It was a little less than a year ago that the global financial crisis began to hit home, which is to say that mortgage rates spiked higher.
Now, the cost of mortgages is coming down. If you're buying a home or renewing a mortgage, it's time to review your options.
Fixed-rate mortgages declined a little last week, but the most dramatic changes can be seen in variable-rate mortgages. For the first time in almost a year, it's possible to get a variable-rate mortgage at the prime rate used by most major financial institutions, which is currently 2.25 per cent.
Pre-crisis, variable-rate mortgages came with discounts that ranged from 0.75 percentage points to as much as 0.9 points off prime. By late last fall, crisis conditions prompted lenders to start charging prime plus a full percentage point or more. Now, some lenders are starting to unwind their crisis-rate premiums.
“Variable-rate mortgages are all over the map right now,” said Gary Siegle, regional manager with the mortgage brokerage firm Invis Inc. in Calgary. “We're seeing them right in the area of prime with some lenders.”
An example of a variable-rate mortgage at prime: ResMor Trust, a small player that deals through mortgage brokers, is offering four-year variable-rate mortgages at prime in all provinces except Quebec. The catch: You have to have your mortgage approved by Sept. 30 and close the purchase within 45 days.
Can variable-rate mortgages fall back to their pre-crisis lows any time soon?
“Definitely, 100 per cent, no,” said Robert McLister, a mortgage broker and author of the Canadian Mortgage Trends blog (canadianmortgagetrends.com). “Could they get a little below prime? Definitely.”
Canadian household wealth rebounds
For the first time in three quarters, Canadian household net worth grew, reflecting stock market gains; use of credit also increased, but this was more than offset by asset growth
Virginia Galt
Globe and Mail Update Last updated on Monday, Sep. 14, 2009 01:42PM EDT
Canadian households were wealthier in the second quarter of this year after losing ground in the three previous quarters, with stock market gains leading the recovery, Statistics Canada said Monday.
Household net worth advanced by $141-billion to $5.6-trillion.
“Canadian stock markets recovered partially in the second quarter, with the S&P/Toronto Stock Exchange composite index up nearly 20 per cent,” Statscan said.
“The resulting increase in the value of household financial assets (including shares, mutual funds and pension assets) was the principal factor behind the rise in household net worth,” Statscan wrote in a report on national balance sheet accounts.
The use of credit also rose more quickly in the quarter, with notable borrowing for mortgages as resale housing markets picked up, and an upswing in consumer credit as car sales increased.
“Despite the growth in credit market debt, households' debt relative to net worth edged down during the second quarter, as gains in assets more than offset the increase in liabilities,” Statscan said.
Households had 24.8 cents of debt for every dollar of net worth, compared with 24.9 cents in the first quarter.
On balance, “this was a positive report as it suggests that, with the worst of the economic and financial crises now behind us, Canadian householders are beginning the slow process of repairing the damage done to their balance sheets,” Toronto-Dominion Bank economist Millan Mulraine said in a research note.
“Moreover, with the recession appearing to have come to an end, we are likely to see further improvement in households' net worth in the coming quarters as the economy grows,” Mr. Mulraine said.
He noted that, despite the improvement in the second quarter, household net worth remains 6.1 per cent below its peak of $6-trillion, reached in the second quarter of 2008.
Although household net worth increased, Statistics Canada reported that net worth of corporations fell by $208-billion in the second quarter.
In the public sector, government levels of debt rose in the second quarter to 39.8 per cent of the economy from 38.3 per cent in the previous three months and from 36 per cent last year.
With a file from The Canadian Press