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AuthorSteve Garganis

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.
Posted Mortgage Rates

Banks slow to lower rates…but quick to raise them

Some things never change…..On Oct 19th, 2010, the 5 year Canadian Bond yield was 1.85%… It fluctuated up and down but staying below 2.00% until Nov 5th when it closed at 2.053%…  We were expecting the Banks to adjust their Fixed rates downward but it didn’t happen..

Since then, it has kept above 2.00% and is currently at 2.27%….  This increase in the Bond yield usually means Fixed Mortgage Rates will go up..  See the chart here.

But earlier this week, the Big Six Banks lowered their posted 5 year mortgage rate to 5.19% from 5.29%…  This is just a delayed reaction the low bond yields.. but it just goes to show that the Banks continue their pattern of reacting slowing to lowering rates but move like Formula 1 race car to raise rates..

Of course, Posted Mortgage Rates really don’t mean much as the Wholesale Market or Broker Market deals with the true rates.. And Fixed rates dropped late last week to their lowest levels ever. … 5 year fixed rates are now at around 3.49%… with some Lenders even offering 3.39%…  WOW!

Watch for Fixed rates to move upward slightly as the Bond yield is now high enough to warrant an increase…

Posted Interest rates

How will the high $Canadian dollar affect mortgage rates?

The Canadian dollar is just about at par with the U.S. dollar…  The BMO Economist sums it up well when he says “Generally speaking, from a stronger currency, consumers win and producers lose.”  As quoted in the Vancouver Sun.

And a high Canadian dollar means the Bank of Canada is less likely to increase the Target Rate which affects Variable Rates…  Any move by the Bank of Canada upwards will only drive the Canadian dollar higher…
A high Canadian dollar hurts our exports as they become more expensive for other countries to buy…  and we will probably see more cross border shopping as our strong $CAD will have more buying power…
Bottom line is that Variable Rates appear to be safe for now… enjoy the low rates…

 

Posted Mortgage News

Annual Mortgage borrowing stats are strong

The Canadian Association of Accredited Mortgage Professionals (CAAMP) released it’s Annual State of the Residential Mortgage Market in Canada, today.   The stats show that mortgage defaults are not a concern….and Canadians can absorb up to another $300/mth in higher mortgage costs…and we have 72% equity in our homes… wow, that’s quite impressive….

I’m amazed at how the media is reporting these stats… look at this headline “Canadian Mortgage Debt tops $1-Trillion for first time”. Well, here are the highlights of the report… the numbers look good to me…

• 35% of all mortgage holders have either increased their payments or made a lump sum
payment on their mortgage in the last 12 months
• Vast majority of Canadians have ability to afford higher mortgage payments. 84% said
they could handle monthly increases of $300 or more in their monthly payments
• 90% of Canadian homeowners have at least 10% equity in their homes, 81% have over
20% equity
• 70% of Canadians are satisfied with their mortgage terms
• Despite low Bank of Canada interest rates reflected in low variable rate mortgages, a
majority (66%) of Canadians still have a five year fixed mortgage, 29% have variable
mortgages and 4% a combination
• Overall, 22% of mortgages have an amortization of greater than 25 years compared to
18% last year
• Overall home equity is 72%. For homeowners with mortgages, equity level averages
50%
• Mortgage rates continue to drop. Average mortgage rate is 4.22% versus 4.55% last
year. For those who took out a mortgage in the last year, the average rate was 3.75%,
72% of those renewing saw a decrease in their mortgage rate
• Overall, mortgage brokers account for 25% of all mortgages and for new mortgages in the
past year, this number rises to 40%
• As of August 2010, there was over $1 trillion in outstanding residential mortgage credit in
Canada
• Mortgage arrears rate remains stable at 0.42%, lower than for most of the 1990s

Posted 1 Comment on Debt consolidation… it’s not a dirty word Consumer Debt

Debt consolidation… it’s not a dirty word

What’s the first thing you think of when someone says ‘debt consolidation’?  Trouble… or, you can’t pay your bills…cashflow problems… We probably all think there is some financial problem..

Sure, that’s the popular reaction…and who can blame us for thinking that way with the recent media hype about Personal Debt concerns…  One day we have an article saying that Personal Debt levels are high or increasing… The next day, Canadians are conservative and managing our debts well.  This flip-flop would confuse anyone.  click here for some articles from earlier this year.

But debt consolidation can actually be a good thing most of the time…  And that time is now.  You’ve heard of ‘buy low and sell high’… Well in credit, you ‘borrower when rates are low to save high amounts of money’…

With record low interest rates it makes sense to borrow….If you own a home, have some equity and have some non-mortgage debt, such as credit cards, a car loan, a student loan, a line of credit, etc…  These debts probably carry a higher rate of interest than what you could get through a mortgage…  Debt Consolidation is a smart thing….paying less interest puts money in your pocket.

Here’s a good calculator to figure out how much you can save…DEBT CONSOLIDATION CALCULATOR.

Use these rates for comparison…Mortgage rates are well under 4.00% today… a 5 year fixed rate is somewhere around 3.59% and Variable rates are around 2.25%…  compare this with 12% to 18% credit cards, 6% lines of credit, 7% car loans, etc… Rolling these debts into a mortgage is not a bad thing, it’s a smart thing.   Paying less interest just makes good financial sense.

And as always, speak with someone who knows and understand financial matters… talk with a qualified Mortgage Broker or Financial Planner….

Posted Mortgage News

Taking a look at Reverse Mortgages

Retirement means different things to different people.   One thing we can all agree on is that we don’t want to run out of money…

Reverse Mortgages seem to be gaining some attention in the media again…. I thought it might be worth bringing or sharing some thoughts… here’s a recent article.

A Reverse Mortgage will give a lump sum of cash or monthly payments for life or a combination of both… it’s all tax free money…. Ok, that does sound good..

But upon closer inspection, we see that the interest rate is around 2% to 3% higher than what you can borrow money at for similar fixed rate products.  5.90% vs. 3.50%. Remember, you are borrowing money and NOT paying it back.. the interest just accumulates and compounds…   there are also appraisal fees, administration fees, legal fees… and if you want to sell your home and pay this off, you face huge penalties that could range from 11 months worth of interest to 4 months of interest….Yikes!

Another alternative would be to borrow a secured line of credit at Prime plus 0.50% with interest only payments…. currently, that rate would be 3.50%….

I remember when these products came out in the mid ’90s.. they were horrible… they have changed and rates are a little better, but my advice is talk with a qualified Mortgage Broker or Financial Planner before making any decision…

My last thoughts… I wouldn’t put my parents into one of these products…..