Do lower mortgage rates make you flock to buy a home?
Fathers are great because they always make you believe they had it so hard. You know, in the “I had to walk to school barefoot, uphill both ways, with four Orson Welles' on my back” kind of way.
Over the long weekend, my own pops gave me his version of this line in a talk about modern mortgage rates. We talked about how fixed rates are incredibly low, and he claimed, of course, that he was charged about 750 per cent interest on his first mortgage.
An exaggeration? Okay, his actual number may have been a bit lower, but the point remains. Mortgages – they’re pretty much giving them away these days.
Yet how low can they go before consumers start taking advantage of plummeting rates?
In Canada, rates are low, but they’re not that low. In a bid to keep the economy churning along, many major banks have slashed their fixed rates to keep Canucks buying homes.
But my, the same can’t be said about the U.S.
*Bing: Who offers the lowest mortgage rates in Canada?
According to CNBC, a 30-year fixed (fixed!) mortgage can be had now for a preposterously low 4.45 per cent, a figure so small it has almost no Canadian comparison. (The longest fixed mortgages CIBC and TD Canada Trust offer, by contrast, are 10 years, at 6.75 per cent.)
Still, the rest of the stinking American economy is simply submarining the wonderful borrowing opportunities for Yankee buyers.
“The refinance index is still almost 30 per cent below last year’s level,” Michael Fratantoni, the Mortgage Bankers Association’s VP, said. “Factors such as negative equity and a weak job market continue to constrain borrowers.”
Have lowered mortgage rates changed the way you think about buying a home? Have you made a move to consider buying with rates down, or has the fear of them inevitably booming again turned you off?
By Jason Buckland, MSN Money
Posted by: Frank Lee | Aug 7, 2021 1:38:14 AM
If you live in a desirable city it doesn't really make a lot of sense to wait for lower mortgage rates. Houses keep appreciating anyways. The house I bought for $450,000 six years ago is now worth $1.2 million (although I did fix it up a bit) and my friend's apartment (with a view of the Pacific ocean mind you) has appreciated by $320k in the last 2 years. If you can afford to move to a city like this the best time to buy is always yesterday...regardless of the interest rates.
But you have to do it when you're young. My brothers are in their 40s and waited too long. Even by selling their fully paid off houses back home they couldn't afford to buy here. But you know the saying, "you get what you pay for". I don't miss the winters but my only regret is that I still miss the Maple Leafs!!! ;-(
Posted by: Shannyanny | Aug 7, 2021 1:44:32 AM
When I bought my ex-husband out of our home last year I got a 5 year closed mortgage at 2.25%. The rate is not fixed but will be .75% below whatever prime is. As long as prime doesn't sky rocket I feel comfortable with my mortgage. I make extra payments whenever I can, and I'm not on a fixed income. The mortgage is less than 1/2 the value of the house so even in the worst case I feel I could sell the house and break the mortgage, but I don't think it will come to that. And when the 5 years is up I'll probably sell so I'm not concerned with what the rates will be then. I prefer putting the difference between 2.25% interest and whatever a fixed rate would be (double that or so) towards the principal and paying it off faster (incurring less interest charges at the same time.) The first mortgage I had was overseas and was over 11% at one point. I think even if I had a fixed income that I would rather have a lower interest rate and take my chances that it might go up. I think the chances of the interest rate rising to more than 6% in the next 5 years is fairly low. Does anyone think I'm nuts for doing it this way?
Posted by: dickson cider | Aug 7, 2021 1:45:25 AM
Really Frank Lee? You mean to say that just because 1 million chinese and koreans flocked to Vancouver and bought everything up like locusts that you made a good decision?
Iif Vancouver didn't allow the richest asians to throw money at housing to get a green card, house prices would be normal and would have corrected like you find in most markets.
Do you think your house is going to be worth 2.4million (double) in another 6 years? What goes up.....
