• The Australian method of selling houses by live auction makes our Toronto practice of ‘bidding wars’ seem pretty tame and civilized.
• Australia has a population of 22 Million with the largest city being Sydney with 4.5 million in the metro area. Sounds very similar to Toronto’s relationship to Canada. The average home price in Sydney is $580K. The average home price in Toronto is about $450K.
• 5-year mortgage rates are at around 8% in Australia while this boom has been happening. Gives pause to those who say that the only thing driving our market here are the ultra low interest rates.
• Property values have increased by 18% in Melbourne over the past year. Prices in Toronto are up around 5% over the past year.

What is driving this real estate boom in Australia? Sounds like the same things as here: cheap pricing by global standards, immigration booming to the urban centres, shortage of new housing supply, strong overall economy with good jobs, and relatively low interest rates. The key difference is that a crash is a stronger possibility in Australia because values have increased so much, so fast, whereas in Toronto we are slowly and steadily rising as we have been for the better part of the last 15 years.

Questions or comments about the Downtown Toronto real estate market? Please contact me.

I got an interesting email from a mortgage broker this week that seems to suggest rates could actually be heading back down in the months to come. Read on for a copy of the email newsletter I received from Marcus Tzaferis of MortgageMarcus.com.

Many of you have been watching the fixed rate mortgages on our website and asking why rates have moved so dramatically.  Over the past month we have seen the 5 year fixed rate move from 3.25% to 4.25% based on the movement of Canadian Bond yields.

As we have explained in previous newsletters, fixed rate mortgages are directly correlated with bond yields, where as variable rate mortgages are affected by the Bank of Canada’s overnight rate and the risk premium associated with mortgages.

Over the past month the Banks in Canada have used the rapid increase in bond yields to account for a dramatic increase in the cost of borrowing. Now the opposite is occurring. Bond yields are coming back down to earth as traders and investors begin to realize that perhaps the yields moved too high too fast. With significantly lower bond yields we can expect to see fixed rate mortgages decrease in the coming weeks. I am sure that you can figure out why the banks are a little slower to reduce rates than they are to increase them.

It would appear that we got ahead of ourselves, with very little positive data coming out of the economy the market surged ahead. It is likely that we will see rates come down to lower levels.

As rates decline once more it will become a great opportunity to lock in. In the meantime variable rate mortgages priced at only 0.25 % over prime will prove to save you in the short term. Keep in mind that when dealing with a non bank lender the major benefit is your ability to lock into a fixed rate over the course of your variable rate term. The fixed rate offered will almost always be the lowest available market rate. Banks will typically offer their variable rate mortgage clients slightly inflated rates as they realize that there are costs associated with leaving.

The purpose of this note is to advise our clients that we have not seen the last of the below 4% five year fixed rate mortgage.

Over the short term the variable rate mortgage will be a relatively safe place to be, we will see fixed rates increase in the next year or two, but not without warning.

Have a look at the rates on our website and please, as always feel free to send this newsletter to your friends and family who may be looking to purchase or refinance.

Marcus Tzaferis

One of the mortgage brokers I work with informs me that rates on 5-year fixed mortgages will be bumping up by 40 basis points. So that juicy 3.79% rate that many lenders are throwing around will now be a slightly less juicy 4.19%.

Of course, this should come as no surprise as when it comes to mortgage rates, what goes down, must come up! Rates have been at all time lows for a few months now, and bond rates have been on the rise (fixed rate mortgages are usually tied to the bond market).

For a good blog on Canadian mortgages, check out Canadian Mortgage Trend. Check out this great chart they have right now on the 5-year posted rate trend over the past couple of years. Pretty revealing and it looks like we have already hit the bottom and are coming back up.

Looking for a mortgage broker or wondering about the pre-approval process? Contact me.