BY PAUL BIANCHINA, Inman News®

The sun is peeking out and the plants are starting to blossom, so it must be about time for spring chores again.

Here's my annual spring checklist of important issues to tend to around the house.

1. Roofing repairs:

If you suspect winter storms may have damaged your roof, it needs to be inspected. (If you're

not comfortable with the height or steepness of your roof, hire a licensed roofing contractor for the inspection.)

Look for missing or loose shingles, including ridge-cap shingles.

Examine the condition of the flashings around chimneys, flue pipes, vent caps, and anyplace where the roof and

walls intersect. Look for overhanging trees that could damage the roof in a wind storm, as well as buildups of

leaves and other debris.

If you have roof damage in a number of areas, or if older shingles makes patching impractical, consider having

the entire roof redone. Also, remember that if the shingles have been damaged by wind or by impact from falling

tree limbs, the damage may be covered by your homeowners insurance.

2. Check gutters and downspouts:

Look for areas where the fasteners may have pulled loose, and for any sags in the gutter run. Also, check for water

stains that may indicate joints that have worked loose and are leaking. Clean leaves and debris to be ready for

spring and summer rains.

3. Fences and gates:

Fence posts are especially susceptible to groundwater saturation, and will loosen up and tilt if the soil around

them gets soaked too deeply. Check fence posts in various areas by wiggling them to see how solidly embedded

they are.

If any are loose, wait until the surrounding soil has dried out, then excavate around the bottom of the posts and

pour additional concrete to stabilize them. Replace any posts that have rotted.

4. Clear yard debris:

Inspect landscaping for damage, especially trees. If you see any cracked, leaning or otherwise dangerous

conditions with any of your trees, have a licensed, insured tree company inspect and trim or remove them as

needed.

Clean up leaves, needles, small limbs and other material that has accumulated. Do any spring pruning that's

necessary. Remove and dispose of all dead plant material so it won't become a fire hazard as it dries.

5. Fans and air conditioners:

Clean and check the operation of cooling fans, air conditioners and whole-house fans. Shut the power to the fan,

remove the cover and wash with mild soapy water, then clean out dust from inside the fan with a shop vacuum --

do not operate the fan with the cover removed.

Check outdoor central air conditioning units for damage or debris buildup, and clean or replace any filters. Check

the roof or wall caps where the fan ducts terminate to make sure they are undamaged and well sealed. Check

dampers for smooth operation.

6. Check and adjust sprinklers:

Run each set of in-ground sprinklers through a cycle, and watch how and where the water is hitting. Adjust or

replace any sprinklers that are hitting your siding, washing out loose soil areas, spraying over foundation vents, or

in any other way wetting areas on and around your house that shouldn't be getting wet.

7. Check vent blocks and faucet covers: As soon as you're comfortable that the danger of winter freezing is over,

remove foundation vent blocks or open vent covers to allow air circulation in the crawl space.

While removing the vent covers, check the grade level around the foundation vents. Winter weather can move soil

and create buildups or grade problems that will allow groundwater to drain through the vents into the crawl space,

so regrade as necessary. Remove outdoor faucet covers. Turn on the water supply to outdoor faucets if it's been

shut off.

8. Prepare yard tools:

Replace broken or damaged handles, and clean and condition metal parts. Tighten fittings and fasteners,

sharpen cutting tools and mower blades, and service engines and belts in lawn mowers and other power

equipment.

9. Change furnace filters:

Now is the time to replace furnace filters that have become choked with dust from the winter heating season. This

is especially important if you have central air conditioning, or if you utilize your heating system's fan to circulate air

during the summer.

10. Check smoke detectors:

Daylight Savings Time snuck up early again this year, and that's usually the semi-annual reminder to check your

smoke alarms. So if you haven't already done it, now's the time. Replace the batteries, clean the covers, and test

the detector's operation before it's too late.

If you have gas-fired appliances in the house, add a carbon monoxide detector as well (or check the operation of

your existing one). CO2 detectors are inexpensive and easy to install, and are available at most home centers and

other retailers of electrical parts and supplies.