Posted by: Captain ray | Aug 7, 2021 2:08:55 AM
I would like to say to Frank that yes, your property may have done well over the last 6 years , as did my property, but this not a prediction of future value. The only good thing is that the interest rates are still very low , but there will be a correction, so hopefully people do not over extend themselves and purchase more than they really need on the basis that housing will appreciate, because that is no guarantee.
Posted by: Captain ray | Aug 7, 2021 2:21:24 AM
Depending on when you buy and when you sell of course.
Posted by: Troy Jollimore | Aug 7, 2021 8:48:23 AM
To Frank Lee, that's what it seems like. To your generation, housing prices and values can ONLY go up. But your two brothers in their 40s probably remember a time when that wasn't true. Housing CAN lose it's value, although it sounds like you did buy in early enough to secure your investment. I'm happy for you.
My story is somewhat different. I'm one of the many that had it hard through the early part of my life income-wise and, although I'm fairly comfortable now, but I'm still the sole income earner. With housing prices so much higher than they should be (a local subdivision opened in 2004 at $105k, now houses start at $250k) it wouldn't matter if they dropped the rates to 0%. My age makes me nervous to carry a mortgage until I'm 55-60, especially when the state of the economy makes it seem very likely that I won't be able to keep steady employment for that long.
So now the message from the media (and their rich backers) is be happy to rent. Combined with the government's support of CMHC (which is a good thing, but keeps housing prices much higher than they should be), everything tends to siphon money out of the pockets of the lower and middle-class people into theirs. With them not giving anything back to keep the cycle going.
Posted by: Canucks Fan | Aug 7, 2021 10:34:09 AM
Frank Lee - I read your comment, and honestly, I can't believe...that you miss the Leafs!!! Seriously?!?
Posted by: Android66 | Aug 7, 2021 10:56:30 AM
Over the past 40 years, I have always made money in real estate as an owner and an investor in both good times and bad times. The only difference between good times and bad times is timing. You don't want to find yourself being forced to sell during bad times. Bad times are good times to buy, and good times are good times to sell. You need both.
Manage your cash. Buy conservatively. Make a good downpayment, or don't bother to buy at all. Don't let greed control you. Always plan positive cash flow. Keep rental incomes higher than projected future mortgage payments. Regard yourself as a tenant in your own house, and evaluate your costs.
Easy advice to give; hard to follow. Go to school. Life is easier if you have an education.
Posted by: Linda | Aug 7, 2021 11:57:57 AM
I just refinanced my home and used a mortgage broker. I hunted until I found one that could give me the best rate possible.
My rate is VRM is now at 2.05 % .....If you think 4.45 % is good, try a little harder. Variable 5 yr closed is the way to go if you plan on staying in your home for 5 yrs. ( Canada)
Posted by: sam | Aug 7, 2021 1:16:55 PM
How did people pay for their mortagage rates years ago..some at 9-10per cent and they manage to pay them and pay them off. None of these 10 - 20 year mortages like they have now..When you get older they will never get paid off. This is the banks biggest mistakes.
More rightoffs for the banks as people will never get ahead to pay them.
What needs to get raised is the rates on bank accounts and GICS
more people probably would invest more into GICS, if the rates were higher. Too much borrowing anymore we have become a society that does not know how to live without having everything. At one time familes lived with what they had till they had enough money to buy things. Now we just one to the bank and borrow.
Look at your markets now in Canada, you claim blaim the Tea Party in the States, do not believe the rich should pay taxes on anything.
As the old saying the rich gets richer off all the other poor suckers.
Posted by: Frank Lee | Aug 7, 2021 1:34:17 PM
To Dickson Cider...I don't know where you're from or if you've ever been to Vancouver but the racial mix is similar to London, New York or any other global city. And BTW I read a stat that says more people have moved here from the rest of Canada than all of Asia combined. And despite your accusation, rich Asians are free to move anywhere in Canada...even where you live. The difference is they choose to live here because hey, they can afford to live anywhere in the world...they choose here because who wouldn't? Sure the market will dip here and there but overall there are few bets as safe as desirable real estate...it's about location, location, location.
