The market seems to be cooling off a little. I think that was the plan with the HST and CMHC changes. With the uncertainty in Europe and the economy moving forward gradually, it looks like the increase in Prime rate will be slow and steady over the next 18-24 months.

 The Victoria market has a large number of homes on the market, around 1000 over the average. Lots of listings mean more selection and a softening in the market.

 Fixed rates are holding steady. The last 3 weeks has seen the bond market decreasing slowly and 5 year fixed rates coming down slightly. Some lenders are still holding at 4.49%, while others have decreased to 4.29%.

 The variable rate mortgages are very attractive now. Prime minus .60% with the slow increase until the end of 2011 allows an opportunity to pay down your principle quickly in the beginning of the mortgage when usually the majority of your payment is interest.

With the chaos in Greece the world is thinking the problems may not be over and increasing rates may not be the best idea.

The Canadian economy created 108,700 jobs last month, more than four times as many as expected. This is the largest monthly gain on record, this should cause the Bank of Canada to think strongly about increasing rates.

The Financial Post is suggesting no increases and the Globe and Mail is suggesting increasing sooner than later.

The official word from the Bank of Canada is that they are not guaranteeing they will hold their lending rate until July.

Whether the Bank of Canada increases rates in June or July, it looks like the predictions from the big banks on a hard and fast increase may have been premature.

We still seem to be in a time where all long term predictions only last a couple months or even weeks.

The bond market has slumped a little this week due to the European situation and one lender has decreased their 5 year rate, but seeing 5 year rates below 4% again is very unlikely,

A slow increase over the next 2 years may be what we see.

By Derek Scott, The Canadian Press

VANCOUVER, B.C. – Buying a house in the hot housing markets of Vancouver, Toronto and other major cities in recent years has been a possible dream for some first-time homebuyers only because many of those houses had suites they could rent out.

But new rules coming into effect April 19 will all but wipe out that advantage in the eyes of banks handing out mortgages.

“It makes it much more difficult for people with rental properties to qualify for their own mortgage on their personal residence,” said Vancouver mortgage specialist Patrick Mulhern.

The new regulations are designed to prevent speculation in the market, said Jack Aubrey, of the Canada Mortgage and Housing Corporation.

But Vancouver mortgage agent Mike Averbach said the new rules will do little to prevent investors from gambling in the housing market.

“They haven’t decreased risk,” he said. “They’re just not allowing you to use the income.”

Currently, landlords can use 80 per cent of their rental income to offset monthly mortgage payments. That means, if they receive $1,000 per month in rental income, they can use $800 to offset a $1,200 mortgage payment, leaving only $400 to be debt financed.

But under the new rule, only 50 per cent of a landlord’s rental income will be used. Even then, that money will not be used to offset their monthly mortgage payment. It will be added to their total income, forcing them to qualify for the entire monthly mortgage.

For instance, a person earning $100,000 per year in regular income plus $12,000 per year in rental income will have a total income of $106,000 with which to qualify for a mortgage on their own home.

Rental income is essential for many of his clients, Averbach said.

In cities like Vancouver, where the average home price in February was more than $662,000, rental offset is the only way many people can qualify for a mortgage and the new rules will keep many of his clients in condos rather than houses, he said.

“Putting a renter in your basement is not speculative, it’s reality,” he said. “It helps you pay your mortgage.”

The rule changes also make it more difficult for people to buy a property separate property to use as a revenue generator.

CMHC will no longer offer high-ratio financing on rental property not lived in by the owner. That means someone looking to buy a house as a rental investment will have to come up with a 20-per-cent down payment on the property, as opposed to five per cent before the rules changed.

The changes haven’t worried groups advocating for tenants.

Jeordie Dent, of the Federation of Metro Tenants’ Association in Toronto, where vacancy and availability rates have dropped over the last year, said he doesn’t see a negative impact on renters.

Instead, he said his group welcomes the changes.

Dent said too many people become landlords without the financial or intellectual wherewithal to properly manage their properties.

“Anything that strengthens mortgage rules, from our perspective, is a good thing.”

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

The ongoing global economic recovery is being driven largely by strong domestic demand growth in many emerging-market economies and supported in advanced economies by exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.

The level of economic activity in Canada has been slightly higher than the Bank had projected in its January Monetary Policy Report (MPR). The economy grew at an annual rate of 5 per cent in the fourth quarter of 2009, spurred by vigorous domestic spending and further recovery in exports. The underlying factors supporting Canada’s recovery are largely unchanged – policy stimulus, increased confidence, improved financial conditions, global growth, and higher terms of trade. At the same time, the persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada.

Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity. The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess supply.

Conditional on the current outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.

The risks to the outlook for inflation continue to be those outlined in the January MPR. On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength of the Canadian dollar. The Bank judges that the main macroeconomic risks to the inflation projection are roughly balanced.

Jim Flaherty Tuesday announced tighter lending standards for mortgages, saying that while the housing market is “healthy” the moves are needed to “help prevent negative trends from developing.” Under the new rules, all borrowers will need to meet standards for 5-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.