By Amy Fontinelle, Investopedia

Many homebuyers think that purchasing a brand-new home is smarter than purchasing a "used" home. A new

home's maintenance costs should be minimal; its construction materials, systems and appliances should be up-

to-code and energy efficient; the floor plan and amenities should meet the needs of modern buyers and the home

should be move-in ready. A new construction also has an emotional appeal for buyers who like the idea of living in

a home that's completely clean and potentially perfect.

What many buyers don't realize is that new homes often have numerous hidden costs. If you're considering a new

construction, here's what you should look out for to make sure you're spending your money wisely and you don't

experience any unpleasant surprises.

Hidden Defects

Just like an older home, a brand-new home can have hidden defects (also called "latent defects") that require

expensive repairs. Heavy rains can reveal inadequate waterproofing or grading that leads to leaks or flooding in

your home. A weak slab could crack. Siding could fall off. The wood floors could warp. Your toilet could overflow.

Electrical wiring could be done incorrectly. Any problem that you might be afraid to find in an older home can also

appear in a brand-new home.

To protect yourself, research the builder's reputation and don't skip a thorough inspection by an independent

home inspectorwho is not affiliated with the builder. Ideally, you would have one inspection after the home has

been constructed but before all the finishes have been put in, when some problems are easier to identify, and

another inspection just before your loan closes and you take possession.

Also, find out what kind of warranty the home comes with and read it carefully before you buy the home. You

may have to rely on that warranty if any latent defects pop up, because your homeowners insurance policy may not

cover them. Different aspects of the home may be covered for different lengths of time, so make sure you're aware

of those limitations and report any problems to the builder as soon as you notice them.

Missing Necessities

New homes often don't come with everything you need. It's quite common for them to lack fences, decks, window

coverings, appliances, landscaping and other essentials.

Each of these missing items can be a major added expense. Before you make an offer, note what's missing and

do some research to figure out how much these items will cost. Make sure to factor these purchases into your

budget. If you can't afford to pay for them out of pocket, getting the builder to pay your closing costs might free

up the cash you need for blinds, sod and a washer and dryer.

If that doesn't work, look for a new home that comes with all the essentials, or consider a property that's almost

brand new and is just lived-in enough that the previous owner has installed all the missing necessities.

Pricey Upgrades

The showy model you'll tour will typically have all the upgrades the builder offers, from hardwood floors and granite

counters to bay windows and oversized bathrooms. Seeing what you could have can lure you into spending

significantly more than the base price that originally attracted you to the community. The price difference between

the base model and the model with all the bells and whistles can be tens of thousands of dollars.

Also, if you buy the upgrades through the builder, you might pay an upcharge and have a limited selection

compared to doing the upgrades yourself. You also have to consider the future resale value. Choose finishes that

will appeal to a wide variety of buyers and pick options that won't make your home over- or under-improved

for the area.

Some builders do include upscale features in the standard model and factor them into the base price. Just make

sure you know what you're looking at before you tour a home and fall in love with something you can't afford.

Uncertain Future

In a new community, you don't really know what you're buying into. Who will your neighbors be? What will get built

on that vacant land? How good will the new school system be? How will these unknowns affect your quality of life

and your home's resale value? "New construction" is not a synonym for "low crime," "friendly neighbors" or

"excellent education."

It's OK to take a chance on these unknowns--just realize that you're taking a chance. Conditions can change in

established neighborhoods, too, but a well-established area might give you a better idea about what life will be

like in your new home.

Lack of Representation

When you buy a new construction, you shouldn't walk into the sales office unarmed. The builder's sales agent

represents the builder--not you--and any financing the builder may have arranged will not necessarily be the best

available financing. Get your own agent and your own lender to make sure you get the best price on the

home and the lowest interest rate and fees on your mortgage.

Conclusion

Don't make any assumptions about what you'll be getting if you buy a new home. Buying a new home can be more

expensive and come with many more uncertainties than you bargained for. However, if you prepare for the

experience, you'll know how to watch out for your best interests and spend your money wisely.

By Thomson Reuters, Financial Post - April 4 2012

Canada’s finance minister said on Wednesday he would rather not tighten mortgage rules again to curb high

household debt and that banks themselves are taking on that job by becoming more strict with their lending

criteria.

Jim Flaherty said he has seen signs of moderation in the Toronto condominium market and expects to see a

similar trend in Vancouver, one of the country’s hottest real estate markets.

