The Greek weeble continues to wobble but does not want to fall down.  Greece finally agreed to undertake even more austerity measures to satisfy the conditions of the most recent bailout terms.  The financial markets were unmoved by this seemingly positive move and  Germany even stated that the measures may not be enough.  In other European news, the Bank of England will spend $50 billion in a new wave of quantitative easing.  Although inflation seems to be waning in the UK, measures like this will eventually bring inflation to the forefront.  As with all the industrialized nations, the governments are walking a fine line between austerity that may improve short term cash flows but hurt economic growth, and stimulus to improve economic growth.    

US job numbers were up this week and slightly positive US economic growth has some people predicting an earlier end to the current economic doldrums.  The US is still in a huge deficit hole but any positive US is always good for Canada since the US is our largest trading partner and the largest customer for all that we sell.  Despite the trend to diversification of our global trading partners, we will be somewhat chained to the US markets for a long time to come.   The Canadian dollar improved slightly this week on this positive US economic news. 

This positive news from the US has also caused Canadian bond yields to increase this week and we may see a few banks remove their super low “special” rates for the time being.  However, fixed rates remain at historical lows and should stay in the current neighborhood for quite a while.  

Variable rates are still available at around Prime less 0.20% but for most clients, fixed rates are a much better choice since the spread between fixed and variable is so small.

Jason McLean   BSc, AMP
jason@garibaldimortgage.com  

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Last Friday, the credit ratings agency Standard & Poor, downgraded nine European nations.  This basically means that these countries, or borrowers, are “officially” no longer considered to be as reliable as they were previously.  Although there was a lot of hullaballoo in the media about the downgrades, the markets were really only affected for a day or two.  This is because the various ratings agencies had been warning of potential downgrades across Europe for the past few  months.   Therefore, the markets had already priced this action into their projections and although further downgrades may occur in the future, the current actions should not have surprised anyone.

Yesterday Spain held a successful bond auction that saw bond yields drop to just under 5.5%, a dramatic improvement from over a month ago when yields were over 7%.  However, Greece remains problematic and is still teetering on the brink of default.  Overall, Europe continues to stumble along with bits of good news popping up here and there.

On Tuesday, the Bank of Canada left the Prime rate untouched and expressed concern about the European debt crisis slowing economic growth in Canada for the next year or longer.  Despite recent positive growth numbers, some pundits are predicting cuts of 0.5% to the Prime rate over the next six months.  I think that the Bank of Canada will remain on the sidelines through 2012, saving their few remaining bullets in case the villain that is negative growth rears its ugly head. 

After one lender announced a 5 year fixed term at 2.99% last week, many other lenders have decreased fixed rates and there are a number of appealing options available.  Two lenders have 10 year fixed terms at 3.89% and 3.99% respectively.  If I was to purchase property now, with the expectation of holding the property for at least 5 years, I would jump all over these 10 year terms.  This is a once in a lifetime opportunity for purchasers to lock in tremendously low rates for a decade.   These lenders are not lending on all Whistler properties but there are attractive options for all buyers at this time.

Jason McLean  BSc, AMP
jason@garibaldimortgage.com 

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Many of our clients today are asking themselves which is better? Fixed rate or variable rate financing?

Fixed rate financing means that your interest rate remains the same for the length of the term you choose.

Variable rate financing is based on the Canadian prime rate and is often available with a discount. For example, the Canadian prime is currently equal to 3.00%, and we have prime less .80 available which gives you a rate today of 2.20%.

The Canadian prime rate is reviewed every 6 weeks by the Bank of Canada and is subject to change. The main factor that influences upward or downward movement on the prime rate is how close we are to the target inflation rate of 2.00%.

If you like the stability of knowing your rate won’t change, then maybe a fixed rate mortgage is a better choice for you. Or, if you are increasing your mortgage for a more expensive home or a refinance, then you may also want to consider a fixed rate mortgage to minimize upward changes to your monthly payment.

If you want to go variable to take advantage of the ultra low rate, it may be a good idea to purposely set your payment a little higher to give yourself a buffer to accommodate future prime rate increases.

If you would like to discuss your mortgage options, please do not hesitate to call or email.

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We are on the verge of fixed interest rates going up…contact one of our brokers to protect a fixed rate today… http://garibaldimortgage.com.

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