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Financial institutions have tossed more fuel onto an already heated housing market by dropping longer-term mortgage rates to record lows.
Industry officials said Tuesday they expect to see an increase in mortgage applications over the next two weeks as homebuyers and homeowners scramble to take advantage of limited-time offers of four- and five-year mortgage rates as low as 2.99 per cent and a 10-year rate as low as 3.99 per cent.
Some shorter-term mortgages are available for as little as 2.24 per cent.
"That's as low as I've ever seen mortgage rates in my 33 years in this business," Gerry Campbell, executive vice-president of sales and services with Assiniboine Credit Union (ACU), said Tuesday.
This isn't the first time a five-year mortgage has dropped as low as 2.99 per cent. It did for a two-week period in January, as well, before moving back up to between 3.19 per cent and 3.29 per cent at many institutions.
But this latest rate cut comes as the mortgage and housing markets are gearing up for what is usually their busiest time of year -- spring home-buying season.
And because most institutions are willing to lock in rates for 60 to 90 days, Campbell said they should make this year's spring market even busier than usual.
Campbell said not only does he expect to see more first-time buyers jumping into the market, but also more homeowners renegotiating their mortgages to either get a lower rate, or to consolidate household debts.
He said one thing that might limit the uptake here is the tight supply of resale homes on the market.
He and Daryl Harris, an accredited mortgage broker with Verico One Link Mortgage & Financial in Winnipeg, noted mortgage rates were already at 30-year lows, even before last week's cuts. So demand for houses and mortgages was already brisk.
First-time homebuyer Elisha Rae Ewonchuk had already taken the plunge before this latest round of cuts. She landed a 900-square-foot bungalow in Transcona about three weeks ago after four unsuccessful bids on homes.
Ewonchuk, a mortgage broker with A+ Financial Services, said she's happy with the three-year rate she got from ACU at 2.84 per cent.
She said even if it had been available, she wouldn't have taken the five-year term at 2.99 per cent because she didn't want to lock herself in for that long.
"I wanted to kind of review things sooner than five years, in case my situation changes," she said.
Marcel Michaud, a real estate agent with Century 21 Carrie.com who owns rental properties in the city, said he has a mortgage that's up for renewal and hopes to take advantage of the new rates.
"If I get offered a four- or five-year term at 2.99 per cent, I'll take it," he said. "That sounds like a great deal."
As was the case in January, it was the Bank of Montreal that sparked the latest round of mortgage-rate wars by reviving its earlier offer of a five-year rate at 2.99 per cent and 10 years at 3.99 per cent. Other financial institutions quickly responded by lowering their four-year rates to 2.99 per cent.
Laura Parsons, BMO's manager of mortgage sales for Manitoba and Calgary, said 2.99 per cent is the lowest rate ever offered for a five-year mortgage. The bank's posted rate for a regular five-year term is 5.24 per cent.
The reason the rate for this no-frills mortgage is so low is because it's for a 25-year amortization, instead of the usual 30 years most institutions are offering.
"A lot of our clients wanted this product because they want to get out from under their mortgages as quickly as possible," Parson said, noting they not only can pay it off five years earlier, but save $70,000 in interest.
The Conference Board of Canada predicted Tuesday housing starts in Canada will moderate over the next two years as waning consumer confidence overshadows low mortgage rates.
It said exceptionally low interest rates are still enticing consumers to buy houses and are probably supporting prices, but it observed the lower rates "won't last forever."
Low borrowing rates have propped up demand for houses since the recession and the Conference Board expects them to remain low for the next 12 to 18 months.
-- with files by The Canadian Press