“Part of that is based on what I’m being told by people who build condominiums, and also what I’m being told by

some of our banks about their standards becoming more stringent with respect to their loans for condominium

development,” Flaherty told reporters in Vancouver after making a speech there.

Flaherty said it was up to markets to “fix” the housing and debt problem, not the government.

“I’ve tightened up the mortgage insurance market three times … I really don’t want to do it again,” he said.

“And I’m glad that some of the banks – at least one of the bank executives yesterday indicated that he agreed that

actually the banks should exercise prudence and not rely on government to do it for them,” he said.

Bank of Nova Scotia Chief Executive Rick Waugh said on Tuesday that the simmering housing market gives

reason for caution, but that it’s up to the country’s banks, rather than the government, to manage the risks of their

massive mortgage portfolios.

Several other bank executives – Toronto-Dominion CEO Ed Clark in particular – have said they would welcome further government moves on mortgages.

The government and central bank have been warning Canadians of the dangers of taking on too much debt,

particularly through mortgages, at a time of historically low interest rates and high housing prices. The ratio of debt

to personal disposable income hit a record high last year and has moderated somewhat since then.

Despite some resemblance to the U.S. housing market prior to the crash, most economists expect a soft landing

in Canada.

Flaherty has tightened rules three times since 2008 in the mortgage insurance market but left them untouched in

the federal budget last week, to the surprise of many.

The budget did propose enhanced supervision of the federal housing agency that issues mortgage insurance.

Flaherty said the banking regulator, the Office of the Superintendent for Financial Institutions, was studying the

matter.

City of Richmond - A Press Release

The strongest real estate markets in the Metro Vancouver

The City of Richmond remains one of the strongest real estate markets in the Metro Vancouver region. An

innovative and ambitious City Centre Area Plan, the arrival of the Canada Line rapid transit service and the

Richmond Olympic Oval are among the catalysts fuelling billions of dollars of new growth in Richmond.

The strong interest in the Richmond real estate market was illustrated by an average 16.5 per cent increase in

property assessments during 2011. The construction value of building permits issued in Richmond in 2010 and

2011 exceeded $1.2 billion.

Richmond's population passed 200,000 in 2011 and is projected to grow dramatically over the next three

decades, with much of that growth centered in Richmond’s City Centre. Richmond is also projecting a 33 per cent

growth in the number of jobs in Richmond by 2041.

The current pace of growth is driven by new high density residential projects concentrated in Richmond's City

Centre. An example of this includes the River Green development near the Richmond Olympic Oval, which will

transform 30 acres of riverfront land into a master planned community. Other major developments are planned for

the Capstan Village area, near the north end of No. 3 Road. Preliminary approval has been given for the first of a

potential 3,000 new residential units that would re-make the northern gateway of Richmond's City Centre. New

development in the Capstan Village will also fund a new Canada Line station to serve the new neighbourhood.

The West Cambie area is another significant redevelopment in the City.

Richmond's growth is not just fuelled by residential growth. Currently, there are proposals for many new hotels in

Richmond under consideration. The largest project ever seen in Richmond, a four million square foot

commercial-office space development, is being proposed for Duck Island, immediately west of the River Rock

Casino.

Outside of the City Centre, YVR is planning significant new development on its lands on Sea Island. This includes

Canada Post's new regional sorting centre, which should bring over 1,200 jobs. Port Metro Vancouver also plans

continued expansion in southeast Richmond, which will be supported by a newly-opened Highway 91 interchange

that greatly enhances traffic access to those lands. With some of the last remaining large parcels of industrially-

zoned lands with waterfront access in the region, Richmond’s port lands continue to be in high demand.

Richmond's future is bright. To find out more about Richmond, visit our website at www.richmond.ca or contact our

Economic Development Office at 604-276-4000.

How to win a real estate bidding war

By Mark Weisleder, real estate lawyer in Toronto 

With fewer sellers and high demand for housing in the GTA, bidding wars are back as the spring market gets

under way. But for buyers these auctions are stressful and fraught with dangers, not the least of which is that you

may end up paying too much for a house and go on to regret it.

Here are some things that can help you come out ahead:

1.Research the area to get the low down on the neighbours, schools, parks, demographics and crime rate.

