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McLean's Market musings for May 16


Blog by Nick Swinburne | May 16th, 2013


European inflation fell to 1.2%, the lowest level in 3 years, as consumer prices on many items declined in a number of countries.     As the European Central Bank will want to avoid the possibility of deflation, another interest rate cut may be seen in the next few months.

US inflation dropped by 0.4%, the biggest decrease since 2008.  This news should make the Federal Reserve more comfortable with continuing the bond-buying stimulus program for the short to medium term.  There was also a minor increase in jobless claims but the overall US economy seems to be on the right track to sustainable growth.   The US is the world’s largest economy and the rest of the world will be watching closely as the global economy needs a powerhouse to lead the way.

In Canada, bond yields have started to creep upwards.  If this trend continues, we may see some lenders start to increase fixed mortgage rates to maintain profitable spreads on mortgage loans.

The Office of the Superintendent of Financial Institutions has announced that it will look into limiting amortizations longer than 25 years for conventional mortgages.   This was done last year on high-ratio mortgages (less than 20% down payment) and the effect on first-time buyers has been dramatic.   Most lenders currently allow 30 year amortizations on conventional mortgages and some even allow 35 years.   In my opinion, the real estate market has already deflated sufficiently.  Any additional moves to limit buyers ability to qualify for homes will negatively affect the economy.   

If you are looking to purchase a home in the next six months and obtain a longer amortization, whether for qualifying purposes or to maintain cash-flow flexibility, it would be advisable to speed up your  search for a property.

Please remember that 80% financing is available for qualified US residents at great rates!

Cheers,
Jason

Jason McLean
The Mortgage Centre: Garibaldi Mortgage
www.garibaldimortgage.com
fax: 604-905-3801
cell:  604-935-9190