Mortgage refinancing is very much a live issue with homeowners who have been tracking housing sales, pricing and interest rate forecasts over the summer. Of course, following the whipsaw numbers and forecasts released this summer by Canada’s mortgage and housing industries can be confusing – particularly so, as analysts turn their attention to what the Bank of Canada is likely to do about its lending rate at its next scheduled policy meeting on September 8.
Fortunately, the Montreal Gazette has come out with a good summary of the latest numbers and forecasts that can help clarify issues for homeowners considering refinancing their mortgages. The Gazette’s bottom line:
“(T)he real-estate market is neither booming nor collapsing. Instead, It’s likely headed for a couple of years of either stagnation or mild price declines.”
The Gazette initially contrasted an optimistic report regarding data released in the Teranet-National Bank House Price Index (reported here), “showing a strong price gain in major cities.” However, the Gazette qualified results from the Teranet survey, noting that it tracked lagging indicators. These numbers were contrasted with a “gloomier report” from the Canadian Real Estate Association (CREA), a report that may, however, be distorted by changing market conditions according to the Gazette.
The Gazette reports that, “(t)he best price measure provided by CREA, one that’s adjusted for seasonal variations, peaked in April and fell by a total of 3.7 per cent through May, June and July. They contrast this, however, with “the carefully constructed Teranet index, which now shows prices rising through most of this period,” with a “particularly large” monthly gain of 1.5 percent in June.
Of course, the $64 question facing homeowners considering refinancing their existing mortgage, is whether the value of their home is likely to drop. (Unfounded nightmares of a U.S.-style housing meltdown dancing through their heads.) The Gazette article points to the importance of this question, quoting Derek Holt of Scotia Capital, who acknowledges, “(t)here are few issues more important to the Canadian economy than whether or not house prices are falling.”
Happily, the Gazette reports, “Holt and other analysts are pretty sure that nothing of the kind is in the cards for Canada. What’s at stake here is simply whether we’ll have a mild housing downturn, which will slow growth for a year or two, or not. The betting now is that we will.”
Homeowners deciding if now is the time to refinance their mortgage in order to lock in current low interest rates should talk to a knowledgeable mortgage broker with a wide network of bank and no-bank lenders. Locking in long-term low interest rates should dispel the concerns of homeowners tracking rates and trends each month to see how these are likely to affect the rates on their open mortgage.
