Daily Market Update

by Jamie Henry30 Mar 2015
Most Canadians would choose fixed-rate mortgage today
If they were arranging a mortgage today most Canadians would opt for a fixed-rate loan rather than risk volatility with a variable deal. That’s the finding of a survey by Nielsen for CIBC, which revealed that 57 per cent would prefer to have certainty in their repayments. A similar survey last year had 48 per cent choosing a fixed-rate while in 2011 it was just 39 per cent. "The poll results confirm what many of our clients are telling us, that they don't expect rates to go any lower and, in today's housing market, they want the comfort and security of knowing exactly what their mortgage payments will be for the next  four or five years," said Barry Gollom, vice president of CIBC. The poll also revealed: 30 per cent of respondents would pick a variable mortgage; 11 per cent are undecided; 44 per cent expect higher rates next year while 42 per cent expect them to stay the same. Regionally there is little difference in the percentage of respondents would opt for fixed rate. But, on how rates will change, those in Atlantic Canada, Manitoba and Saskatchewan are more likely to expect rate rises in the next 12 months. A larger proportion of younger Canadians (18 to 24 years old) believe that rates will rise.
Lenders highlight features other than rates as competition intensifies
With the busy spring buying season kicking off mortgage lenders are keen to be seen as having the best deal, but it’s not necessarily all about the rates. BMO and TD Bank both recently announced headline-grabbing ‘special’ rates, but this week RBC is launching its marketing for ‘employee pricing’ on new loans, essentially offering a staff discount to customers. Although that would mean a rate of 2.69 per cent, beating those advertised by BMO and TD, the bank is not advertising the numbers. Sean Amato-Gauci, RBC’s senior vice-president of home equity financing told The Globe and Mail: “We all know there is so much more involved in the home-buying decision and taking on such a large debt. To keep the conversation focused on just the rate does a disservice to consumers.” Meanwhile, Scotiabank will be highlighting other elements that make a mortgage product better; being able to break the loan early or make additional payments. The bank is publishing results of a consumer survey showing that 84 per cent said rates are important but a large number also care about other features. Read the full story.
Builder shifts from the suburbs to downtown, says ‘no bubble’
With the trend towards more Canadians choosing to live downtown one of Canada’s most prolific building firms is following the crowd. Mattamy Homes is the largest homebuilder in the country and built a large proportion of the city of Oakville where the company is currently based. However, its boss Peter Gilgan said the company has outgrown the suburbs and are moving its operation downtown, partly because that’s where his staff want to be. The firm will occupy the 55th floor of a tower in Toronto’s TD Centre. Asked if he believes that Canada’s housing market is in a bubble he told the Financial Post that he does not, as demand still outstrips supply: “What caused the housing bubble in the U.S. nearly a decade ago, it’s not happening here. Yes, price escalation is more than the rate of inflation, but if you look at the condominium market, we are seeing prices staying flat, because supply has finally caught up to demand.” Read the full story.

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