Another Sign That The Recession Is Coming To An End

Interest RatesFor some time now on this blog, I’ve been warning potential buyers  to watch interest rates.  While sale prices may fluctuate a few percentage points here and there, the interest rates dictate the actual bottom line of what will come out of your pocket each month.  For example, a $200,000 mortgage, amortized over 25 years at 4% would cost $1052.00 per month versus $1163.00 at 5%.  Over a fixed five year term, that’s $6,660.00.  And that’s just 1%.  If you wait for the price to come down another $5,000 on that house or condo you’ve been eyeing, is it worth it if rates go up?

We’ve come through a period now of historic low interest rates.  Up until two weeks ago, you could get a five year, fixed rate of 3.79% on a residential mortgage.  Then last week they crept up to over 4% and yesterday, TD Bank led the way with a fairly significant increase of another 40 basis points.  We can assume other major banks will follow suit as banks face higher borrowing costs on the bond market and, further increases are predicted.

While it may feel like you missed the boat, rates are still excellent comparatively speaking.

average-interest-rates-since-1951-chart-using-june

My friend and mortgage broker, Michelle Reichart over at Invis sent me this chart the other day.  It shows the average interest rate for the month of June each year since 1951.  You may be surprised to realize that the average of all these rates is 9.08% up to 2008 (shown in last column) and 2009 is not included in the chart.  So despite the recent rate increases, we’re still well below average levels.

Caveat:  With these increases, even the banks are signalling a belief that the recession is coming to an end.  Rates will go up.  It’s almost a sure bet so think twice if you are still on the fence about buying.


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About Marg

is an award-winning real estate Broker who has successfully been helping people move since 1989. When it’s time for a move in or out of a bigger, smaller, better, more expensive, less expensive, newer, older, house, condo, farm, investment property, vacant lot or business, talk to Marg.

This entry was posted by Marg on Wednesday, June 10th, 2009 at 9:03 pm and is filed under Buying Real Estate, Money Matters. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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