Notable News of the Week: March 22, 2013
Why did Manulife cave to Flaherty pressure? – Yahoo! Finance
After BMO recently cut its 5-year fixed mortgage rate to 2.99 per cent, Finance Minister Jim Flaherty commended the other big banks for not following suit. Then, earlier this week, Manulife cut its posted rate to 2.89 per cent. In a surprise turn of events, the Department of Finance stepped in and asked Manulife to reconsider its rate decrease. Manulife did not do anything illegal by dropping their rates but they agreed to Flaherty’s request and reversed their rate decrease. It is a fair assumption to make that Manulife was reminded of the power that the Department of Finance has, this week.
Who loses and wins when Ottawa encourages artificially high mortgage rates? – The Globe and Mail
The Department of Finance is trying its best to cool the increasingly hot housing market, by encouraging the big banks not to drop their mortgage rates too low. Recently, Manulife and BMO both received backlash from Flaherty, after dropping their posted 5-year fixed rates below 3.00 per cent. But all major banks are currently offering a rate of less than 3.00 per cent, even if they don’t publicly advertise it. Keeping the rates artificially high does have some economic benefit, as many consumers are unaware that they can negotiate with their banks to get the real market rate. However, the underlying concern with an overly competitive mortgage rate industry is that housing prices will unnecessarily appreciate. Robert McLister argues in opposition of this view, stating that “borrowers don’t buy a home because they can save a tenth of a per cent on their interest rate. Moreover a rate saving like that would only enable borrowers to pay up to one per cent more for their property.”
Baby Boomers to sway Canada’s housing market – Yahoo! Finance
According to a recent report by Scotiabank, Canada’s aging population will soon cause a slowdown in overall housing sales. The older population tends to be more attached to their homes, and the report found that only 20 per cent of Canadians over the age of 65 will move in a given 5-year timeframe, compared to 40 per cent for the rest of the population. The condo market, on the other hand, will benefit from Baby Boomers who decide to downsize, as well as the growing number of people choosing to live alone. The number of one-person households in Canada in 2011 was 28 per cent, up from 9 per cent in 1961. Immigration is also expected to change the housing market landscape in the years ahead, as immigration will account for three-quarters of net population growth by 2031. While it is true that immigrants often rent upon first moving to Canada, they tend to become homeowners within 6-10 years of residency.
Vancouver’s vacancies point to investors, not residents – The Globe and Mail
According to the 2011 census data, roughly one in every four condos in downtown Vancouver is empty or sits unoccupied by non-residents. The rate of empty apartments in Vancouver is much higher than in other large cities in Canada, and is similar to the rates seen in places like New York and San Francisco during the most recent U.S. mortgage crisis. One of the leading factors of this high rate is that investors are purchasing these condos and not living in them. The corresponding problem is that this affects the perception of the population density in the downtown communities and skews the assumptions about how much commercial activity these communities can support.
CANADIAN MORTGAGE RATES
Where are they this week?
A history of weekly 5-year fixed mortgage rates and 5-year variable mortgage rates.
Canadian Mortgage Rates Since 2012
The average discounted mortgage rates in Canada in 2013:
