canada has certainly benefited from a stronger than expected recovery. This is largely due to its safe haven status, with foreign investment flowing in to buy resources/commodities as hedge against deflation. This investment and stable banking system have the Bank of Canada slowly unwinding its economic stimulus in our country which is positive news. In a recent stress test in Europe, they advised that 7 of the 91 banks would likely fail if the economy dipped back into recession. We are so lucky to have escaped the extremes of the whole sub-prime debt fiasco in Canada!

As the Vancouver real estate market enters its summer slowdown, we are seeing increased competition with variable rate offerings. P-.60% is now the norm, with a few lenders offering summer specials of P-.70% for well qualified owner occupied applicants OAC. Fixed rates are also increasing in competitiveness with a few lenders now offering 3.95% – 3.99% specials.

Another sign of emerging stability is that Equity Lending is slowly making a comeback to our marketplace. For borrowers who may not “income qualify” or meet “Credit Score” guidelines with Bank lenders post April 19th changes, there are now some alternatives. Equitable Trust, Home Trust and TD Finance are now lending in Vancouver with financing options up to 90% of purchase price O.A.C.. Even though their rates and fees are higher than standard, they certainly beat rates & fees charged by Private lenders who were bridging the market. Thanks again for your trust in us and our team and have a wonderful week!