Dominion Lending Best Rate Mortgages

This edition of the Weekly Rate Minder has the latest, best rates for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the mortgage that suits your needs. Best of all — our service is free.* It's the selected lender that pays us and YOU get the best rate. *(O.A.C., E.&O.E.)• Our Best National Rates • Explore Mortgage Scenarios with Helpful Calculators on http://www.derekdiener.com

Terms Bank Rates Our Rates 6 Month 3.14% 3.10% 1 YEAR 2.89% 2.29% 2 YEARS 2.84% 2.09% 3 YEARS 3.39% 2.25% 4 YEARS 3.89% 2.49% 5 YEARS 4.64% 2.59% 7 YEARS 5.30% 3.39% 10 YEARS 6.10% 3.84% Rates are subject to change without notice. *OAC E&OE

Prime Rate is 2.70% Variable rate mortgages from as low as Prime minus 0.60%

Canadian Retail Sales

In a further sign that the Canadian economy is recovering, Canadian retail sales rose 0.5 per cent in July, the third consecutive monthly increase. On a year-over-year basis, sales were up 1.8 per cent. Retail sales were higher in 6 of 11 retail sub-sectors with sales of motor vehicles and clothing leading the way.  In BC, retail sales dipped 0.4 per cent on a monthly basis but were up 5.7 per cent compared to July 2014. 

Consumer spending continues to be the main driver of economic growth in Canada, though weakness in the loonie is helping export growth. Canadian real GDP is currently tracking at between 2 and 2.5 per cent in the third quarter which would mean an end to the "technical" recession experienced over the first half of the year. 

Copyright BCREA - reprinted with permission 

Canadian Monthly GDP

The Canadian economy grew faster than expected in July with output expanding by 0.3 per cent on a monthly basis. Growth in real GDP, as measured at the industry level, was led by gains in the mining, oil and gas sectors as well as rising output in the manufacturing and finance and insurance sectors. 

Solid economic growth in July comes on the heels of very strong growth in June and generally encouraging economic data since the beginning of summer. July's GDP data also signals a high likelihood that third quarter economic growth will not just be positive, therefore breaking a string of two straight down quarters, but will register a fairly robust 2.5 per cent. 

Copyright BCREA - reprinted with permission 

Canadian Consumer Price Inflation

The Consumer Price Index (CPI) rose 1.3 per cent in the 12-months to August, matching the increase from July. Inflation continues to be pinned down by lower energy prices with gasoline prices falling 12.6 per cent year-over-year. Inflation measured by the Bank of Canada's core CPI index, which excludes fuel, food and other volatile components, registered 2.1 per cent. This is the 13th consecutive month that core inflation has been above the Bank's 2 per cent inflation target. Inflation in BC was up 1.2 per cent in the 12-months to August and is tracking at just 0.8 per cent for all of 2015. 

Copyright BCREA - reprinted with permission 

US Federal Reserve Interest Rate Decision

The US Federal Reserve ("the Fed") opted to leave its key interest rate unchanged at its current level of between zero and 0.25 per cent. In its accompanying statement, the Fed cited slowing global economic growth and continued low inflation as key factors in its decision. The Fed further noted that it will be appropriate to raise its target rate once it sees further improvement in the labour market and once it is convinced that inflation is on track to reach its 2 per cent objective over the medium term.

Focus will now shift to the Fed's remaining 2015 meetings in October and December. Whether the Fed chooses to act on rates this year or next, historically the correlation between Canadian and US long-term interest rates is very strong, even at times such as now when the two countries’ normally in sync monetary policy is heading in different directions. Therefore, as the Fed eventually moves to increase its target rate, there will likely be some upward pressure on 5-year interest rates in Canada. When paired with a recovering Canadian economy, this will likely translate to higher fixed mortgage rates by the middle of next year. 

Copyright BCREA - reprinted with permission 

Dominion Lending Best Rates

Canadian Manufacturing Sales

Canadian manufacturing rose for the third time in as many months, increasing 1.7 per cent on a monthly basis in July. Sales were led by higher shipments of motor vehicle parts, which accounted for close to two-thirds of the gain. Overall, sales were higher in 12 of 21 Canadian manufacturing sub-sectors. In BC, where the manufacturing sector employs roughly 170,000 people, sales rose 0.5 per cent on a monthly basis and were up 2 per cent year-over-year.

   

Solid manufacturing data in July is strong evidence that the Canadian economy is recovering from the shock of low oil prices, particularly in sectors helped by the weaker Canadian dollar. We expect that the recovery will continue into the third and fourth quarter with the Canadian economy eking out modest growth of about 1.1 per cent this year. Meanwhile, the BC economy continues to set the pace for Canada and remains on track to post the highest economic growth of any province in 2015.

