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February 2012 Market Update


     
 
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February 2012

 
 

February 2012 Market Update

Last month, the Bank of Montreal, in an attempt to gain market share during the slower winter housing months, surprised the mortgage industry by introducing a posted 2.99% 5-year fixed rate mortgage to the marketplace. The move prompted a bit of a mortgage war as other lenders played catch-up to match what was done by BMO. The result of all of this maneuvering is that consumers now have some of the lowest rate options in history.

But why would the Bank of Montreal want to start a mortgage price war?

The reason is that many of the big banks see mortgage lending as an effective loss-leader in order to capture more overall banking market share. After all, a mortgage is often a 20+ year commitment. During that time, your lender will have a good reason to contact you about an assortment of lucrative financial products: banking services, credit cards, commercial loans, lines-of-credit, private banking, investment products, etc. So it makes financial sense for the banks to sacrifice profits in their mortgage division in order to attract more customers to their higher margin products.

This explains BMO's strategy for offering the 2.99% mortgage. You see, this product is offered as a no frills mortgage, which effectively means that the bank is locking its customers into a contract, with punitive penalties for breaking it (and without a bona fide sale it cannot be paid in full). That's a good option for the bank, which is counting on being able to up-sell other products during that time, and it's a good option for borrowers who know how their lives are going to unfold over the foreseeable future. But beware: a lot of things can change in one's life over 5 years.

So what should you do?

While it's always nice to get the best rate possible, remember that there's more to a mortgage than just the rate. This price war has resulted in the lowering of MANY different types of mortgages so now should be the time to sit down with a professional mortgage specialist or broker and see what is best for your set of circumstances.

Please contact me at the address above if you have any questions, or would like to be referred to a mortgage broker.

 
   
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January 2012 Update


 

     
 
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January 2012

 
 

British Columbia Luxury Home Sales Continue Upward Surge in 2011

Happy New Year and welcome to 2012!

2011 was yet another record-breaking year for BC's luxury housing market. According to MLS stats, over 700 $3 million+ homes were sold in 2011, smashing the record set last year of 375, and more than tripling the number achieved in 2009. Macdonald Realty manager, Matthew Lee, whose firm sold the most expensive house ($16.8 million) and most expensive condo ($10.1 million) in 2011, believes that international buyers are fuelling the luxury market. "Buyers from Mainland China continued to push prices upwards in 2011," Lee says, "but they're not the only ones buying. Locals and people from other parts of the world like BC as well."

Macdonald Realty VP Dan Scarrow concurs. "For the past couple of years, we've seen a really remarkable run-up in prices in the 5 areas that have the highest concentration of Chinese buyers: Vancouver (Westside), Richmond, Burnaby, West Vancouver, and White Rock. The housing market in the rest of the Lower Mainland and BC looks very similar to most markets across the country."

That said, both Scarrow and Lee believe that the hot markets of 2011 will be more stable in 2012, while the slower areas slightly outperform to play catch-up.

The stats seem to support this view. Midway through 2011, Macdonald Realty projected that there would be more than 800 sales of homes over $3 million for the year. The drop to 700, albeit slight, indicates a trend of slowing luxury sales. Macdonald Realty projects that the more affordable jurisdictions in the Lower Mainland will see the biggest price gains in 2012. "We think that prices will remain quite stable in most of the province," says Scarrow, "while prices in some of the more affordable areas of the Lower Mainland, specifically East Vancouver, are expected to rise considerably to close the gap."

3 Most Expensive Homes Sold in 2011:

  • 1) $16,800,000
  • 2) $14,680,000
  • 3) $13,100,000

3 Most Expensive Condos Sold in 2011:

  • 1) $10,100,000
  • 2) $7,500,000
  • 3) $7,200,000