2.Visit with your lender or mortgage broker in advance to get a clear understanding as to what you can afford to

spend in order to buy a property, without having to dramatically change your standard of living.

3.Work with a professional sales person. You need to know the real market value of properties. Many sellers

deliberately list their property at 5 to 25 per cent below market value to bid it up.

4.Conduct a home inspection before submitting the offer, so you can make an offer without conditions. Sellers

prefer this.

5.Do not participate in a faxed offer process. Always insist on having your agent present in person.

6.Put in a deposit with your offer of at least 5 per cent of the price, to demonstrate you are serious. If possible, use

a bank draft.

7.Bid later in the day and give the seller a shorter time to deal with it. That way they will not have the time

generate offers from other buyers.

8.Offer to close the deal faster.

9.Market yourself and your family. Many sellers do care who will be living in their home and taking care of it after

they leave. Explain how you and your family will do this.

10.Be flexible. Offer to close the deal early, but perhaps let the seller stay there for a few weeks, rent free, to more

easily arrange their own move.

11.Know your limit and do not budge from it. Do not get carried away. It is better to walk away and try again on

another property than to seriously overpay.

12.In some cases, sellers indicate they will not accept any offers for two to three days. Bring your offer in early as

the seller will usually want to see it anyways and this may give you an advantage.

13.If you are suspicious about whether there is a competing offer, consider inserting a clause that states that if the

seller does not receive another offer, you will have the option to either cancel or revise yours.

Bidding wars are emotional and stressful. By being properly prepared, you have the best chance of succeeding.

Telus’s Vancouver condos fly off the market

FRANCES BULA - The Globe & Mail

Telus has sold out the first condo development it has ever built, before a planned formal launch in mid-April,

making it the second large Vancouver project to sell out almost instantly in the past month.

“We were tremendously surprised by the interest. It’s been really gratifying for us,” said Andrea Goertz, senior vice-

president for strategic initiatives at the telecommunications company. “I think it speaks to the building’s technology

features, sustainability features and public plaza.

But industry experts say that doesn’t necessarily mean that condo or general real-estate boom times are back.

Instead, they say, it is projects that are close to transit that are winning out.

“Transportation is the new green,” said Tracie McTavish, president of Rennie Marketing, which sold the PCI Marine

Gateway project’s 415 units in a public launch mid-March.

That’s why projects like Marine Gateway, a tower that will be part of an office and entertainment complex at the foot

of Cambie next to a Canada Line station, and Telus Garden, with 428 units in a 53-storey tower a block from

Vancouver’s key downtown intersection, are being gobbled up at a rate not matched elsewhere in the region.

“Some of the more outlying developments aren’t seeing that kind of interest,” said Don Forsgren, president of the

Urban Development Institute, which represents large builders in the region. “The single-family suburban house

market is pretty flat.”

Also flat are sales in Surrey and the northeast Tri-Cities area and lower-rise wood-frame buildings, said

development consultant Bob Ransford.

“It’s all geographic who’s doing well.”

Recent figures from the Real Estate Board of Greater Vancouver compiled by various real-estate analysts indicate

higher numbers for unsold inventory than past years at the same time.

Local sellers all say that it’s not foreign investors driving the market for the successful projects, but local investors

and people planning to live in the condos themselves.

Ms. Goertz said Telus offered its employees priority in sales at Telus Gardens and 150 of them bought, even

though the price discount was a modest one per cent.

The project’s developers, Telus and Westbank Projects, also didn’t allow anyone to buy more than two units.

Mr. Forsgren, whose company Intracorp sold out a tower instantly at Metrotown in May of last year, said the

company has to track buyers closely because of requirements from FINTRAC, the agency that monitors money

laundering and criminal organizations.

The personal information that had to be submitted for those units showed there were only four offshore buyers.

He said he expects Intracorp’s newest tower, Silver, to get about 50 to 60 per cent investors among the 3,000

buyers lined up for it. That’s similar to what Mr. McTavish said was the ratio for Marine Gateway.

But those investors tend to be local investors, people who are buying something for their children to move into

some day and renting it in the meantime, or people who are looking for an investment that’s more stable than the

stock market appears to be right now.

