Looking back at the first three months of this year, fixed mortgage rates started to fall noticeably in late February as the bond market reacted to the economic threat of the virus. Then in early March, the Bank of Canada, followed the US Federal Reserve in cutting rates by 50 basis points and then did so again in mid March and added another at the end of the month, cutting the rates by 50 basis points on three separate occasions. At this week’s meeting the Bank of Canada kept the benchmark interest rate steady at 0.25% despite a bleak economic outlook.
The Prime Rate followed the Bank of Canada rate, from 3.95% in January to 2.45% today. The increasingly cloudy economic picture that has pushed the prime rate down, has also led banks to reverse their cuts to Fixed rates and instead pushed them up, even to levels that were higher than when the crisis began, as banks became more cautious about lending and liquidity. Rising fixed rates as prime rates fall, is unusual and reflective of how much uncertainty banks have on the direction of the economy said one financial expert.
A Fixed Five-year Insured rate for example, was 2.34% in early March is now 2.84%. Fixed rates could look more attractive when the world gets the pandemic under control and the challenge becomes a more straightforward economic one.
The Realty Market
Market data shows that home purchases declined the last two weeks of March, which is understandable, and while volume reductions are likely to continue, its not possible to predict by how much or for how long.
Canadian home sales and listings were increasing heading into what was expected to be a busy Spring, but soon changed. Home sales were down 14% nationally in March, according to the Canadian Real Estate Association (CREA). The declines in sales volumes varied by region. Average house prices came in at $540,000 unchanged from February and up 12.5% from last year. Excluding the higher priced markets of the Vancouver Areas and Greater Toronto, the average price comes in at $410,000.
Original article: www.firstnational.ca/mortgage-brokers