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Note: if this page does not display correctly, click on First Rate - September 2004 edition(this page is optimized for MS Outlook, Yahoo mail and Hotmail)September 2004
Dear homeowner,
As a 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:
- Interest rate trends
- Total Cost Analysis
- In the news
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- Interest Rate Trends
- Residential interest rates were down in the second week of
August due to disappointing job statistics in the US and Canada, an
indication that the economy had hit a "soft patch". By the end of
the month, interest rates began creeping upwards.
- Most analysts are predicting a 25 basis point increase in the overnight rate when the Bank of Canada meets on September 8, 2004. An increase in the overnight rate will result in a similar increase in the Canadian prime rate. In the US, the Federal Reserve Board increased their Fed Funds rate by a quarter to 1.5% (after already increasing the rate by a quarter in July).
- Core inflation rate remained essentially the same at 2.3% in July (vs. 2.5% in July 2004). The rate of inflation is an important determinant of interest rates.
Prime @ 3.75%Term
Jul 16
Jul 23
Jul 30
Aug 6
Aug 13
Aug 20
Aug 27
3 year
4.75%
4.75%
4.75%
4.75%
4.50%
4.50%
4.50%
5 year
5.20%
5.25%
5.25%
5.25%
5.00%
5.05%
5.05%
10 year
6.00%
5.99%
5.99%
5.99%
5.75%
5.75%
5.85%
Table shows the best 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
Use Total Cost Analysis (TCA) to quantify your costs
If you are in the process of purchasing a home, you are probably besieged by a variety of interest rates options. There are variable rates mortgages which are priced at a rate below the prime rate. Some have an lower introductory rate. While others have a cashback or a cap rate. For fixed rate mortgage, terms range from 1 year to 25 years. Deciding on which option to take is probably the most challenging decision you need to make.
The best way to sort out each option is to use the Total Cost Analysis methodology. TCA is a valuable tool to use as it quantifies the total of the interest cost of each mortgage alternative. Over the life of your mortgage, you could easily overspend in the tens of thousands. Ask your mortgage provider to give you an analysis so you chose the right mortgage option.
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In the News (excerpts from recent press releases)
1) Fed Expected To Increase Interest Rates (Associated Press, Aug 29, 2004) - The job market may be in a funk and oil prices may be in the stratosphere, but interest rates probably will climb again in September because the Federal Reserve is confident the economy's "soft patch" is temporary. Click here to read the full article.
2) Rents Flatten, Suites Sit Vacant (Vancouver Sun, Aug 13, 2004) - Greater Vancouver's boom in home sales and construction is creating leaner times for the region's rental property owners and managers. Vacancy rates are rising, rents have stalled and the pool of rental stock is expected to grow as a new wave of investor-bought condominiums comes on the market. Click here to read more.
3) CIBC World Markets August Report (CIBC World Markets, Aug 6, 2004) - CIBC's Monthly Indicators for August 2004 offer the following conclusions: (1) Recent softness in economic indicators in US and Canada resulted in slower economic growth predictions; (2) Inflation is not a threat and most of it is attributable to volatile Oil Prices; (3) Prediction is that there will be less action than originally anticipated on rate increases in the US; (4) Fed in US will double the pace of rate increase versus the Canadian counterpart by year end 2005. Prime predicted to be only 4.50% by end of 2005 in Canada and the Fed Funds target 2.75% (1.50% growth) by end of 2005; (5) Bonds did better than expected which has resulted in the recent decline in fixed rate mortgages; (6) Consumers and the economy remain extremely sensitive to rate increases in both Canada and the US.
Click here to read more.4) Valley Homes Prices Jumping (Vancouver Sun, Aug 6, 2004) - The price of houses and townhouses is rising faster in the Fraser Valley than in Greater Vancouver, July statistics show. The average price of a detached home in the valley rose 20.9% since July 2003, to $360,488. the Fraser Valley Real Estate Board reported. Townhouses averaged $235,963, up a whopping 27.6% in just a year. Click here to read more.
5) House Sales Generate A Fortune In Spinoffs (Vancouver Sun, Aug 5, 2004) - Purchasing a home can cost much more than you think. The Canadian Real Estate Association commissioned a study by Toronto's Clayton Research Associates to gauge the economic impact of buying and selling of existing homes. On the average, each sale generated just under $20,000 in spinoffs over the period 2000-2002, the study concluded. On average, buyers spent $9,485 on professional fees (lawyers, appraisers, realtors, surveyors, etc.), $3,550 on renovations, $3,385 on furniture and appliances, $1,315 on general household purchases, and $490 on moving costs. Click here to read more.
- Links and Resources:
- 1) Royal Bank - Financial Market Weekly (adobe pdf required)
- 2) Bank of Canada - Bond Yields
- 3) Bank of Canada - Consumer price index, 1995 - present
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.
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