After a couple of fixed interest rate increases at the end of the first quarter, rates have recently trickled downwards as the bond yields (basis for which fixed interest rates are priced) have taken a few steps backwards and have hit a six-month low.
The posted rated of three weeks ago was 5.59% (Government of Canada’s benchmark rate) and it’s now lowered to 5.39%.
Simply put the benchmark rate is the rate you need to qualify for if you want less than a five-year fixed term or a variable program.
Also it can be called the banks’ full retail rate, if you compare them to the fully discounted rates offered by mortgage brokers, which is currently 3.79% for a five-year fixed rate.
The decreases to interest rates have some concerned about the health of the global economic engine.
“We are in an unusually uncertain market,” echoed Benjamin Tal CIBC senior economist of the Federal Reserve’s remarks a couple of weeks past. Canadian and U.S. central bankers would be the “first to admit” they don’t know what to do. When policy makers don’t know what to do, says Tal, they tend to be very conservative, because trillions of dollars of economic output are riding on interest rate policy (prime rate) and past recessions have frequently been caused by monetary policy error.
All economic watchdogs are on the Americans these days and what they do to get themselves out of years of troublesome decisions they made in the Bush years.
But, if you are living in Alberta consider yourself lucky as we are living in a place where we are one of the anomalies in the world whereas we will have growth based almost solely on the fact that we are the verge of a labor shortage. This labor shortage means that we may end up with a migratory pattern similarly related to the few years prior to 2007.
I’m not saying that we will have real estate growth similar to those years, but all signs are pointing to an increase in values, and all we should be asking for is normal growth patterns in the 3-5% range with regards to housing values.
Much over that and we could be setting ourselves up for another post boom hangover.
So even though Alberta’s economic engine doesn’t necessarily require a rate decrease, we are fortunate that we get that benefit especially when rates in a normal market would only be pointing upwards at this time of year.
Jean-Guy Turcotte is an Accredited Mortgage Professional at Dominion Lending Centres-Regional Mortgage Group and can be contacted for appointments at 403-343-1125, texted to 403-391-2552 or emailed to email@example.com.