Will microscopic interest rates continue through 2015?

Attractive times currently to borrow to buy a house

By Mark Schadenberg

Interest rates continue to hover around microscopic percentages (1.0 - Bank Of Canada), which should entice all possible home buyers (especially those considering an upgrade in homes) to buy buy buy in 2015. Right?

When you factor in a 25-year amortization chart and realize a good portion of your required every-other-week payment is making the principle evaporate rather quickly (versus a much higher interest rate), the amount of home you can afford has never been higher.

If your employment record is strong and your credit cards are under control, you should be buying bricks and mortar.

We all want to be optimistic about these low rates continuing for forever, but we realistically know it will not be the case.

I found a terrific blog (posted below), which discusses five variables which could see interest rates be on the upswing. These factors most certainly include world economic factors, such as the stresses seen currently in China, but the list continues with the rapidly improving U.S. economy and the reduction in the cost of a barrel of oil on the world scene.

I always tell folks who are considering a real estate purchase to talk to their lender (whomever she/he may be – bank, credit union, mortgage broker, etc) to guarantee at minimum a 90-day rate (or 120 days) which will not change, so you're ready to leap if you fall in love with a house you would like to call home. At the same time, and even though a mortgage person at a bank is not a qualified economist (neither am I certainly) they know what is happening within their four walls, so discuss the differences between a variable rate and fixed rate. If your bank is suggesting a fixed rate, that could be your best indicator rates are going to rise.

Dave Larock – Dave The Mortgage Planner – presents a good summary below, but so do many other scribes.

A CBC story below includes a forecast from a prominent TD bank staffer:

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TD economist Leslie Preston says her bank is still sticking to its prediction of a rate hike in October (2015). Commodities are notoriously difficult to forecast, Preston says, and she agrees that if economists' oil price forecasts are wrong, then there is a risk the Bank of Canada would delay interest rate hikes.

But Preston says oil prices could find a bottom in the first half of the year and start gradually heading back up.

Meanwhile, Canada's economy had a fairly decent year in 2014 with around 2.4 per cent growth, she says, with forecasts for 2015 at 2.3 per cent growth. Unemployment is also expected to hold steady and Canada should benefit from the U.S. economy growing at a very strong pace.

"It's good to have disagreement," Preston says. "I find we economists here in Canada, it's frequently tough to find disagreement between the various shops. Or the disagreement is very minor."

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I also located an old story from Global TV, which could be best described as a Q-and-A or a glossary explanation.

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How does the Bank of Canada rate affect borrowing rates from the bank?

Lenders set their prime rates, or the minimum interest they charge their customers, based off the BoC’s key rate. “The big banks peg their prime rate against that rate, and that prime rate is the best rate a bank will lend their best customers,” says Kelvin Mangaroo of  www.centum.ca , a site that tracks consumer borrowing rates.

LINKS:
http://www.integratedmortgageplanners.com/blog/
http://www.bankofcanada.ca/rates/interest-rates/
http://globalnews.ca/news/1716835/is-2015-the-year-the-bank-of-canada-finally-raises-its-key-interest-rates/

December of 2014 stories:

http://www.cbc.ca/news/business/bank-of-canada-holds-rate-steady-at-1-1.285876
http://globalnews.ca/news/1705431/bank-of-canada-expected-to-maintain-its-one-per-cent-interest-rate/

Mark Schadenberg, Sales Representative

Senior Real Estate Specialist (SRES designation)

Royal LePage Triland Realty

757 Dundas St, Woodstock

www.wesellwoodstock.com

(519) 537-1553, cell or text

Email: mschadenberg@rogers.com

Twitter: markroyallepage

Facebook: Mark Schadenberg, Royal LePage Triland

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