Lower five-year mortgage rates aid first-time buyers

Multiple housing market segments are also expected to benefit

Interest rates continue to give home buyers a reason to be optimistic, say city builders.

The Bank of Montreal (BMO) pulled its five-year fixed rate down to 2.74 per cent last week. This follows the bank’s move to 2.79 per cent rate from 2.99 per cent in March of this year.

TD Bank also has 2.74 per cent posted as a special offer on a fiveyear fixed term.

“These changes will help with affordability and first-time buyers getting into the market,” says Ryan Scott, president of Avalon Master Builder.

Avalon builds town houses in the inner-city community of Marda Loop along with Okotoks and Airdrie.

"It’s one more thing showing the growing strength in the Canadian economy,” Scott says.

“Even at historic low rates banks are continuing to compete for new business. Obviously they feel confident in the Canadian housing market.”

The rate drop will make a difference to a number of demographics and should give a boost to multiple segments of the market, says Birchwood Properties sales and marketing director Adele Kerr.

Birchwood is the company behind the Bristol Townhomes in Quarry Park and Ezra on Riley Park.

“With the interest rates being exceptionally low, it opens the door for the first-time buyers to afford a new home as well as the opportunity for those move-up buyers to be able to afford even more in terms of their next home purchase,” Kerr says.

While the improvement in short-term rates is a welcome sign for house hunters, says Morrison Homes Multi-Family vicepresident Rob Kennedy, he adds long-term numbers are something worth keeping an eye on.

“The downward movement on long-term rates is great, as lower long-term rates provide better stability for purchasers and the overall market,” Kennedy says.

Morrison Homes’ Multi-Family Division is selling a townhome project called Sonoma at Nolan Hill in northwest Calgary.

“Lower long-term rates provide purchasers the ability to settle into their new homes and normalize their lives for a longer period of time without having to worry about the volatility of interest rates as they would if their renewal was within one, two or three years,” Kennedy says.

“I believe the lower long-term rates we are currently seeing today provide an opportunity for buyers at this time and should be taken advantage of as the longer term rates are generally the first to rise in a turning market.”

With the interest rates being exceptionally low, it opens the door for the first-time buyers to afford a new home.