|I hope everyone is enjoying the weather we are having!
The warmer summer has certainly been heating things up in the mortgage industry. Interest rates are back to levels of two years ago and there are some fantastic opportunities available. We are always happy to do a review of your mortgage so please reach out to me if you would like to do that. With rates taking a significant drop over the last few months it’s an excellent time to take a few minutes to do a quick review.
Here are a few hot topics this month in the Real Estate and Mortgage Industry.
Rate Cuts by US Federal Reserve Keeps Mortgage Rates Low
With the US Federal Reserve cutting interest rates by 0.25% in early August, bond yields in both the US and Canada have taken a sharp turn downward in the past couple of weeks, reaching their lowest levels since early 2017. The drop in bond yields means no upward pressure on mortgage rates for now, so fixed rates are poised to remain low for the foreseeable future. Many experts predict the US Federal Reserve will continue its rate cutting trend, which could put pressure on the Bank of Canada to also cut rates, but that is yet to be determined. In any event, the speculation over future rate cuts is keeping fixed mortgage rates low for now.
We are experiencing a very rare situation at the moment where long-term fixed mortgage rates are actually LOWER than variable mortgage rates. This is something that happens very seldom. While the possibility of future rate cuts by the Bank of Canada is a plus for variable rates, its far from being a sure thing at this point. If you were confident that the Bank of Canada would cut rates in the near future, then perhaps taking a chance on a variable rate mortgages makes sense. However, with long-term fixed rates available as much as 0.21% BELOW the best variable rates on the market, taking a chance on a variable rate is a risky strategy.
The drop in mortgage rates seems to be giving a much needed boost to the housing market in many areas of the country. Mortgage rates are back near historic lows, with 5 year fixed rates available as low as 2.64% on insured mortgages, and variable rates available as low as 2.85%.
With the recent drop in rates, we are ready and happy to review your mortgage to see whether a there are any savings available for you, so please don’t hesitate to contact us!
Bank of Canada Cuts Benchmark Interest Rate
In late July, the Bank of Canada reduced its benchmark interest rate from 5.34% to 5.19%. The benchmark rate is the interest rate used in the mortgage “Stress Test”. This marks the first time that the benchmark rate has been reduced since the latest version of the stress test came into effect in January 2018.
While the reduction in rate has very little impact on most borrowers, it is at least a small step towards making mortgage qualifying just a touch less difficult.
A Hot Month for the Housing Market in July
July was another strong month for the Ottawa housing market. While sales often drop off in July after a busy spring market, that certainly was not the case last month. Sales volume saw a significant jump over last year’s figures, and average sale prices saw a healthy increase over last year as well. Here are some highlights from the Ottawa Real Estate Board’s July statistics:
- There were 1,842 properties sold in July compared with 1,605 properties sold in July 2018, an increase of 14.8%. The 5 year average for July is 1,579. Sales volume for July was the highest recorded in 15 years.
- July sales comprised of 1,382 residential class properties, an increase of 12.3% from a year ago, and 460 properties in the condominium category, an increase of 23% from a year ago.
- A surge in new listings has improved housing inventory, but inventory is still not enough to keep up with demand.
- The average sale price for condo properties in July was $299,665, an increase of 6.8% from last year. The average sale price for residential class properties was $487,308, an increase of 10.4% from a year ago.
The Ottawa market is still showing signs of very strong demand. While the lower supply of homes is still creating competitive situations and is ultimately the driving force behind the increases in average sale price, it seems that supply has increased at least somewhat, and hopefully that trend will continue. The Ottawa market continues to be healthy and perform well!
Purchase a Multi-Unit Property With As Little As 5% Down Payment!
Did you know that you can purchase a multi-unit property with as little as 5% or 10% down payment? That’s right! You can purchase a 2 unit property with as little as 5% down payment, and a 3 or 4 unit property with as little as 10% down payment. There is catch though. In order to qualify for these, one of the units must be occupied by the owner. If the property will be a straight rental property with no intention of the owner to occupy one of the units, then a 20% down payment is required.
Buying a multi-unit property can be a great way for a first-time home buyer to make a first home purchase, while having some rental income to help reduce the “shock” of all the new expenses.
Statistics show a recent trend of more people wanting to live in more central areas of the city, as opposed to heading for the suburbs as previous generations have. Central neighbourhoods often offer more amenities and much shorter commutes than the suburbs. However, homes in these neighbourhoods can be quite expensive and single family homes may be out of reach for many. Purchasing a multi-unit property with rental income from other units can help make living in these high demand areas more affordable. Furthermore, with mortgage qualifying more difficult than in the past, having some rental income from other units can help borrowers to qualify for a higher purchase price, which may make some of these central neighborhoods attainable.
If you or anyone you know is interested in exploring a multi-unit property purchase please reach out to us and we would be happy to discuss it more!