Affordability doesn’t seem to be necessarily at the top of the list for buyers, either. Mr. McTavish said that half of the

40 high-end units in Canada House West, at the former Olympic village in Vancouver, have already sold in the first

two and a half weeks at “very attractive rates” of more than $1,000 a square foot.

That may push the city of Vancouver, which took over the project from the private developer in late 2010, into putting

the other 20 units in Canada House East onto the market.

Telus has also been successful in nailing down a first tenant for the office component of the Telus Gardens

project. The law firm of Bull, Housser and Tupper has committed as a tenant. That means 70 per cent of the office

space, which will include Telus’s head office, is now leased.

Ms. Goertz said the company is negotiating with several other interested tenants and will be releasing details

about those leases shortly.

Renegotiating your mortgage before the term is up

Expert Contributor: Jennifer Coy | goldengirlfinance.ca

Let's say you have a mortgage with a 5-year term, but you're only 3 years into the term. Do you have to wait until the

full 5 years is up before renegotiating (especially given an appealing lower interest rate environment)?

Mortgage expert, Jennifer Coy, provides the following advice:

There are three different categories of mortgages where pre-payment is concerned:

1)     Open mortgages refer to those mortgages open to full pre-payment at any time, without penalty.

Closed mortgages can be broken down into two very distinct categories:

2)     Mortgages that are closed to pre-payment entirely.

3)     Mortgages that are open to pre-payment within certain guidelines.

Most mortgages in the open market are the latter. So, in most cases, you can pre-pay a certain amount without

penalty. Outside of these terms, you would be responsible for paying a penalty, representing some loss of interest to

the lender.

In the specific case of a 5-year mortgage at a higher interest rate than is currently available, you may benefit from

switching to a mortgage with a lower interest rate, despite the penalty you will pay to break the term early.

The best thing you can do is to read your original mortgage agreement, as pre-payment guidelines must be provided

in writing. If the guidelines are unclear, or you need a hand in calculating what your costs might be, don't be afraid to

ask a mortgage professional. Ultimately, you want to search out the mortgage that is best suited to your current

needs.

By Amy Fontinelle | Investopedia – Tue, 20 Mar, 2012

Before you buy a home, one of the things you should do is to have the home checked out by a professional home

inspector. Buying a home is expensive enough as it is - why would you choose to fork over another $400 if you're

not required to? In this article, we'll delve into what a home inspection can reveal and why you shouldn't forgo this

optional procedure.

The Home Inspection Contingency
Your first clue that a home inspection is important is that it can be used as a contingency in your purchase offer.

This contingency provides that if significant defects are revealed by a home inspection, you can back out of your

offer, free of penalty, within a certain timeframe. The potential problems a home can have must be pretty serious if

they could allow you to walk away from such a significant contract. 

What a Home Inspection Examines
Inspectors vary in experience, ability and thoroughness, but a good inspector should examine certain components

of the home you want to purchase and then produce a report covering his or her findings. The typical inspection

lasts two to three hours and you should be present for the inspection to get a firsthand explanation of the

inspector's findings and, if necessary, ask questions. Also, any problems the inspector uncovers will make more

sense if you see them in person instead of relying solely on the snapshot photos in the report.

The inspector should note: 

• whether each problem is a safety issue, major defect, or minor defect
• which items need replacement and which should be repaired or serviced
• items that are suitable for now but that should be monitored closely

A really great inspector will even tell you about routine maintenance that should be performed, which can be a

great help if you are a first-time homebuyer. 

While it is impossible to list everything an inspector could possibly check for, the following list will give you a

general idea of what to expect.

Exterior 

• Exterior walls - The inspector will check for damaged or missing siding, cracks and whether the soil is in excessively close contact with the bottom of the house, which can invite wood-destroying insects. However, the pest inspector, not the home inspector, will check for actual damage from these insects. The inspector will let you know which problems are cosmetic and which could be more serious.
• Foundation - If the foundation is not visible, and it usually is not, the inspector will not be able to examine it directly, but they can check for secondary evidence of foundation issues, like cracks or settling.
• Grading - The inspector will let you know whether the grading slopes away from the house as it should. If it doesn't, water could get into the house and cause damage, and you will need to either change the slope of the yard or install a drainage system.
• Garage or carport - The inspector will test the garage door for proper opening and closing, check the garage framing if it is visible and determine if the garage is properly ventilated (to prevent accidental carbon monoxide poisoning). If the water heater is in the garage, the inspector will make sure it is installed high enough off the ground to minimize the risk of explosion from gasoline fumes mingling with the heater's flame.
• Roof - The inspector will check for areas where roof damage or poor installation could allow water to enter the home, such as loose, missing or improperly secured shingles and cracked or damaged mastic around vents. He or she will also check the condition of the gutters.

