Canada, hype, mortgage, rates

Dirt cheap rates, limited time offer

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78 Comments

The Investors Group is making waves with a 1.99% 3 year variable mortgage.

Here’s a story about it over at the CBC.

The offer comes with strings attached — namely that you can’t break the mortgage for any fee during the three-year term, unless you sell your home. But the offer does come with the ability to double up monthly payments, or pay a 15 per cent lump sum once a year.

In real dollar terms, it could knock a lot of money off a mortgage payment, at least over the short term. A standard 25-year $500,000 mortgage at a five-year rate of 2.99 per cent works out to $2,364 a month. That mortgage under IG’s new terms would be $2,115 a month — savings of $249 monthly, at least for the first three years, and as long as the variable rate doesn’t increase.

This is from ‘the first one’s free’ school of marketing.  It looks like Investors Group is willing to lose money on mortgages in order to make it up with more business in the future.

It will be interesting to see if offers like this give a bump to the market and to see where we are with rates in 3 years.

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Rosalie

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trackback

[…] Link: Dirt cheap rates, limited time offer – Vancouver Condo Info […]

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Nonplayer Character

@7: “Time to pack up and look for alternatives outside this crazy city. It is a shell game”.

As long as people keep paying their property taxes, cell phone bills and YVR levies, top management will keep squeezing the fist: “If they pay X, they must be able to pay 1.2X… 1.5X… 2X…”

Our being here and having a bank account here is plea for more screwery. “See? We can stand it!”

The problem is that “here” is any country with a central bank.

I am twice an immigrant. Left Russia in 1999 for Israel, Israel in 2005 for Vancouver. It’s all the same. But BC is at least beautiful and peaceful. So far.

Every hierarchy works as a ratchet strap until it strangles itself, or we’d still be living in the Akkadian empire.

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trackback

[…] -Carrick not worried about debt -Low rates for higher prices? -Analysts warn of market froth -Bitter bear -Condo ordered sold over parking […]

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4SlicesofCheese

Looks like Brad Lamb is building in Alberta. I have a friend moving there to work on one of his projects because wages are 25% above here.

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Best place on meth

I guess ted eastside doesn’t feel like extolling the virtues of southern California today.

That’s ok buddy, massive wildfires and oil-soaked city streets can happen anywhere.

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Best place on meth

“I thought computer programmers are supposed to be smart”

You probably also thought that they have above average social skills.

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patriotz

@60: ” I don’t think anyone can claim RE market is efficient ever! ”

Nobody except the bubble deniers claims that it is. A market cannot be efficient if it does not allow short selling, which allows rational players to combat overvaluation. Add government support of irrational players and the RE market is a paragon of inefficiency.

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patriotz

@53: ” If you bought an SFH in the fall of 2008, or in 2009 or even 2010 after the prices began rising again after the 15% dip in prices, you would be sitting pretty.”

You forgot to add “… if you sold it today”.

Both future prices and interest rates are unknown and anyone holding a house bought in 2008/9, never mind today, is making a big bet on these going the right way for a long time ahead.

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patriotz

@49: “Obviously we won’t have negative wage inflation”

Why “obviously”? I don’t think nominal wage cuts are likely for given existing positions, but higher wage jobs have been disappearing and being replaced by low wage and part time jobs for some time. Also we didn’t have half a million slave labourers competing in the job market with Canadians a decade ago.

At this point should say that I really don’t pay much attention to “affordabilty” metrics as they depend on statistical aggregates of RE prices and incomes which are open to question. What I pay attention to is rental yields of individual properties and they stink, even relative to today’s record low interest rates.

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Bull! Bull! Bull!

Space needs to be banned for being stupid.

I thought computer programmers are supposed to be smart. I guess its true what people say about the developers in this city.

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An Observer

@60

“If you ever poker, especially no-limit, you know that more often than not, it’s not the AA, KK, QQ, AK, etc that wins you the most $$. Rather it is the ok or even crap ones like T3 that you called a big pre-flop raise with that wins you the most cuz when you hit that T73 on the flop, you pretty much just need to let the player holding AA bet him/herself into total oblivion.”

Wow… This is what people who are actually good at poker tell people hoping that they believe it in order to quickly separate them from their money

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Johnny-boy

Maybe we should watch the Chinese MOI…

. Inventories of unsold homes in Beijing are reported to have risen from seven to 12 months’ supply in the year to April. But when it comes to homes under construction and total sales, the bulk is in “tier two” cities, where the overhang of unsold homes has risen to about 15 months; and in tier three and four cities, where it is about 24 months.

I know , I know the BOC will blink.

