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Note: if this page does not display correctly, click on First Rate - May 2005 edition(this page is optimized for MS Outlook, Yahoo mail and Hotmail)
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May 2005
Dear home owner,
As a homeowner (or prospective homeowner), investor or real estate professional, you rely on your mortgage professional to keep you informed about interest rate movements and trends. This newsletter is designed to do just that.
In this issue:
- Market commentary and Interest rate trends
- Capital gains tax rules for principal residences
- In the news
Please check out my NEW affiliate website: A-Mortgage.ca - BC's only website for non-conforming mortgages
Market Commentary
We continue to recommend a variable rate strategy for most of our customers. This is because interest rates are expected to remain stable over the foreseeable future. On a $200,000 mortgage, most clients will save approx. $147 on their monthly payments. If this amount is applied towards principal, clients can shorten the amortization by 4.66 yrs to 20.33 yrs (from 25 yrs).
For those on a fixed term mortgage, there may be an opportunity to save money by switching to a variable rate mortgage, or even a shorter term mortgage. While there is likely to be a penalty to prepay your mortgage, it may save you thousands of dollars depending the amount of your mortgage, interest rate and the remaining term. Feel free to phone us for an evaluation.
After a slight interest rate spike towards the end of Mar 2005, fixed interest rates started heading down to where it was at the beginning of 2005. Canada's slower than expected growth rate has reduced pressure for higher interest rates. Variable rates were also stable as the Bank of Canada left the overnight rate unchanged at 2.5%. Prime rate remained stable last month at 4.25%
Rates and Charts
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Prime @ 4.25%
Term
Mar 18
Mar 25
Apr 1
Apr 8
Apr 15
Apr 22
Apr 29
3 year
4.45%
4.70%
4.70%
4.70%
4.50%
4.50%
4.50%
5 year
4.75%
4.95%
4.90%
4.90%
4.75%
4.75%
4.75%
10 year
5.45%
5.55%
5.45%
5.45%
5.35%
5.32%
5.32%
Table shows the discounted residential mortgage rates for 3, 5 and 10 yr closed fixed rate mortgages
For a longer term view, click here to see the 3, 5 & 10 year best residential rate since September 2003 (updated monthly)
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Click to view other relevant graphs
Capital gains tax rules for principal residences
Many home owners are aware that the gain on sale of a principal residence is tax free. Many are not aware, however, of the tax implications of renting out the principal residence. In this situation, the property would have deemed to be sold at market value. If the property has increased in value, there would be a gain on sale which could be subject to tax.
It is useful to know, however, that there is a provision in the Income Tax act that allows the home owner to keep their principal residence status for a period of 4 years after renting out the property. To apply for this, the home owner must include a letter in their tax return stating their intentions.
This information is provided as general information. If you are planning to rent out your principal residence, you should consult your accountant or lawyer.
In the News (excerpts from recent press releases)
1) First time home buyers benefit from lower costs (CMHC, Apr 22, 2005) - CMHC reduces mortgage insurance premiums for purchases with less than 10% down payment. Individuals purchasing with 5% down payment will pay a premium of 2.75% (from 3.25%). Premiums for zero down purchases are reduced to 2.90% (from 3.4%) Click here to read more.
2) Housing prices continue to soar (Vancouver Sun, May 5, 2005) - The cooling trend predicted for the Lower Mainland's real estate market does not seem to be materializing as prices climb, although sales in April tailed off compared with the red hot market in the same period of 2004... Click here to read more.
3) No bargains foreseen in property prices (Canada.com, Apr 27, 2005) - If you're standing on the sidelines waiting for the Lower Mainland's hot property prices to drop so you can buy up some bargains, don't hold your breath. Click here to read more.
4) CIBC World Market's Monthly Indicators (CIBC World Markets, Apr 5, 2005) - Visit CIBC's Interest and Foreign exchange rates table to see where the bank expects the prime rate to be by Dec 2006. Click here to read more.
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Please consider the information provided in this newsletter as general information. Before you do anything consult a professional.
To unsubscribe, please click reply with the subject "unsubscribe" and you will be removed from this email list.