Interior 

• Plumbing - The home inspector will check all faucets and showers, look for visible leaks, such as under sinks and test the water pressure. He or she will also identify the kind of pipes the house has, if any pipes are visible. The inspector may recommend a secondary inspection if the pipes are old to determine if or when they might need to be replaced and how much the work would cost. The inspector will also identify the location of the home's main water shutoff valve.
• Electrical - The inspector will identify the kind of wiring the home has, test all the outlets and make sure there are functional ground fault circuit interrupters (which can protect you from electrocution, electric shock and electrical burns) installed in areas like the bathrooms, kitchen, garage and outdoors. They will also check your electrical panel for any safety issues and check your electrical outlets to make sure they do not present a fire hazard.
• Heating, ventilation and air conditioning (HVAC) - The inspector will look at your HVAC system to estimate the age of the furnace and air conditioner, determine if they function properly and recommend repairs or maintenance. An inspector can also give you an idea of the age of the home's ducting, whether it might have leaks, if your home has sufficient insulation to minimize your energy bills and whether there is any asbestos insulation.
• Water heater - The home inspector will identify the age of the heater and determine if it is properly installed and secured. The inspector will also let you know what kind of condition it is in and give you a general idea of how many years it has left.
• Kitchen appliances – The inspector will sometimes check kitchen appliances that come with the home to make sure they work, but these are not always part of the inspection. Be sure to ask the inspector which appliances are not included so that you can check them yourself.
• Laundry room - The inspector will make sure the laundry room is properly vented. A poorly maintained dryer-exhaust system can be a serious fire hazard.
• Fire safety - If the home has an attached garage, the inspector will make sure the wall has the proper fire rating and that it hasn't been damaged in any way that would compromise its fire rating. They will also test the home's smoke detectors.
• Bathrooms - The inspector will check for visible leaks, properly secured toilets, adequate ventilation and other issues. If the bathroom does not have a window and/or a ventilation fan, mold and mildew can become problems and moisture can warp wood cabinets over time.

Home Inspection Shortcomings
A home inspection can't identify everything that might be wrong with the property - it only checks for visual cues to

problems. For example, if the home's doors do not close properly or the floors are slanted, the foundation might

have a crack - but if the crack can't be seen without pulling up all the flooring in the house, a home inspector can't

tell you for sure if it's there.

Furthermore, most home inspectors are generalists - that is, they can tell you that the plumbing might have a

problem, but then they will recommend that you hire an expert to verify the problem and give you an estimate of the

cost to fix it. Of course, hiring additional inspectors will cost extra money. Home inspectors also do not check for

issues like termite damage, site contamination, mold, engineering problems and other specialized issues.

SEE: 10 Reasons You Shouldn't Skip A Home Inspection

After the Inspection
Once you have the results of your home inspection, you have several options. 

• If the problems are too significant or too expensive to fix, you can choose to walk away from the purchase, as long as the purchase contract has an inspection contingency.
• For problems large or small, you can ask the seller to fix them, reduce the purchase price, or to give you a cash credit at closing to fix the problems yourself - this is where a home inspection can pay for itself several times over.
• If these options aren't viable in your situation (for example, if the property is bank-owned and being sold as-is), you can get estimates to fix the problems yourself and come up with a plan for repairs in order of their importance and affordability once you own the property.

The Bottom Line
A home inspection will cost you a little bit of time and money, but in the long run you'll be glad you did it. The

inspection can reveal problems that you may be able to get the current owners to fix before you move in, saving

you time and money. If you are a first-time homebuyer, an inspection can give you a crash course in home

maintenance and a checklist of items that need attention to make your home as safe and sound as possible.

Don't skip this important step in the home-buying process - it's worth every penny.

