An outlook for the future

As British Columbia gets ready to host the 2010 Winter Olympic and Paralympic Games, the province’s economy is preparing for a burst of economic activity, according to an RBC Economics report published in December 2009.

“The Games should give a big boost to tourism, retail trade and a variety of other services that will help move B.C.’s economy into recovery mode in 2010,” said Craig Wright, RBC’s senior vice-president and chief economist. Signs of a recovery have been emerging in recent months, with retail sales and housing starts trending higher since the spring. A stunning rally in existing home sales, boosted by low mortgage rates, helped the B.C. resale market fully recover in October.

By October 2009, the number of homes sold through the Multiple Listing Service in B.C. and Canada had not only recovered the ground lost during the downturn, but had climbed an astonishing 74 per cent since January to reach an historic high. For Vancouver, strong demand has outpaced the supply of homes for sale, so market conditions have tightened and affordability reduced due to increasing home prices and recent interest rate increases – although slight.

What should this mean to British Columbians? For people who have been timing their entry into the housing market, or for those looking to upgrade their homes, the reversal in affordability trending may be a sign to act. With interest rates still at near record lows, now more than ever, prospective homebuyers should speak to a mortgage specialist and a realtor so they may feel confident about buying a home that they not only love, but one they can afford. In addition, by getting pre-approved, prospective homebuyers can shop with confidence when looking at homes that are within their budget and act quickly and confidently when they find the right home.

One of the biggest decisions homebuyers face is choosing between a fixed or variable rate mortgage. This is not a simple decision today, considering potential rate increases – which is why many people are looking for advice to help them decide which type of mortgage interest is best for them and their personal circumstances. Mortgage rates continue to trend at historic lows, despite the fact that fixed rates have edged up recently. In this environment, people who are comfortable without a guaranteed rate are opting for a variable rate mortgage.

Such a strategy could result in considerable interest savings. What homebuyers choose should depend on how they feel about rate fluctuations and their cash flow. For example, a first-time home-buyer may want assurance that the rate and payment will not change, and may be wise to opt for a fixed rate term.

Today’s flexible mortgage products can help you bridge the gap between these strategies. The RBC Homeline Plan, for example, lets homebuyers split their mortgages and enjoy the advantages of both variable and fixed rates within a credit limit of up to 80 per cent of the value of the home.

(prepared by Kevin Lutz/West Coast Home & Design/Vancouver Sun)