Canada First Mortgage

- TD Canada Trust releases 2010 Home Buyers Report -

TORONTO, July 5 /CNW/ - Are Albertans better negotiators than the rest of Canada? More than any other province, first time home buyers in Alberta are expecting to pay less than the asking price for their home (71% vs. 65% nationally). One-quarter (26%) expect to pay asking price and only 3% expect to pay more than asking price. This is according to the first TD Canada Trust Home Buyers Report, which surveyed Canadians who have purchased their first home in the past 2 years or who intend to purchase a home in the next 2 years.

More than in any other province, Albertans report putting down as much as they can afford for a down payment (95% vs. 88% nationally). Sixty-five per cent say they saved or plan on saving for two years or less for their home purchase. Despite the majority putting down as much as they can afford, only 25% plan to have more than a 20% down payment. The remaining 75% will require their mortgage to be insured by organizations like the Canada Mortgage and Housing Corporation (CMHC). Two-thirds (65%) are worried about being able to afford their home if interest rates rise.

“It’s only natural to want your first home to be the home of your dreams, but it is important to be realistic about what you can afford as a down payment and what that will mean for both the type of home you buy and for your mortgage payments over time,” says Farhaneh Haque, Regional Sales Manager, Mobile Mortgage Specialists, TD Canada Trust. “I advise first time home owners to consider a larger down payment because a 10% or greater down payment will make a big difference. It may mean that you need to save longer before buying your first home, but it will pay off in the end. Speak with a representative at your bank about setting up an automatic savings plan to help you save.”

Seventy-three per cent of those surveyed in Alberta have or plan to have a fixed-rate mortgage. “Historically you are more likely to save interest costs with a variable rate or short-term mortgage option, so if they can handle some volatility then I recommend buyers choose a variable rate. If people are adverse to interest rate fluctuations then a fixed-rate is best,” says Haque.

Albertans are doing their homework:

Nearly all home buyers are making informed financial decisions before buying their home. Top activities before buying a home include getting pre-approved for a mortgage (94%), learning about mortgage options (93%), calculating closing costs (89%) and speaking to a mortgage lender before shopping for a home (89%). However, land transfer tax, closing costs and property taxes were the top costs that buyers felt unprepared for (53%, 51% and 48% respectively).

What type of home do Albertans want?

Fifty-nine per cent of Albertans prefer fully detached homes, followed by condominiums (17%) and semi-detached homes (14%). If two homes were at the same price point, 68% would prefer a newer home over an older home. Albertans are split about the preferred location for their home; for the same price, 55% would prefer a smaller home closer to work and 45% would prefer a larger home that requires a longer commute to work.

Home shopping process:

People in Alberta do their due diligence when searching for a home, spending almost 9 months looking for a home and viewing on average 13 homes. They spend a lot of time shopping in Alberta because they plan to live in their first home for longer than people in other provinces. In fact, only 5% of people plan to spend less than 3 years in their first home (compared to 11% nationally). Thirty-nine per cent plan to spend more than 10 years in their home or to never sell.

Eric Lam, Financial Post · Friday, Jul. 2, 2010

With Canada’s economy stumbling in April, adding fuel to speculation the country’s roaring recovery that began in September 2009 was coming to an abrupt end, economists warned Canada’s central bank will have to tread carefully on its plan to raise interest rates for the rest of the year.

Derek Holt and Gorica Djeric, economists with Scotia Capital, said the Bank of Canada “was not likely to be swayed” by Wednesday’s economic data. The pair maintain a forecasted 1.25% benchmark rate by the end of the year.

“There should be enough strength in the underlying economic momentum to dismiss the drag on GDP in April as something that does not portend the start of a new trend,” the pair say in a note.

In April, Canada’s gross domestic product neither expanded nor contracted, compared with 0.6% growth in March. Economists surveyed by Bloomberg had been forecasting 0.2% growth in GDP for April.

This is the first time in eight months Canada’s economy did not expand.

In its report, Statistics Canada blames the stagnant April on a “large decline” in retail trade of 1.7%, after a 1.9% gain in March. Declines in manufacturing and utilities also contributed to the underperformance while advances in mining, wholesale trade, the public sector and construction helped to offset the decreases.

Krishen Rangasamy, economist with CIBC World Markets, said it was too soon to jump to conclusions.

“It’s too early to conclude from this GDP report that the recovery is already waning,” he said in a note on Wednesday. “The excellent handoff from March means that we’re starting the second quarter from a higher base, which sets Canada up for a decent quarter despite a slow start.”

Michael Gregory, senior economist with BMO Capital Markets, said that while the 3% growth now expected is respectable, it is a bit of a letdown compared with the 5% to 6% growth figures seen earlier.

“It’s kind of like driving on the highway at 100 kilometres an hour, then getting off and going 50,” he said in an interview. “But 3% growth is still all right and where we see it for this year.”

The second half of the year will likely move quite sluggishly, however, as a lot of spending in housing, renovation and other big-ticket items was “pulled forward” due to the HST, introduced in July in Ontario and British Columbia. Mr. Gregory expects growth of about 2% on average in the fall and winter months.

Canada’s economy also faces headwinds from the sovereign debt crisis in Europe, an even worse slowdown in the United States, and possible fallout in China, he warned.

Warren Jestin, chief economist with Scotia Economics, said in a note on Wednesday that Canada’s position as a resource leader should help keep it afloat in the face of other developed countries, although “this won’t be a hard race to win.”

The situation in Europe is troubling for Mr. Gregory, but he suspects the combination of weakening housing, high unemployment and zero credit growth will hurt the United States.

“That buzz you hear about a possible double-dip recession is legitimate and will remain a worry for markets the rest of the summer and into the fall,” he said. “It’s why we think the Bank of Canada will be on hold for a while after July.”

Mr. Gregory figures the central bank will raise rates 25 basis points at its next meeting in July, then go on hold to see how things play out in Canada the rest of the year. It is likely the BoC will push rates to 1% by the end of 2010 and add another 1 percentage point to 1.5 percentage points in 2011.

“An environment of 3% growth is still something that requires higher interest rates,” he said. “Rapid buildup in household debt is a long-term risk.”

Read more: http://www.financialpost.com/Weak+Canadian+puts+spot/3226392/story.html#ixzz0sWmoS1qa