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Term Life Insurance Canada: The News in the Interest Rate World

Times have changed drastically in the world of home loans because of recent happenings. What’s up next for us now? Is there any way to guess if the rates will continue to improve?

Tight conditions in the mortgage world should normally mean lower rates, since banks would have to lower rates in order to attract customers with good credit ratings. But it sems that banks are actually raising rates, in the hope that will improve their revenue.

Under other circumstances, this would seem like a bad choice since the usual route to increased earnings is to lower prices. This shortsightedness is not limited to the home loan industry; credit card companies are doubling and even tripling their rates in reacton to defaults on the part of customers in this depressed economic environment.

It used to be that when the economy slowed down, banks would lower their interest rates and this would give an incentive to borrowers. But with the lending industry in turmoil, it seems like none of the old rules count.

So what is the solution for a potential homebuyer with the right credit score to borrow? Wait for this phase to pass and for rates to come down or grab a loan now, while there is still some credit around, or wait for the fallout from the recession?

Not only is there a current, there are many who even believe there is a depression coming, which will surely lead to deflation. Normally, deflation will in turn lead to lower interest rates, so this indicates a wait and see attitude is the best to take right now.

Some lenders are still actively seeking borrowers. Many small lenders never had the capital to delve into the giant home loan programs that many of the larger banks did. In this case, being small was an advantage, since many of them were insulated from the problems now haunting most of the credit industry.

A second good argument for waiting is that home prices continue to plummet, with predictions of futher price cuts of as much as 35%, even after the 20 to 25% decreases already seen. The Case-Schiller study published in November of 2008 reported year on year decreases of 17% nationally, with 25% in some areas. If the scenario is set not only for decreased rates, but also for lower home prices, it would seem wise to wait until more of the credit crisis fallout can be judged.

http://www.classic-realestate.com/term-life-insurance-canada-the-news-in-the-interest-rate-world.html

reviewed by Moishe Alexander, CFC canadian funding corp CEO

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Real estate recovery expected to be tepid

The worst of Canada’s housing market woes appear to be past but the sector’s rebound will be tenuous as a rise in mortgage rates and high unemployment limit the recovery in prices and sales.

Property experts say first-time buyers and Bank of Canada rate cuts have helped restore stability to a market that slumped from late 2008 to early this year, when the worst leg of the global financial crisis battered consumer confidence.

“We should be less fearful than we were six months ago, but I don’t think we should be exuberant yet. The resale markets in Canada are very strong. May numbers were pretty good, and June numbers will be even better,” said Will Dunning, an economic consultant who specializes in the housing market.

“But by July and into the fall there will be an offset of considerably slower activity. I don’t think it’s likely to go off a cliff. It’ll depend on what happens in employment and the broader economy, and how that affects confidence.”

Recent data suggest Canada’s residential property market, which weathered the financial crisis much better than its hard-hit U.S. counterpart, has been thawing for several months.

The latest Canadian Real Estate Association data shows May resale home prices rose 0.4 per cent to $319,757, topping the previous record set a year earlier. It was the first year-over-year increase since May last year. And sales activity climbed for a fourth straight month.

The industry group, which represents more than 97,000 real estate brokers and agents, also cut its forecast for a drop in home prices this year and said it expected sales activity to trend higher.

Meanwhile, Canada Mortgage and Housing Corp., the national housing agency, forecast in its second-quarter outlook that new home construction is expected to decline to 141,900 units in 2009 but rebound next year.

“ Stability is something you can’t overemphasize”

Still, no one predicts the residential property market is headed back to the heady times seen between 2002 and 2007, when prices surged and outpaced income growth. In some cities, such as Vancouver and Calgary, home prices doubled and are now going through a sharp correction.

A “stable but unremarkable” period for the real estate market is expected this year, said Philip Soper, chief executive officer of Brookfield Real Estate Services, an arm of Canadian property giant Brookfield Properties Corp that holds real estate broker brand Royal LePage.

“Stability is something you can’t overemphasize in terms of its importance for the housing market right now.”

Unless the global financial system succumbs to another crisis, analysts expect the Canadian home market is likely to stabilize further.

Activity from first-time buyers appears to be providing support because of stimulative measures by the federal government that allow these buyers to defray closing costs and withdraw more from retirement funds.

The Bank of Canada has also pledged to keep interest rates near zero until mid-2010, which could underpin confidence.

But the economy is still on shaky ground, contracting for the ninth straight month in April. And the unemployment rate spiked to an 11-year high in May, boosted by layoffs in the factories of Ontario.

Experts warn that further job losses in pockets of Canada’s export-oriented economy could slow the momentum that has been gathering in the housing sector.

“We don’t expect the recession to end until the fall. It’s clear that the spring fling in housing markets, this remarkable surge in resales and prices, has been driven by record low mortgage rates,” said Sal Guatieri, senior economist at BMO Capital Markets.

These record low rates, whether variable or fixed, had increased affordability for many buyers. But weakness in the bond market, caused in part by reduced investor demand for safe-haven assets, has pushed mortgage rates higher.

The posted rate on a five-year mortgage at Royal Bank of Canada, the country’s largest lender, has risen to 5.85 per cent from 5.25 per cent in April.

Brookfield’s Mr. Soper has been telling his management team to prepare for softness in the housing market in the second half.

“The advice I have been giving … is to accept the recovery this spring with humility, to continue to plan for a difficult second half of the year although the comparables are going to be positive simply because the second half of 2008 was so poor,” he said in an interview.

“But at least we have a stable market and stable prices, which is something that you need to encourage consumers to trade.”

http://www.theglobeandmail.com/report-on-business/real-estate-recovery-expected-to-be-tepid/article1204023/

reviewed by Moishe Alexander, CFC CEO

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Moishe Alexander add the revew: “Statistics Canada Labour Survey”