Also, the government is lowering the maximum amount Canadians can withdraw when refinancing to 90 per cent of the value of their homes, from the current 95 per cent, and requiring a 20 per cent down payment for government-backed mortgage insurance on “speculative” investment properties.“There are no definitive signs of a housing bubble,” Mr. Flaherty said. “We think we’re being pro-active in the three steps we’re taking today.”Frank Techar, the President of Personal and Commercial Banking for BMO Bank of Montreal, welcomed the announcement.“While we do not believe that Canada faces a housing bubble, we fully support the minister’s actions,” Mr. Techar said in a statement. “Given the prospect of higher interest rates and the recent run-up in housing prices in some markets across Canada, the measures announced today are prudent. Currently, we require high ratio mortgages to be able to qualify using the 5 year rate.” In a release, the finance department indicated that the three new changes to the mortgage insurance guarantee rules are intended to take effect April 19, 2010.  In reference to the tightening of re-financing rules, Mr. Flaherty said this will encourage Canadians to build equity in their homes instead of tapping that equity as a source of cash. “This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up. We are encouraging people to build equity over time, using home ownership as an effective way to save, rather than as a vehicle for quick cash,” he said.  In his comments on the third measure, Mr. Flaherty said the hike in minimum down payments for such properties will help keep prices from climbing too high. “We will require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner occupied properties purchased for speculation. This will discourage the kind of reckless real estate speculation that can drive prices to unsustainable  levels which does not serve Canadian home buyers,” he said. “We’re not aiming here at investment properties,” Mr. Flaherty added. “What we’re getting at is the speculation in multiple-condo markets, in particular.”  CIBC economist Avery Shenfeld said “these look to be very well targeted at the one area of concern that we have, which is that low rates are making larger variable rate mortgages look more affordable than they really are on a long term basis.” The moves send an appropriate message to borrowers about debt, he said. While the rules don’t take effect yet, Mr. Shenfeld suggested that the banks might begin adopting them earlier. And they could take a little bit of steam out of the market, he said. “It may be part of a cooling that we’ll see in house price appreciation,” he said. “We were pushing into house prices that were running a bit ahead of rental rates and income fundamentals – not to the point that we feared a huge house price crash, but to the point that it might be time to head-off such risks.”

Real estate sales in Greater Victoria got off to a solid start in 2010 with 418 homes and other properties sold through the Multiple Listing Service during January.

The Victoria Real Estate Board noted the January figures were down slightly from the 453 sales in December, but up nearly 70 per cent from the same period a year ago when real estate hit a low point amid the recession.

“After last year’s remarkable recovery in the real estate market, we are pleased to see strong sales for January and look forward to a balanced market in the months to come”, board president Randi Masters said in a statement.

The average price for single family homes sold in Greater Victoria last month was $644,678, down from $651,316 in December.

There were 15 sales of more than $1 million, including one in Central Saanich of more than $2 million and one sale in North Saanich of more than $2.5 million, affecting the overall average in January.

The median price of single family homes rose to $595,000. The six-month average was $615,271.

The overall average price for condominiums was $313,337 last month, down from $345,907 in December. The average for the last six months was $322,775. The median price for condominiums in January rose to $299,900.

The average price of all townhomes sold last month was $453,013 down from $485,307 in December. The median price declined to $399,250. The six month average was $452,447.

MLS sales last month included 220 single family homes, 112 condominiums, 46 townhomes and eight manufactured homes.

The number of properties available for sale increased last month to 2,793 up from 2,557 at the end of December, but still down 24 per cent from January of last year.

Masters said the board expects further increases in the number of properties on the market heading into spring that will offer a greater choice to buyers.

The Bank of Canada Held it’s lending rate today holding Prime at 2.25%. The employment numbers look great for November but they will need to see a trend first before reading to much into it. Economists think that they will not repeat the 2 premature rate hikes in 1992 and 2002 with an early increase mid next year.

Either way it looks like the rate will not be increasing until next summer or later.

Please contact me if you have an questions about purchasing or refinancing.

“Vancouver and Victoria, especially, are posting near record unit sales this fall,” said Cameron Muir, BCREA Chief Economist.

With mortgage rates ranging from 3.89% to 4.29% for a 5 year fixed in the past 6 months there has been large consumer demand. Unit sales have increased by 20% from 2008 and there is a forecasted increase of another 8% in 2010.

Affordability constraints should help keep the home price inflation down even with the strong unit sales.

To read the full BCREA atricle please go to 

It looks like the fixed mortgage rates are on the way back down again. The CDN dollar has dropped slightly and so have the bonds. We are seeing a decrease to below 4% again for 5 year fixed. This is the second time in 6 months we have seen fixed rate increase from 3.8% to 4.4% and back down.

 3 year rates are down to 3.25%.

 It seems the economy is holding steady and the strength, or weakness, of the US dollar is controlling our fixed rates by affecting the bond rates.

 The Bank of Canada is still holding steady until next summer. No new news from them.