Copyright BCREA – reprinted with permission 

MORTGAGE RATES LOW AND STEADY

Mortgage Rate Outlook

The current spread between fixed five-year mortgage rates and five-year government bond yields remains well above historical norms. Normally, this is suggestive of a coming decline in fixed rates. However, elevated risk in global financial markets and a tightening of credit among Canadian lenders reported in the most recent Bank of Canada Senior Loan Officer Survey has translated to fixed rates remaining steady in spite of falling bond yields.

Perhaps more importantly, US bond yields have risen in recent months as the US economy accelerates and the US Federal Reserve prepares to raise its target overnight for the first time since the 2008 financial crisis. Canadian yields have so far diverged from those in the US, but historically the correlation between the two is very strong, even when the two countries’ normally in sync monetary policy is heading in different directions.

Therefore, whether the Fed opts to raise interest rates this year or next, it will have a meaningful impact on bond yields in Canada. In conjunction with what should be a recovering Canadian economy, we expect there to be some upward pressure on fixed mortgage rates by the middle of next year with five-year rates rising to just over 5 per cent.

Economic Outlook

The Canadian economy contracted in the second quarter of 2015, declining 0.5 per cent on an annualized basis following a 0.8 per cent contraction in the first quarter. A second consecutive quarterly decline fits what some call the technical or statutory definition of a recession.

While some may quibble over whether the economy was in recession, technical or otherwise, economic growth was undeniably weak for the first five months of the year. However, the downturn was quite modest compared to the severe recessions of the early 1990s or the 2008 financial crisis.

Moreover, it appears from available third quarter data that the economy is already rebounding and should post fairly robust growth for the remainder of the year. We expect that the Canadian economy will eke out growth of 1.1 per cent this year and 2.4 per cent growth next year.

Interest Rate Outlook

The Bank of Canada once again finds itself in a delicate balancing act between supporting those regions of Canada adversely impacted by low oil prices while not tipping the balance of risk in the economy toward overly indebted Canadian households. Further complicating matters are the realities of conducting monetary policy so close to the so called “zero lower bound”. While in theory, the lower bound for interest rates is zero; in practice, transaction costs associated with short-term money markets make 25 basis points as low as the Bank can go while preserving a functioning market. With its target overnight rate at just 0.5 per cent, the Bank is risking returning to its effective lower bound of 25 basis points for the second time in six years. As monetary policy approaches that lower bound, it tends to get more and more ineffective, particularly when the usual channels for monetary policy to work, such as housing and consumer debt, are already somewhat clogged by high Canadian debt levels. If traditional monetary policy were exhausted, the Bank would have to resort to less conventional policies, including forward guidance or quantitative easing, to achieve its inflation targeting mandate.

In the absence of a crisis inducing economic or financial shock, the Bank would likely prefer not to test the lower bound on interest rates and may even begin to tighten rates by the end of next year if the economy resumes a healthy and sustainable rate of growth.

Copyright BCREA – reprinted with permission 

Vigorous Housing Demand Unabated in August

The British Columbia Real Estate Association (BCREA) reports that a total of 8,811 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in August, up 20 per cent from the same month last year. Total sales dollar volume was $5.5 billion, a 32.8 per cent increase in comparison to the previous year. The average MLS® residential price in the province rose to $619,881, up 10.6 per cent from August 2014.

“Housing demand continued at an elevated level in August,” said Cameron Muir, BCREA Chief Economist. “More homes were sold in BC during the first eight months of the year than in the entire 12 months of 2012.” A total of 67,637 residential transactions were recording in 2012, compared to 70,617 year-to-date in August.

“Many BC regions are now exhibiting sellers’ market conditions, with home prices rising well above the overall consumer price index,” added Muir. Eight of the 11 BC real estate boards recorded a higher average home price than a year ago.

The year-to-date, BC residential sales dollar volume increased 35.9 per cent to $44.3 billion, when compared with the same period in 2014. Residential unit sales climbed by 22.4 per cent to 70,617 units, while the average MLS® residential price was up 11.1 per cent to $627,008.

Copyright BCREA - reprinted with permission 

Best Rate Mortgage Rates - Dominion Lending

Terms Bank Rates Our Rates 6 Month 3.14% 3.10% 1 YEAR 2.89% 2.29% 2 YEARS 2.84% 2.19% 3 YEARS 3.39% 2.25% 4 YEARS 3.89% 2.49% 5 YEARS 4.64% 2.54% 7 YEARS 5.30% 3.39% 10 YEARS 6.10% 3.84% Rates are subject to change without notice. *OAC E&OE

Prime Rate is 2.70%  Variable rate mortgages from as low as Prime minus 0.65%  Please note that rates shown above are subject to change without notice. The rates shown are  posted rates and the actual rate you receive may be different, depending upon your personal financial situation. “Some conditions may apply. Rates may vary from Province to Province. Rates subject to change without notice. *O.A.C. E.& O.E.” Check with your Dominion Lending Centres Mortgage Professional for full details and to determine what rate will be available for you. *O.A.C., E.& O.E.