Royal Bank raises mortgage rates on both fixed and variable types

By The Canadian Press

TORONTO - Royal Bank (TSX:RY.TO - News) is raising its posted fixed and variable mortgage rates, of between 10

and 50 basis points in a sign the era of ultra low borrowing could be drawing to a close.

The Toronto-based lender said its posted five-year closed mortgage rates will move up 20 basis points to 5.44 per

cent effective Mar. 29, while bank's special fixed rate offer on a four-year fixed rate will add 50 basis points to 3.49.

Meanwhile, the posted five-year variable rate — which rises or falls along with the bank's prime lending rate — will

rise 10 basis points to prime plus 0.20 percentage points.

The prime rate, which usually moves with the Bank of Canada's key interest rate, is currently three per cent.

The moves come after a recent race to the bottom that recently saw Royal and others push their special offer fixed

rate down to 2.99 per cent.

Although variable rates usually follow the lead of the Bank of Canada, longer-term rates are more influenced by

bonds. Higher bond yields increase the cost of funds for lenders, who in turn pass them on to customers.

Government of Canada five-year bond yields have jumped more than 50 basis points in the past three months

alone.

The other banks could soon follow RBC's move in raising rates as the big five Canadian banks often move in

lockstep.

In a BMO report Friday, its economists argued that with the U.S. recovering gathering steam, central bankers on

both sides of the border are becoming more comfortable with the economy and less so with historically low

interest rates that in Canada are fanning the flames of the hot housing market.

Both Finance Minister Jim Flaherty and Bank of Governor Mark Carney have recently flagged household debt at a

danger to the economy.

Household debt to disposable annual income is above 150 per cent.

Mortgage war means good news for homeowners

By Gordon Pape | Moneyville

Good news! The mortgage wars are back. Bad news! The mortgage wars are back. It all depends on your

perspective.

If you’re an aspiring homeowner or you want to refinance to pay off back-breaking credit card debt, the latest battle

of the banks for market share is a terrific opportunity.

If you’re Bank of Canada Governor Mark Carney, it’s a slap in the face. You’re the most influential financial person

in the country and you’ve been spending a lot of time during the past two years warning Canadians about the

dangers of their ever-increasing debt levels. And what is the banking oligarchy doing in response? Thumbing their

collective noses at you by encouraging people to take on even more debt!

The latest cat fight for mortgage market share couldn’t have come at a better time for prospective borrowers. The

spring housing season is just starting to heat up and prices stubbornly continue at record highs despite alarm

bells that the bubble could burst any time soon. In this climate, any break on mortgage rates that makes your

dream home more affordable is welcome.

The mortgage market is a Wild West show right now. The banks are aggressively undercutting one another to

build their business before the low-interest window closes. Bank of Montreal kicked off the latest round of rate-

cutting by offering a five-year closed mortgage at 2.99 per cent and an even more eye-popping 10-year rate of 3.99

per cent.

Royal Bank has countered with an “all the frills” four-year fixed rate of 2.99 per cent with amortizations up to 30

years. That translates into a monthly payment of $1,260 on a $300,000 loan. By comparison, at 5 per cent the

monthly carrying cost would be just over $1,600. Royal even offers to pay the switching costs if you move your

business from another financial institution. Talk about dog-eat-dog!

Most other banks are offering similar deals just to stay in the game. For the moment, this is a true buyer’s market

for borrowers but it may not last long. Some of the deals have fixed termination dates (e.g. March 28 for BMO’s 10-

year 3.99 per cent rate). Others could be pulled at any time.

Meanwhile, in Ottawa, Carney must be seething. The last thing he wants to see is Canadians jacking up their

household debt to income ratios even more. But short of intervening directly in the private sector, which he would

be reluctant to do except under extreme circumstances, his hands are pretty much tied.

He’d love to raise the key overnight target rate from its current level of 1 per cent but for the moment he’s a

prisoner of the domestic economy and international forces. The recovery is still fragile and the high loonie

continues to hurt our export markets. Still, you can bet he’ll make a move at the first possible opportunity.

Do you remember in high school when your English teacher would make you parse lines from Shakespeare?

That’s what economists do when the Bank of Canada issues its interest rate statements. They dissect every line,

looking for clues that indicate any subtle shifts in position that might suggest a move up or down in the near future.

They found several such clues in the March 8 announcement that the overnight rate would remain unchanged for

now.

