Housing Market Outlook Quebec

Recent economic growth, favourable borrowing conditions and sustained positive net migration will again support new home construction in 2011. As the global and national economic recovery slows, less vigorous household spending and private investment are expected in the province. GDP will grow by 2.3 per cent in 2011 and 2 per cent in 2012.

Demographic factors will continue to sustain the province's housing markets in the coming years. Strong net immigration to the province will continue to have a positive impact on the rental and resale markets. In addition, population ageing will likely prompt older households to re-enter the market in response to their housing needs.

This environment, combined with an easing resale market, will lessen the demand for new homes. Accordingly, 48,000 housing starts are expected this year, followed by 44,500 in 2012.

In Detail

Single Starts: For most of 2010, new construction of single detached homes benefited from the improved economic and financial environment, as well as from the reduced supply of such homes on the resale market. However, the rising popularity of multi-family housing and densification trends will cool this market segment. As a result, close to 17,000 single detached homes will be started in 2011, with a 3 per cent increase expected in 2012 to 17,400 units.

Multiple Starts: Following a strong rebound in 2010, starts of multi-family dwellings will settle back to more sustainable levels over the course of the next two years. Nonetheless, multiple starts will reach 31,100 units in 2011. Given the current supply of condominium apartments on the market, starts of multi-family homes will slow to the 27,100 unit level in 2012.

Resales: Given the weaker start during the first half of this year, MLS® resales will record a lower level of activity than in the previous year. However, resale activity will pick up during the last part of 2011 as the housing stock continues to grow. As a result, close to 77,000 MLS® sales are forecast for 2011 and over 79,000 in 2012.

Prices: Relatively stable demand for resale homes, combined with rising supply, will take some pressure off prices over the course of the next year. With a return to more balanced conditions, price growth in the resale market will moderate over the course of 2011 and in 2012. The average MLS® price is expected to be $251,200 in 2011 and $257,400 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 Mortgage vs 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 Quebec

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.