Markets around the world are up today after the progress that was made at the European Union debt meeting yesterday.   The agreements reached included getting private investors that hold Greek debt to take 50% of what they are owed (which they probably thought was better than the potential for zero if a deal was not reached); increasing capitalization requirements of banks to 9% (this makes the banks better able to withstand economic shocks and bad loans); and increasing the size of the emergency bailout fund for the EU and the European banks.  

Although this is really only the first step, it represents the most significant progress on this issue in months.     It does not mean that the problems have been entirely solved but it provides the markets with optimism that the debt contagion can be contained to a few countries within the EU.   If Greece can show some positive economic growth, which is going to be very difficult to do, then the financial lesion under this latest bandage may start to heal.

The positive European news, along with decent economic data out of the US this week, have pushed the Canadian dollar back over par.   Earlier this week, the dollar initially showed some strength on increased inflation for September, but quickly fell off again as the Bank of Canada reported concerns about sluggish growth prospects for the next year or two.   This continued volatility seems to be the new norm but it will provide opportunities for currency speculation for those who can act quickly.

All this good news will likely show up as increases in bond yields over the next few days.  Although the spread to the lenders is currently quite large, in times of volatility the lenders are being very cautious.  Therefore we may see some slight upwards pressure on fixed rates.  The best way to protect against this movement is for buyers to get  a rate hold.  With a rate hold, the client is not obligated to do anything but it is insurance against higher rates if the client closes on a deal in the following three to four months.  The best part is that this “insurance” is free!

Discounts on variable rates continue to evaporate and make fixed terms look more attractive.    The best term choice really depends on the situation of the individual client so feel free to ask about your situation.    One lender still has 3.29% 5 year rate for CMHC deals on regular, non-restricted properties (this works well for Pemberton) and another has 3.45% which is available for most owner-occupied properties in Whistler.   

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