August 24th, 2014

Long-term GDP. Variable-Friendly

Canada’s economic engine ultimately determines the mortgage rates we pay. And these days, that engine is running at a lower RPM than in the past.

 “Canada’s economy is in a new age,” says Desjardins Economics. In a report released last week it states that economic growth potential “will remain between 1.5% and 2.0% from now until 2030.”

If this call is even remotely true (remote being the most we can expect from an economic forecast), then we’ll have gone from a 3.3% real average growth rate since the 1960s to as low as 1.5% for the next 15+ years. A healthy growth rate is closer to 2.5%.

Is it any wonder then that Desjardins concludes: “…interest rate equilibrium levels will be lower than in the past?” At these stunted growth levels, even risk-haters may start considering variable mortgage rates.
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August 20th, 2014

First-time Buyers Are Paying Up

Each year about 300,000 Canadians buy their very first home — at least, that’s how many did in the years 2009-2013 (source: Altus Group via The Globe and Mail).

Typical first-timers have been purchasing homes that are roughly 11.6% cheaper than the national average. That implies up to a $355,000 price tag for today’s typical first-time purchase, much higher than previous reports have estimated.

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News on Canadian mortgages, mortgage brokers, and mortgage rates.