Brrr...it is Cold, but the Market is Hot!
It sure is brutally cold in Calgary. Waking up to -30 degrees is not a great start to a weekend. We hope you are staying warm. If you are in another part of the Country, or out of Canada altogether, lucky you!
2014 is already two months in and once again, we are seeing a lot of changes in the mortgage and housing market. A quiet rate war, government changes and a lack of inventory are the perfect storm for a busy spring in Alberta. Other parts of Canada may not have the same heated market, but still should experience some additional housing activity in the next two months.
The Mortgage Market:
Starting in June of 2013 long term 5 year fixed rates rose nearly 100 basis points and it looked like all-time low rates might have finally have come to an end. Not so fast, we are again experiencing falling rates and are near the rock bottom pricing we saw in the second quarter of last year. 5 year fixed rates are hovering around 3.25%, with short term money a half point lower than that. Bottom line-money remains extremely cheap. However, buyer beware. A common trend we are seeing is the promotion of low-frill mortgage products. These are advertised by banks and mortgage brokers, without telling the full story. A extremely low rate, with no portability, sales-clauses, or an extremely high payout penalty should the mortgage be broken mid-term-is likely not the best plan for most borrowers. As always, a mortgage is more than an interest rate and knowing what you are signing up for is extremely important-saving one thousand dollars now, may cost you ten thousand later.
On February 28th, 2014, CMHC announced that premiums for default mortgage insurance will be increasing by 15% effective May 1st. This will impact all new approvals after the May 1st date. Mortgages that have already been underwritten and approved will be exempt from the change and grandfathered with current premium rates. This is an added cost to home buyers with less than 20% down. Although the change is not drastic from an overall cost to home ownership, the deadline will likely lead to a surge in the market, with potential buyers that until now have been sitting on the sidelines, jumping in. The non-crown corporation insurers (Canada Guaranty and Genworth) will follow suit with the premium hike as well-so all three Canadian insurers will be on the same playing field.
Calgary Housing Market:
In 2014, we have seen a robust market thus far in Calgary and area. Multiple offers, short days on market and offers over list are becoming the norm. In Calgary, active listings are down over 18%, days on the market is down over 20% and average price is up close to 6%. We do not see this trend changing any time soon. March and April will likely be an even tighter market. We may see an increase in inventory, but that will also mean more new buyers looking to move. We are also seeing a lot of houses sell before they reach the public MLS system. As such, it is so very important to be pre-approved and working with a Realtor that is on top of what you want. The early bird certainly gets the worm in this market. If you are looking to buy, Mortgage Connection can get the pre-approval side done and recommend some great real estate agents.
RRSP and Tax Season:
The deadline for RRSP deposits is this Monday, March 3, 2014. So, if you want to make a contribution and have yet to do so, make sure you get things completed. One of the benefits of an RRSP is obviously the tax deferral and likely tax refund come April. This benefit can also help you with your mortgage planning. A great strategy is to take a tax refund and apply it to the principal on your mortgage. Even a small amount can make a big difference long term. Please call, or email us to discuss how this strategy can work for you and your specific plan.
As always, thanks for your business, we here at Mortgage Connection are honoured that you have chosen us to be part of one of your biggest investments. If you have been happy with our service, we hope that you will do us the favour of dropping us a review on Google by clicking here and please remember to like us on Facebook