March 28, 2014

A Surprising 5 Year Rate Drop Will Help the Vancouver New Home Market

In a surprising move the Bank of Montreal (BMO) has dropped their 5 year fixed rate to 2.99%, down from their previous posting of 3.49%.  This is an incredible 14% increase in your buying power for a mortgage renewal or purchase of a new home.  This is the first time this year that a major bank has dropped their 5 year fixed rates below the 3% mark.

Previously when BMO led the charge of lower rates from the major banks it resulted in record low interest rates.  Eventually the government, led by Finance Minister Jim Flaherty, stepped in and stopped the reductions when Manulife Financial dropped their 5 year rate to 2.89%.  The fear was that the ever decreasing mortgage rates would lead to a spike in the market that would eventually have to balance out.

With Finance Minister Jim Flaherty out and the new Finance Minister Joe Oliver in, all eyes will be looking to see how they react this time around.

Joe Oliver responded to the sudden sharp decrease in mortgage rates by stating that he will be keeping a close eye on it, however, “the government is gradually reducing its involvement in the mortgage market.”

What this means for you as a home owner is that you can now lock in at an almost record rate and save a substantial amount of money over the 5 years with this significantly reduced rate.

For example on a $400,000 home with 10% down the savings on the monthly payment work out to be just under $100 per month.  Over the 5 years that’s $6000.

If you were considering a new home or perhaps a new townhome in Maple Ridge *cough* TwoBirds, and were waiting for a better rate then this is your opportunity.  With Mr. Oliver keeping a close eye on the mortgage market there is no certainty as to how long these rates will be around.