Bank of Canada leaves Key Rate unchanged

This morning marked the fourth of eight scheduled meetings for 2011 by the Bank of Canada.  No surprises, the BOC left the rate unchanged. This keeps the Bank Prime rate at 3.00% and keeps those Variable rate mortgages well under 3.00%.  Great news for borrowers.

In their press release, the BOC noted concerns about the high Canadian $dollar… increasing the BOC rate would probably mean an even higher $CAD, putting more pressure on Canada’s exports.   The  $CAD is currently $1.02US.  Still, the BOC is concerned about inflation and keeping inflation within the Target Zone of between 1.00% and 3.00% has always been one of the biggest factors that drive BOC policies.   “…inflation expectations remain well-anchored.”

The next BOC meeting is July 19… right now, it does not appear as though we will see any hikes until September or later…

Spring market means lower mortgage rates..and some more creative financing.

A funny thing happened on our way to higher interest rates….  They did an about face and went down.

Fixed Rates

The bond market drives fixed rates… and the 5 year Govt of Canada bond market has come down around 50bps in the last month…  So far, we have seen lenders reduce fixed rates by around 30bps… We are seeing 5 yr fixed rates in the 3.89% from some better lenders… and we could see a few more drops.

But we are also seeing some very interesting programs for cashback deals that are worth a look at….there is a 5 year fixed rate at 4.29% with a 2% cashback.. this one is worth looking at as it puts some cash in your pocket and gives you a good rate…

Variable Rates

Fixed rates are good for those that don’t want to worry about rates going up or down and don’t mind paying a little more for the security of fixed payment.  But we can’t ignore the lower variable rate mortgages… still hovering around 2.25%…

Earlier this year, most Economists and Experts believed the Bank of Canada was going to raise the rate at their next regular meeting on May 31st.. but with weak economic data coming out of the U.S., Europe and even Canada, most now believe the Bank of Canada won’t move until September or even next year in January.

Historically, Variable rate has outperformed Fixed rates…the product choice depends your risk tolerance, goals and objectives….

Govt program makes solar power a cost effective option.

We’ve heard about ‘green’ programs for some time now.  I thought we’d take a look at one of these programs… this one is of particular interest to me as I am considering participating with my house.

It’s called the Microfit program.   I’m looking specifically at the residential program…The deal is this.  You install the solar panels on your roof.  The solar panels produce electricity. The electricity is then sold back to your hydro provider…and here’s the real carrot…the Ontario Provincial govt will guarantee to buy the electricity from you for 80.2 cents Kwh for 20 years!!!...

Why is this good?  Currently, the price of electricity costs us between 6 cents and 10 cents Kwh depending on when you use your electricity…  (peak and off-peak hours…. another cash grab from our govt but that’s a discussion for another day).

So, if you haven’t figured it out yet,  you are making a profit of around 70 cents per Kwh….  They say you can produce around 10,000 Kwh per year… it depends on how much sun your roof gets.  That means you could potentially earn around $8,000 to $9,000 per year.  And the reason for the huge payout is to encourage homeowners to take part in green renewable energy.

So what’s the catch?   The panels are not cheap… look to pay around $40,000 for the panels…. And that’s why the govt is paying out 80.2 cents Kwh… to entice you..  You also have to apply to get approved for the Microfit program.  And like so many govt programs, it’s not an easy process.  An application must be completed. A sun/shade test is done to see if your roof can produce enough electricity.  If that works, then you need to apply to your local Hydro provider (Toronto Hydro, etc) and they will also need to accept your application to supply electricity to their grid.

I’ve only done some preliminary research and prices seem to be dropping as technology and more competitors get into the market.  $40,000 is not a small investment but definitely worth looking into with a 20 year guarantee from the govt at 80.2 cents Kwh.   Then there’s the environmental reasons…It’s green, renewable energy… we all want that… Eventually you could be right off the grid and supply your own energy.

Some words of advice…. with a Provincial election coming up this fall, this program could get taken off the table…Look for a reputable Solar energy company and get referrals.  If it sounds too good to be true, then it probably is.  Stay away from companies that say they will give you the panels for free and pay you 15% of the energy produced.  The govt recently stopped allowing the leasing of residential space.

By the way, the PC govt says they would scrap the Microfit program if elected…but they would have to honor existing agreements…

TD is not able to accept collateral mortgage transfers.

Last October, we reported one of the biggest changes by a major bank in recent history…. TD Canada Trust changed how they would register mortgages…  Quietly, TD announced they would now register all mortgages as a collateral charge…  Most borrowers won’t know what the difference is, but for us in the financial industry, we know this will have huge ramifications and limitations and could end up costing the average borrower $$thousands.   Click here to read what the experts say.

And then in December, we heard a rumor that TD was looking at ways to transfer in collateral mortgages…. They wanted to give us the impression that there were few limitations to taking a TD mortgage… uh, let me say that again… that’s TD collateral mortgage.

We just heard that this has been put on the shelf.   They just can’t figure out a way to transfer in collateral mortgages…  If this doesn’t make you think twice about taking a TD mortgage, then I don’t know what will.   I’ve never heard of any bank accepting a collateral mortgage for transfer……Just isn’t possible with today’s real estate and mortgage laws.

Oh and by the way, if you’re wondering.. TD will allow you to transfer in your mortgage from any other financial institution…  But be warned, once you are there, I think you’ll have a hard time getting out.

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