Dialled down interest rates by two major Canadian banks is welcome news for the city’s housing market, say home builders.
Earlier this month, The Bank of Montreal (BMO) pulled back its five year fixed term to 2.79 per cent from 2.99 per cent. TD Bank later posted the same rate.
“It’s incredible, if you think about it,” says Hal Pike, area manager for WestCreek Homes. “If you’re looking to take on a mortgage, it’s pretty cheap money, that’s for sure. It’s crazy that they would be this low.”
Pike sells move-up homes in the southeast community of Legacy. These houses start from the $500,000s.
“Buying a home is one of the biggest decisions and financial commitments Canadians will make in their lifetime, so it’s critical that home buyers get the help they need to make the right mortgage decision,” says Cam Fowler, group head, Canadian personal and commercial banking for BMO Financial Group. “Choosing a longer term, such as five years, along with a great rate will help Canadians own their home sooner while saving them thousands in interest payments over the life of the mortgage.”
Both new construction and resale activity of single-family homes in the Calgary area have been slower over the first two months of 2015 compared to the same time last year. There were 778 construction starts in the Calgary census metropolitan area between Jan. 1 and the end of February, down from 1,010 a year ago.
On the resale side, 739 single-family homes changed hands, a 31.5 per cent downtick from 1,080 sales a year ago.
The new rates will likely influence a number of people considering a home purchase, says Pike.
“It’s definitely going to perk their ears up, that’s for sure,” Pike adds. “As the affordability factor comes down with the interest rates, its going to be very good for the people that want to get into the market again.There’s no doubt about it. It’s going to be a reward for people that are riding that fine line, trying to get into the market. Maybe now they can and maybe last week they couldn’t.”
Savings from the new mortgage rates may result in increased buyer confidence, which would make a difference in a number of home segments, says vice-president of Astoria Custom Homes Lisa Stinson.
“Any time the mortgage rates are lowered, it brings buyers out for another look, and we see another surge of optimism,” says Stinson. Astoria builds in luxury communities, including Watermark at Bearspaw and Artesia at Heritage Pointe.
“We’re talking about very low rates to begin with and a cut in rates gives people an extra boost to invest in a solid market where equity is sure to grow,” Stinson adds. “It’s a great time to buy.”