For your information - January 2009
Welcome to the 2009 Recession … two quarters of negative growth means it is official!
Now that Obama has been sworn in and has encouraged us to “pick ourselves up and dust ourselves off” we can all focus on the important economic issues at hand. There’s no question that 2009 will be a transitional year, and in these transitional times there are definite opportunities. For those with stable employment and who like to jump on the opportunity to buy wholesale … your time has arrived. With GTA home prices down about 9% over last year, and mortgage rates at record lows the opportunity is now to make your move. In another year or so when both home prices and mortgage rates are expected to be higher, it’s likely we’ll be back to retail pricing. Future inflation is inevitable because of rising food and energy costs, which will take us back to higher borrowing costs … likely not significantly higher, but higher nonetheless.
On Tuesday January 20th the Bank of Canada lowered its overnight rate to a record low of 1%, and believe it or not there may be more before the year is out. Economic conditions indicate that mortgage rates cannot move up in the near future. There are many different mortgage options and they are ALL good. The key to choosing the right mortgage is to clearly understand your short and long-term goals, as well as your budget expectations. Many borrowers are currently choosing a one-year convertible mortgage at about 3.89% until it becomes more clear that longer-term mortgage rates have stopped dropping. Most are not eager to lock themselves into a long-term mortgage agreement until they are reasonably sure borrowing costs have hit the bottom. Please do not rely on your lender to notify you if and when you should be making changes to your existing mortgage; this is not the proactive type of service they provide. Typically a Bank will supply the mortgage and thereafter you are on your own, even though this will be a crucial year for you to keep on top of the latest mortgage information and ensure you are being financially prudent. Our responsibility as “Mortgage Planners” is to ensure you know when, why, and how to make the right move at the right time so you can enjoy the benefits of long-term savings and get your home paid off sooner. Having a low mortgage rate is only part of paying less interest for your home; everyone must have a sound mortgage strategy as well.
We believe by next year most consumers will opt for a 5, 7 or 10 year fixed mortgage term. If rate discounts return to variable mortgages, which appears to be a 50/50 chance at this point, many will rely on the long term benefits of variable mortgages to prevail as has been the case over last 15 years. We are definitely in interesting times that can yield some positive financial benefits. Whenever you or someone you know, needs to learn about mortgage manoeuvres that the Banks are not usually conversant with ... contact us anytime.
If you are finding that you are entering 2009 with a lot of high-interest debt that is eating into your cash flow, click here to read how your home can be your financial haven, especially if you’re finding that your holiday bills have added too much to your overall debt burden.
