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Notable News of the Week: August 2, 2013

Toronto home prices up but rising mortgage rates could spell trouble: economists – Yahoo! Finance Canada

The average sale price of homes in Toronto continues to climb but, alongside it, so are fixed mortgage rates. According to some economists, the continued rise in mortgage rates and an oversupply of condos could potentially spell trouble for Toronto’s real estate market. Sales were down by less than one per cent in the GTA last month, compared to June 2012, but the average selling price was up by 4.7 per cent to $531,374. Fixed mortgage rates have been sub-3 per cent since June 2012, but have risen by nearly 0.5 per cent over the past two months. “If (the current) rate of increase is sustained for another month or two, that could put a bit more stress on the housing market,” said Robert Hogue, a senior economist at RBC. “It will all depend on how quickly and dramatically bond yields rise. If those bond yields stabilize and interest rates don’t necessarily surge, then the market may take it in stride.”

Over-heated housing market dragging down Canada’s lead, report says – CTV News

A new report from Capital Economics states that Canada’s reign as a growth leader among big industrialized countries may be over. Projections from the report forecast economic growth to be 1.5 per cent this year, followed by growth of only 1.0 per cent in 2014. These growth rates would likely put Canada behind the U.S, Japan, and potentially even Germany, among countries in the G7. David Madani, the analyst who wrote the report, expects that the Bank of Canada will keep interest rates at low levels until 2015. Capital Economics’ outlook is more negative than several private sector bank economists, mainly because Madani believes that the housing market is poised for a large correction. In response to other reports forecasting higher growth, Madani said, “We’ve got a housing sector that’s over-extended, the government sector is cutting back, you’ve got businesses not feeling confident right now, so where is this growth going to come from?”g

Canada’s real housing crisis: Extreme weather – The Globe and Mail

Over the past several years, Finance Minister Jim Flaherty and the Bank of Canada (BoC) have worked together to tighten mortgage lending rules, in an attempt to avoid a major housing crisis. However, one new threat is emerging that could have a large effect on the market. There is potential for extreme weather, like the Calgary floods that occurred this summer, to render large portions of the Canadian housing market uninsurable. Without home insurance, most consumers would not be able to qualify for a mortgage. However, a more probable course of action would be insurers charging higher premiums for certain areas. This could still have a significant effect on housing, if the premiums go up high enough to prohibit any homeowners from entering the market. Property and casualty insurance providers’ losses have exceeded premiums for seven of the last nine years, leading to a cumulative loss of approximately $11 billion. This trend cannot continue.


A look at current mortgage interest rates and 5-year mortgage rate history.

Current Mortgage Rates August 1 2013

The average discounted mortgage rates in Canada in 2013:

Discounted Mortgage Rates August 1 2013

A history of weekly 5-year fixed mortgage rates and 5-year variable mortgage rates.