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paulb

New Listings 220
Price Changes 93
Sold Listings 129
TI:16770

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Bull! Bull! Bull!

stock market has crashed already just a few years ago. it was a bubble. now it’s making new highs. but this time it isn’t a bubble. this time is different, right guys?

housing market has been steadily climbing for a decade and a half. no crashes. but it’s a bubble. it hasn’t crashed but this time is different, right guys?

stock market crashes this millennium: 2001, 2008, 201X

canadian housing crashes this millennium: none.

btw a leveraged ETF is a really STUPID way to play the market long term.

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crabman

space – Bad decisions may pay off for a while, but not in the long run. Or as Benjamin Graham put it:

“Speculators often prosper through ignorance; it is a cliché that in a roaring bull market knowledge is superfluous and experience is a handicap. But the typical experience of the speculator is one of temporary profit and ultimate loss.”

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space889

– I don’t think anyone can claim RE market is efficient ever! Even stock, bond, and FX markets are not 100% efficient and those are very liquid and deep markets.

Sometimes the “bad” financial decisions are what pays off the most, and the most “correct” ones paid off the worse.

If you ever poker, especially no-limit, you know that more often than not, it’s not the AA, KK, QQ, AK, etc that wins you the most $$. Rather it is the ok or even crap ones like T3 that you called a big pre-flop raise with that wins you the most cuz when you hit that T73 on the flop, you pretty much just need to let the player holding AA bet him/herself into total oblivion. Oh, and no A, K, etc on the turn/river.

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crabman

I would love to hear your explanation of how the bubble “theory” was proven wrong! Bubbles can last a long time.

OTOH, your “affordability is within historic norms” comment is easily proven wrong by looking at the RBC report. Prior to the current bubble, affordability in Vancouver was never this bad.

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space889

Single family houses within CoV or even in GVRD with reasonable transit options (bus, train, drive, bike) has a very low ability to increase supply relative to condos & townhouse. Given population is increasing and most people prefers a SFH all else equal, it is conceivable that the consumer composition for SFH has shifted since 1990s with the massive immigration and is no longer affordable to the general public. CoV west of Oak is an extreme clear example of this. The supply is static or even in slight decline but demand just keeps piling up. Using purely living space per person measure, ignoring whether you own the land or not, then housing affordability on a per month cash flow is not as horrendous as some make it out to be. Most people have adjusted expectations and as Dave said, looks… Read more »

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Dave

crabman, I believe the current level of affordability is within historic norms.

I do believe that affordability will not get worse for condos, but will continue to worsen for SFH’s over the medium run.

I could imagine affordability improving a little bit for condos with wages outgrowing price gains. I think that outcome will be closely tied to construction rates and immigration.

Overall, I’ll stick with the same old thesis, which is an expectation of a flat market going forward.

The bubble theory doesn’t hold water anymore. It was effectively proven wrong in Spring 2010. Now, if affordability for condos took the shape of the SFH curve, then I’d be the first to call for a pop.

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southseacompany

G&M: “Analysts warn of market ‘froth’ as home prices rise again in April”

http://www.theglobeandmail.com/report-on-business/economy/housing/canadian-home-prices-rise-again-in-april/article18676485/

“… at an annual growth rate of around 5 per cent, Canadian home prices are continuing to rise faster than incomes are, something that is worrying to some economists.

“With home prices already estimated to be 10 per cent overvalued, the risk is for more froth to gather in the Canadian housing market,” Toronto-Dominion Bank economist Diana Petramala wrote in a research note Wednesday.”

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crabman

So, Dave, you believe that we passed some sort of population tipping-point between 2005 and 2008 where housing went from affordable to never-again-affordable?

And ProblemBear demonstrates why the market is not efficient and prone to bubbles. He knew buying a house was a bad financial decision, but he bought one anyway.

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Enigma

There are many very simple ways of accessing leveraged investments. For instance, looking at the S&P 500 alone, there are several 2X and 3X S&P 500 index ETF’s available which have made substantial returns over the past 5 years. For fun, let’s compare middle-of-the-road 3X BXUB from Barclays and compare to optimistic 0% and 10% down investments in the GV detached benchmark over the past 5 years. UPRO (ProShares) went 15 to 102 and performed substantially better, but let’s ignore that one. I think I’ve made the house purchase scenarios overly optimistic with low interest rates, decent rental income and selling for more than the current benchmark. This was done quickly, so corrections are certainly welcomed. Ignores taxation and FX. 5 Yr analysis of three purchase & resell investment scenarios, from 2009. Assuming the same starting cash and roughly the… Read more »

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Softy

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