Housing Market Outlook Prince Edward Island

Starts in the province are expected to be 785 units in 2011 and 600 in 2012.Growth in Prince Edward Island will be weaker than 2010 as a result of a slowdown in capital spending.Economic growth is forecast at 1.4 per cent in 2011 and 1.5 per cent in 2012.

While economic diversity in emerging sectors, such as information technology and biosciences, will provide some support for the provincial economy, it will not be sufficient to offset the declines in the larger more established sectors, which include tourism and agriculture. These established sectors have been adversely affected by the strong Canadian dollar.

In Detail

Single Starts: Single-detached construction will decline in both 2011 and 2012.Strong in-migration is expected to provide support to the local housing market, but it will not be enough to lift the market above the 2010 level. Expect single starts to decline to 305 units in 2011 with a further drop to 275 units in 2012.

Multiple Starts: Multiple unit starts, have improved so far in 2011 due to increased activity in the Summerside area.As a result, the CMHC forecast has been revised upward with an expectation of a moderate increase in 2011, from the 2010 results. At the same time, the apartment vacancy rate in Charlottetown has begun to climb due to more new units being added to the supply in the past year.As a result, expect a small increase in multiple starts to 480 units in 2011 in the province before falling to 325 units in 2012.

Resales: Prince Edward Island is expected to experience modest declines in the number of MLS® sales over the next two years.Sales are forecast to be 1,450 units in 2011 with an additional pullback to 1,375 units in 2012.

Prices:The average MLS® sales price is expected to remain near levels reported in 2010, with the current trend pointing to a moderate increase. A rise in the number of listings on the market, along with new home construction, will limit price growth. The average MLS® sales price is expected to be $148,750 in 2011 and $150,000 in 2012.

Source: Canada Mortgage and Housing Corporation (CMHC) 

Fixed Mortgage Rates vs. Variable Mortgage Rates

Fixed Rate
A fixed rate means that your interest rate remains the same (fixed) for the entire term (duration) of the loan. Generally, this means the percentage of interest will be a little higher since the lending institution may be losing money in the future if the interest rates rise. A fixed rate loan provides the buyer with the serenity of knowing the cost of their interest will stay the same over time. This means your payment and the amount that goes towards reducing the principal (original loan amount) will remain the same over time as well.

Variable Rate
A variable rate means the percentage of interest that you are repaying will vary based on the changes in the interest rate(s) of the overall market. Typically, fluctuations in your interest rate will not alter your monthly payment, but will vary the amount of your monthly payment that goes towards reducing your principal (original loan amount). This means if overall interest rates go down you will actually be paying off your loan more quickly. On the other hand, if interest rates increase, you will be paying off your loan more slowly. Accepting a variable rate does involve a certain amount of risk but can work to the advantage of the buyer over time.

Open Mortgagevs Closed Mortgage (mortgage types)

Open Mortgage
An open mortgage means that the loan can be paid back partially or in full without incurring any penalties. The mortgage can also be renegotiated if market conditions or your financial situation shift. Although an open mortgage provides more options and opportunities for life adjustments, this comes at a cost, as the interest rates for this type of loan tend to be higher. For those able to make larger payments or who plan on selling their home within a short period of time; however, an open mortgage can be a solid choice.

Closed Mortgage
The advantage of a closed mortgage is that the interest rates tend to be lower, but options are limited. Typically a homeowner may make extra payments or larger payments as long as the sum of the payments does not exceed a set amount determined in the loan agreement. Payments exceeding the agreed upon amount; however, would incur penalties.

Although most buyers will elect to choose a closed mortgage, there are advantages to choosing the open mortgage. For instance, if market conditions are expected to change, the type of mortgage should be balanced against the type of interest rate so that as the buyer your needs are .

Best Mortgage Rates Prince Edward Island

No matter which province or territory you reside in, finding the best mortgage ratecan save you thousands of dollars. Obviously, there are not many people who can purchase property without taking out a home loan. Taking out a home loan lets you buy, live in and/or use a home without needing to come up with the full dollar amount at the time of purchase. Usually the amount of the loan is equal to the majority of the home’s worth, but the downfall of this is that you will be required to pay interest on the loan. Most lenders insist on a down payment, i.e., a payment equal to a portion of the property’s worth. For instance, if a home is worth $200,000 and the buyer would need to make a down payment of 10%. This would equal a $20,000 down payment ($200,000 x 10%). To make up the balance, the lender would loan you $180,000 ($200,000 minus the $20,000 down payment).

When you are dealing with interest rates on large amounts of money even a variance in interest rates as small as an eight of a percent can make a significant difference in the amount you will be required to repay. Typically the interest is also calculated over long periods of time, which puts even more emphasis on securing the best rate possible. To make things more complicated there are also different rate and mortgage rates. This can make it difficult to determine whether you are comparing apples to apples or apples to oranges.

Interest rates can vary widely even from day to day so locking in on the best rate is extremely important. One of the easiest ways to do this is to enlist the help of a mortgage broker who can act as an entry way to a variety of lending institutions – banks, credit unions, etc. Mortgage Rate Comparison website like Ratesheet.ca could help you get the best mortgage rates and save you thousands of dollars. Its is advised that you compare mortgage rates before you lock in with any lender.

A potential buyer also needs to understand how much is a reasonable amount to borrow as well as the implications of payment frequency.