Market and Mortgage News - Week of August 8th, 2011 - Edmonton & Calgary


First Foundation’s Best Rates to Open the Week:

Term Rates
1 Year 2.64%
2 Year 2.99%
3 Year 3.39%
4 Year 3.49%
5 Year 3.49%
7 Year 4.69%
10 Year 4.99%

ARM / Variable 2.20%
Line of Credit 3.50%
Prime – 3.00%

Market News

Down grading of the US credit rating by Standard & Poor’s caused mayhem on the world markets, Monday, causing the TSX to drop a steep 492 points and saw trillions of dollars in value wiped out from global stocks. Tuesday took a welcome turn, however, closing up 438 points, erasing much of the damage sustained on Monday

An analyst from S&P said the downgrade boiled down to the American government taking too long to come to a final plan to bring the country’s finances to order.

“The debt debate has dragged on without any policy distractions…and what we see is very little progress,” said an S&P analyst on Saturday evening.

What does this mean to me?

Firstly, don’t take a job as a stock broker if you have any heart problems – talk about a roller coaster 48 hours for the markets!

Secondly, the downgrading of the US credit rating that dictates the country’s ability to pay back it’s debts and the interest rates it may pay on it’s loans is an unprecedented move and therefore brand new territory when it comes to trying to predict how it may impact the average Canadian. The predictions are all over the map from positive to negative, from causing Canadian trade to be impeded to encouraging American companies to mover their head offices to Canada, boosting employment here at home.

All in all, like everything that has happened since the credit crisis, nothing is behaving in a predictable manner and the best bet is to stay focused on your own situation and creating as much stability as you can. For instance, if your a new home owner and you don’t have a solid savings plan in place yet, why not begin by saving up at least one month’s mortgage payment, just in case. In fact, some lenders even allow you to make and extra mortgage payment and then “skip a payment” at a later date if need be.

If you are thinking of purchasing a home, give yourself as much wiggle room as possible when considering mortgage payments as income raises and bonuses could be uncertain in the years ahead. Don’t count on them for creating “buffer savings” but rather work in a savings structure based on your current base pay.

When arranging your financing, our licensed mortgage brokers can help you come up with home-buying plan that includes a debt repayment structure and savings plan along side your mortgage responsibilities.

Mortgage News

The U.S. Federal Reserve said Tuesday that it will likely keep interest rates at record lows for the next two years after acknowledging that the economy is weaker than it had thought and faces increasing risks.

As a result, the Bank of Canada will feel more pressure to keep borrowing costs on hold despite recent speculation that the BoC would begin rates this fall to curb inflationary pressures in the Canadian economy, which has been growing faster than the United States.

However, economists say the recent stock market turmoil and the fears of a double-dip recession in the United States has made it likely that rates won’t rise in Canada until next spring at the earliest.

What does this mean to me?

Firstly, this is good news for the Canadian housing sector, which has expanded strongly because of low mortgage rates and solid economic growth in recent years.

Secondly, those in variable rate mortgages will likely enjoy their low, low interest rate for about 6 more months than initially anticipated – high fives all around for them – and lastly, fixed rates are expected to drop this week so keep a close eye on our site for the latest updates.

As the company’s first employee, Jennifer has been a Licensed Mortgage Associate since 2004, but her current role is not focused on mortgages. She is the resident blog writer and…

Learn more about Jennifer Rochford