Interest Rates on the way up... Early?

Media sources have reported that Mark Carney governor of the Bank of Canada has indicated that inflation and the economy are rebounding more quickly than expected. As reported in the Toronto Star "Higher Interest rates on way - March 25th" he has the option of hiking rates sooner than expected should the Bank of Canada feel this necessary. The Globe and Mail article "Mark Carney mindful of hotter inflation" suggested that the "Bank of Canada governor's comments increase odds of an interest rate hike within next few months.

The Bank Governor has reiterated that the committment to hold rates through June 2010 was always conditional on inflation remaining within an acceptable range. So we await the next Bank meeting on Tuesday April 20th to see if they will indeed move rates up ahead of the anticipated time.

Rates will increase the interest rate charged, and thus the interest payable, on all variable rate mortgages. Further a rate hike will put upward pressure on fixed rates. In both cases this will increase the cost of homeownership and decrease affordability.

Consumer Confidence Hits 2-year High!

The Index of Consumer Confidence rose 13.8 percentage points in January to a 23 month high, according to the Conference Board of Canada's latest Index of Consumer Confidence. The index is over 40 points higher than it was one year ago suggesting Canadians are seeing a light at the end of the recession tunnel. In Ontario, an increase of 12.3 points in January boosted confidence in the province to 93.7 - more than double its December 2008 level of 45.9. To see the full report, visit www.conferenceboard.ca.

Harmonized Sales Tax - Reality check

Okay i'm no tax expert, but lately i have had a lot of questions and comments directed my way that indicates the new Harmonized Sales Tax (HST) is not understood by consumers. I cannot answer a lot of detailed or complicated questions on the subject, but I can dispell a couple of common myths I have been coming across.

First - Residential resale houses and condominiums in Ontario and Toronto are NOT subject to the new HST - check out the Government of Ontario site to confirm this and other important facts. Second - Newly purchsed homes and condominiums ARE subject to HST, though there are some complicated change over rules and helpful rebates that take some of the sting out of the change. If buying new check in with your lawyer and or accountant to make sure you understand how this tax change will affect you.

The primary impact buyers and sellers of residential resale properties will experience are the services they must purhcase to support their real estate needs will now be taxed at a higher rate.

For example home inspectors, lawyers, home stagers, and realtors all must add the HST to our bills, an additional 8% above and beyond the current GST... so yes it will hurt to some degree but it could have been a lot worse... when buying the HST may add between $100 to $200 to the purchasing costs. For sellers the sting is a bit more as the Realtor Fee's are the most expensive selling cost and this could add anywhere from $1000 to several thousand dollars depending on the price of the house.

If you have detailed questions about the HST, especially if buying new or if you are a builder or investor, I recommend you speak to your accountant or your real estate lawyer.

Toronto Real Estate Market Watch - February 2010

Earlier today the Toronto Real Estate Board released it's February 2010 Market Watch. While it appears a strong sellers market remains both in the data and on the ground, in following market news and studying more local real estate market data i've noted some signs begining to appear that change may be coming to the market this spring. For today i'll offer up a quick summmary of the February report but am working on a post that speaks to these signs.


First though some of the high level numbers, Overall the volume of available listings in the Greater Toronto Area was 32% lower in February 2010 than February 2009, this compares however to 42% lower inventory in the January 2010 report. In other words while inventory remains tight in the early going the gap is getting smaller.


Secondly the average price of a residential resale home in the Greater Toronto Area was up 19% year over year. While this is an incredible rebound it's important to note the comparison month of february 2009 is an average price stemming from a recessionary buyers market with dropping prices. The 19% increase however still represents an increase over pre-recession average prices


The third note is that sales volumes were up a staggering 77% compared to the same time last year and the volume of new listings was up 24%, again a substantial number, but with recessionary data as the comparison year.


These regional numbers are interesting high level notes but of course real estate is a very local market where values, conditions etc can change city to city, neighbourhood to neighbourhood, and even block to block based on a myriad of variables. In two East Toronto Treb Districts that I follow the year over year price increases were 21% and 22%, substantially above the market average 19%, while another was well below this at 6.77%.

This is part of what makes real estate so fascinating and perilous to navigate without expert guidance... We often don't know what we don't know and over estimate our level of knowledge whic of course can negatively impact our decisions and the resulting outcome. Competent realtors understand how important and dymanic local market conditions are and the many pieces of data that affect them today and into tomorow.

If your interested in the specific conditions that exist in your area and how this might affect your plans drop me a line and we can chat....

Interest Rates on the rise later in 2010?

Yesterday the Bank of Canada announced that is was going to maintain the banks overnight rate at current levels. The release further indicated that they expect to continue to conditionally hold the overnight rate at current levels until at least the end of the second quarter.


However as noted in the Toronto Real Estate Boards economic commentary on the announcement better than expected economic performance and other positive factors lead to anticipation that the Bank of Canada may begin to raise rates in the second half of the Year. If so this will of course increase the cost of borrowing and could begin to modestly impact the demand side of the Real Estate Market.


Rising interest rates is one of a number of data points i'm currently watching to get a sense of where the market might be headed... i'll have more to say on that very soon.

Note: that interest rates do fluctuate up and down based on other market conditions but do tend to follow the Bank of Canada's overnight rate in terms of overall direction. If you are interested in know the best going rates today you can contact Mary McCreath of Mortgage Intelligence for an update on current rates.