Banking on lower rates

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Daryl Harris says banks could drop their prime lending rates again in March. (BORIS MINKEVICH / WINNIPEG FREE PRESS)

And those same homeowners could be laughing right out loud if the banks drop their prime lending rates by another half a percentage point in March, as mortgage broker Daryl Harris of Verico One Link Mortgage & Financial expects.

Harris said that would reduce the interest rate on variable-rate mortgages signed before last October to an even more eye-popping 1.5 to 1.9 per cent.

Harris was commenting after a Toronto-based mortgage specialist told the Winnipeg Realtors Association's third annual housing-forecast breakfast that the rates on all types of mortgages -- everything from variables to five-year fixed rate -- are heading down to at least 50-year lows. Will Dunning, chief economist for the Canadian Association of Accredited Mortgage Professionals, said in an interview the discounted rate on five-year fixed mortgages -- still the most popular type -- could drop to as low as 4.25 per cent by the end of this year from the current 4.8 per cent. And he predicted variable rate mortgages could drop to as low as three per cent from 4.5 per cent.

But Harris noted that would be the rate for variable rate mortgages taken out since last October. That's when the banks changed the standard rate to prime plus 0.6 per cent instead of the previous prime minus 0.6 per cent, because of the worldwide credit crunch.

He said variable-rate mortgages signed before then will remain at the old rate until their term expires. And in most cases, the term was for five years and the rates were prime minus 0.6 per cent or, in some cases, even prime minus one per cent. "Those people sitting on a prime-minus mortgage are in a great position, because they'll have more money going toward their principal (and less toward interest)," he said.

Dunning was one of four guest speakers at Tuesday's breakfast session, which drew more than 300 people. The others were Destination Winnipeg CEO Stu Duncan, WRA residential market analyst Peter Squire, and WRA commercial division president Don White.

Duncan and Squire predicted the local real estate market will continue to benefit from Winnipeg's economic strength during this recession, compared with most other North American cities. White said it should also be another good year for commercial real estate, although maybe not quite as good as 2008.

Dunning said although house sales and prices are plummeting in many Canadian cities, unit sales in Winnipeg should hold steady for the next two years at about 12,000 units a year. And the average selling price should still increase by 5.2 and 5.7 per cent respectively.

murray.mcneill@freepress.mb.ca

Forecasts calling for sunny skies ahead

Experts were asked to predict what might happen on the local real estate and economic front in 2009. Here's what they had to say:

On the economy: Destination Winnipeg CEO Stu Duncan said one of the country's leading economic forecasters -- the Conference Board of Canada -- is predicting Winnipeg will rack up the third-highest real GDP growth among 27 Canadian cities in 2009, at 2.5 per cent. "While 2009 will be a tough time nationally, Winnipeg and a handful of other cities will be skating around the recession," the head of the city's economic development and tourism agency said.

On sales of existing homes: Peter Squire, residential market analyst for the Winnipeg Realtors Association, said Winnipeg could be looking at anywhere from no change to a five per cent decline in unit sales in 2009. Wilf Dunning, chief economist for the Canadian Association of Accredited Mortgage Professionals, predicted sales of existing homes in Winnipeg will hold steady for the next two years at about 12,000 units a year. "Manitoba really is an exceptional housing market," he said.

On average selling prices: Squire said Winnipeg is looking at anywhere from no change to a two per cent increase in 2009. (The average selling price in 2008 was $206,213). Dunning is forecasting price increases of 5.2 per cent this year and 5.7 per cent in 2010. That, too, will buck a national trend of declining house prices, he said.

On Winnipeg's commercial real estate market: Don White, president of WRA's commercial division, said the market should enjoy another good year in 2009, although maybe not as good as 2008 when more than $300 million worth of sales transactions were completed.

-- Compiled by Murray McNeill

Republished from the Winnipeg Free Press print edition January 22, 2009 B5