The Bank of Montreal recently announced a five-year fixed mortgage rate of 2.99 per cent, the lowest advertised rate for that term by any major Canadian bank ever. Other banks and credit unions have responded to this with their own fixed rate deals, some a full point less than what they were previously offering.
Although this is being promoted as a short-term deal with additional restrictions, it does mean that qualified persons in the market for a new home are going to be able to take advantage of the savings like never before.
There are a variety of schools of thought for why the borrowing rate has decreased. The bottom line for consumers is that it has decreased, and fairly significantly. What makes this more dramatic is that for months we have been hearing from some sources that rates were going to increase when, in reality, the exact opposite came true.
Before going any further, I want to clarify that this change in rate has not made money easier to access; it has not suddenly become open to unqualified shoppers; and this is not some bargain basement sale to encourage Canadians to take on more debt. It is a realization that for those persons who are in a positive financial situation that enables them to purchase a new home, some financial incentive is being provided to do so.
The savvy buyer has the opportunity to create a payment schedule that fits within their existing comfort zone and to pay it off faster. For those concerned about their debt load over a period of time, this lower rate will permit the consumer to better stay within their means while continuing to save money for other expenses or emergencies.
In a competitive market, the consumer definitely wins.
This column has been espousing for some time that it was a good time to buy a new home. Manitoba new homes continue to increase in value over time, thereby making a new home a much less risky investment than many other ventures. Manitoba new homes are the best built and most energy efficient in Canada, also making them more healthy homes.
With the lowering of mortgage rates by various financial institutions, purchasing a new home has now become more affordable, another reason why now may be the best time to build a new home.
Mike Moore is president of the Manitoba Home Builders' Association.