“The heightened uncertainty around the global economic outlook has decreased in the weeks since the Bank

released its January Monetary Policy Report (MPR),” the statement said. “With tentative signs of stabilization in

European bank funding and sovereign debt markets, conditions in global financial markets have improved and

risk aversion has decreased.”

Reduced global uncertainty. Signs of stability in Europe. Global financial markets looking better. Less risk

aversion. Hmm.

The statement went on: “Canadian household spending is expected to remain high relative to GDP as

households add to their debt burden, which remains the biggest domestic risk.”

It doesn’t take an economist to read between the lines here. With the global economy improving and household

debt “the biggest domestic risk” interest rate increases are on the way sooner rather than later.

The U.S. Federal Reserve Board’s pledge to hold its rates at record lows until 2014 is a problem because it

means a Canadian rate increase will probably push the loonie even higher. But Carney may be prepared to live

with that to try to shake the country out of its debt spiral.

So if you are thinking about borrowing money, my advice is to act now. The window may be closing faster than you

think. And here’s another tip. Take the longest low-rate option you can find. You may not see anything like it again

in your lifetime.

Is it time to lock-in your mortgage? Bank of Montreal economists say yes

By Julian Beltrame, The Canadian Press

OTTAWA - The days of super-low mortgage rates that made home ownership dreams a reality of many Canadians

may be numbered, says the Bank of Montreal.

The bank's advice? Say goodbye to variable mortgages and lock in longer-term fixed rates while the going is still

good.

In a report released Friday, BMO economists Douglas Porter and Benjamin Reitzes argue that with the U.S.

recovering gathering steam, central bankers on both sides of the border are becoming more comfortable with the

economy and less so with historically depressed interest rates that in Canada are fanning the flames of the hot

housing market.

Already, financial markets have priced in a close to 50 per cent chance that Bank of Canada governor Mark Carney

will start hiking his one per cent policy setting before the year's end, they note.

"We just believe the tide on some of these longer-term interest rates is beginning to turn," explained Porter, the

bank's deputy chief economist.

"You can get a five-year rate for 2.99 per cent. Today's inflation rate was 2.6 per cent; that's almost unheard of that

you can borrow for basically the cost of inflation. I don't believe it's sustainable."

Both Finance Minister Jim Flaherty and Carney have recently flagged the danger to the economy of Canadians

becoming increasingly indebted, mostly through taking advantage of low rates to buy homes or take out home

equity loans. Household debt to disposable annual income is above 150 per cent and likely to rise further toward

the 160 per cent level that preceded the housing collapse in the U.S., say analysts.

This week, Flaherty expressed some exasperation that banks are calling on him to stop them from making loans

that Canadians may not be able to afford once rates start rising.

And both the Canada Mortgage and Housing Corporation, and the Office of Superintendent for Financial

Institutions issued documents suggesting debt tolerance is being tested.

The BMO economists concede that variable rates have been the best option most of the time. Their report says

variable has been the cost-effective route 84 per cent of the time since 1975.

"But recent rate competition has all but erased the spread between the five-year fixed mortgage rates and variable

rates," they add.

"The bond market, in particular, is sending loud warning signals that the era of low interest rates may finally be

drawing to a close. Government of Canada five-year bond yields have jumped more than 50 basis points in the

past three months alone."

Porter notes that although variable rates usually follow the lead of the Bank of Canada, longer-term rates are more

influenced by bonds. Higher bond yields increase the cost of funds for lenders, who in turn pass them on to

customers.

"So even if variable rates take some time to climb, we may not see such low fixed rates again any time soon," he

said.

In fact, the "special offer" 2.99 per cent five-year rate offered by many banks are due be withdrawn next Thursday.

The report offers several reasons for locking in, including that householders will attain certainty on how much they

will be paying for five years, without worrying what will happen to interest rates.

The case of staying with a variable mortgage is that historically it has saved borrowers money, and given that

inflation is tame, interest rates are unlikely to rise rapidly.

When they do, however, today's low fixed rates are unlikely to be available, say the economists.

"Our interest rate outlook now projects a significant advantage to choosing a fixed rate," they conclude. "While the

decision still depends on the individual, a low rate combined with a shorter 25-year amortization would

significantly strengthen a borrower's financial stability."