To Captain Ray and Troy Jollimore...you are right I am lucky...my timing was pretty good but I guess my point is that when the real estate is desirable the timing is always good. My wise decision was buying in the right place...not at the right time. The saying is "location, location, location" NOT "timing, timing, timing".
To Canucks Fan...I do miss the Leafs ok they suck on the ice and the fans are as desperate as a fat chick in a candy store but the Leafs mean more to that city than any other NHL market. Let's face it there isn't a lot to live for from November to April in Ontario so the Leafs gave us something to hope for. The tens of thousands of Ontarians (maybe hundreds of thousands) who moved here still all love the Leafs. Once a Leaf fan...always a Leaf fan. And you've never noticed how many Leafs jerseys there are at Canucks games when the Leafs come to town?!?!?! That is loyalty!!!
Posted by: casey | Aug 7, 2021 1:49:58 PM
I have found that northern Alberta during the last 10 months is a good area to buy a house
because of the turndown in the oilsands industry, there are many vacant properties at very
good negotiable prices.
This area population age is in the 30 to60 years, when I was there in June 2010, there was
not to many old age pensioners. this is Land of our younger generation were there are more
opportunities,and housing is more affordable.I believe that this is the future growth area in Canada.
Posted by: Ted | Aug 7, 2021 8:43:15 PM
Did any of you ever think about the fact that your family has to have to live somewhere? You all sound like a Bernie Madoff pitchman.
Families are not resources to be exploited. They need to live in homes; not investments.
Greed is killing this country and you guys are the vehicles that are carrying it forward. Buy a house, live in it, raise good kids and die happy.
Posted by: Paige | Aug 7, 2021 10:09:22 PM
Excellent post Ted. The only difference between someone who rents and someone who owns right now, is a tenant rents space where a homeowner rents money from the bank. Everyone thinks they are geniuses right now because their house has appreciated. You better have a huge next egg in a diversified portfolio as well to cushion yourself with what is coming next. It will take time to unfold but once the momentum kicks in, you will wonder why you threw all your savings into one asset. Would you put all your money into one stock? BTW, I have an investment portfolio in the seven figures and guess what folks, I rent! Shock horror!
Posted by: Trixie | Aug 9, 2021 10:52:28 AM
Good for you Paige! (2 reasons you should rent. One, if you are as rich as Paige and you don't care and don't need the money in an investment property. Then, please, get someone else, (the landlord) to do all the work on your "home" for you. Two, if you are poor, like a great many Canadians are, and you are a financial risk, then you won't qualify for a home anyway, and go ahead and rent and learn how to save money, so that someday you can own.)
However, even if it isn't your dream home, the rest of us should buy, because as the old saying goes, otherwise you are just being stupid and putting your hard earned dollar into someone else's pocket.
Now, to the question at hand, lower mortgage rates should be slightly irrelevant simply because you need the cash to own no matter where you are buying or what you are buying. So, always be prepared.
Posted by: Gulp | Aug 9, 2021 2:02:49 PM
To Frank Lee,
Oh what a surprise!! You're a wealthy ex-Torontonian who is smug because you moved to Vancouver. It's becoming such a stereo-type. Gimme a break. I'm sick of people like you who bailed on Toronto...you'll be sorry when we get back on top. So enjoy you valuable real-estate but stop rubbing it in out faces. The fact that you miss the Leafs shows me theres no real spirit in Vancouver anayways.
Posted by: dean | Aug 10, 2021 11:34:47 AM
Frank .. unless you sell and move to a lower cost area, the value of you home means little.
I did very well on the value of my home rising but when I sell it, all the other homes
in my city have also gone up in value. Now if I move to a small town where housing is cheaper, I will have many $$$$$ left over.