Canada Mortgage rates not likely to fall

Mortgage rates in Canada, which have plunged by almost 50 percent in the last year, aren’t likely to fall further, said Phil Soper, chief executive officer of Brookfield Real Estate Services Fund.

“Certainly with the Bank of Canada’s target rate set at virtually zero, there’s very little room,” Soper said today at a conference in Toronto on Canada’s real estate market. The rate is “the lowest it’s been in anyone in this room’s lifetime.”

Rates for home loans have been dropping during the biggest financial crisis since the Great Depression, with some lenders offering mortgages approaching 4 percent, Soper said. That compares with an average posted five-year rate of 7.5 percent a year ago, according to the Bank of Canada. He added that home prices in Canada aren’t likely to rise “sharply” over the next two years.

Bank of Montreal, which sponsored the conference, lowered its rate for a five-year fixed-rate mortgage this month to 4.15 percent.

“We are approaching almost zero interest rates,” at the Bank of Canada, said John Turner, the Toronto-based bank’s director of mortgages. “The question becomes, how much upward pressure will there be as we come out of this recession?”

The Bank of Canada last month cut its benchmark lending rate to 0.5 percent, its lowest ever, and said it’s preparing to use policies beyond interest rate moves to revive an economy hit by a recession and tight credit markets. The next rate announcement is April 21.

Canadian existing home sales rose in February for the first time since September as buyers took advantage of lower mortgage rates and prices, according to the Canadian Real Estate Association’s Multiple Listing Service. Sales of existing homes rose 8.6 percent from January to28,669 units.

Bank of Montreal senior economist Sal Guatieri predicted that Canada’s housing market will decline further this year, without the “crash” experienced in the US.

Canadian housing starts rose an unexpectedly strong 13.7 per cent in March, breaking a six-month losing streak thanks to renewed strength in Ontario and Quebec, Canada Mortgage and Housing Corp said Wednesday.

Ground breaking on new homes climbed to a seasonally adjusted annualized rate of 154,700 units from an upwardly revised 136,100 units in February, CMHC said.

Analysts had predicted 130,000 starts in March.

The Canadian dollar strengthened on the data and by 8:25 a.m. was at $1.2331 to the U.S. dollar, or 81.10 U.S. cents, compared to $1.2378, or 80.78 cents, at Tuesday's close.

Construction of urban single-family homes rose 1.3 per cent to 46,400 units last month from 45,800 in February. Construction of multiple dwellings, such as condos, jumped by 28.3 per cent to an annual rate of 81,500 units from 63,500.

"New home construction is now at a more sustainable level after having been exceptionally strong over the past seven years, exceeding 200,000 units per year," the CMHC said in a statement.

Rural starts in March were estimated at an annual rate of 26,800 units, unchanged from February.