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CategoryInterest rates

Posted Consumer Debt

Rising personal debt levels.. but how about rising asset levels?

net worthEver notice how all economic news is bad?  Seriously, when was the last time you heard Canadians were doing well, financially?   Even when we came out of the October 2008 U.S. sub-prime mortgage crisis (notice I’m very specific about the cause of that recession) with flying colours, we kept seeing the same negative messages about how lucky we were to come out of this as strong as we did.

But here we are, 5 years later (hard to believe it’s been 5 years) and all we keep hearing and reading is how the economy is fragile… the housing bubble is coming… personal debt levels are at record highs…  housing affordability index has increased (this measures how much of your income is used for housing)…   This all sounds terrible and depressing.. maybe we should sell everything, move to another country and herd sheep? Continue reading “Rising personal debt levels.. but how about rising asset levels?”

Posted Interest rates

Real estate sales up 21% and 52% due to end of low fixed rates.

home-prices-upAugust real estate resale numbers are in….  and what a jump!  Up 21% in the Greater Toronto Area and an incredible 52% in Vancouver.   And here’s another interesting stat.  The average home price in Toronto is $505,000.  That’s a 5.5% increase from the previous month.

REAL ESTATE SALES DRIVEN BY HIGHER RATES..

But here are my thoughts on what caused the increased sales.  I think it has more to do with the steady mortgage rate increases that we’ve seen since May.  You see, most Lenders and Banks will offer rate holds of 120 days.   So that means you could have got a 5 year fixed rate mortgage preapproval in May for under 3.00%….  Those record low Fixed rates definitely forced many homebuyers to buy for fear they could miss out on the low rates. Continue reading “Real estate sales up 21% and 52% due to end of low fixed rates.”

Posted Interest rates

5 year Fixed rates are going up.. time to consider Variable rate.

graph trend upThe 5 yr Gov of Cda bond yields hit a 2 yr high on Friday reaching just over 2.00%.  That’s up around 0.35% since mid July and up around 0.75% since May.   The increase started in May when the U.S. Federal Bank Chair, Ben Bernanke, made some comments about possible easing of the Fed’s stimulus program beginning as early as September.

Fixed mortgage rates are closely tied to the Gov of Cda bond yield.   When the yield goes up, mortgage rates are sure to follow.  With 5 yr fixed rates expected to rise, it makes for an interesting mortgage market.  Which product and term is best to choose today?   The answer is different for everyone.   We all have different needs, goals and risk tolerances.   Continue reading “5 year Fixed rates are going up.. time to consider Variable rate.”

Posted Interest rates

Choose short term money for long term gains.

short termOnly recently has 5 year fixed rate become a product worth considering when it comes to paying the least amount of interest on your mortgage.   Studies prove that short term mortgage funds are the cheapest way to finance a house.. this includes Variable rate mortgages.

Historically, Variable rate and short term fixed rates have had lower rates than long term rates.   And yet, the BIG SIX BANKS, the Federal govt, and several popular finance experts have preached 5 yr fixed.  ‘You must take 5 year fixed so you know what your rate is.’   That’s a load of nonsense.   It’s true, that over the past 2 years, 5 yr fixed did make more sense given that the spread between Variable and Fixed was less than my target of 1.00%.  (I like to see a 1.00% spread between Variable and 5 yr fixed before recommending Variable).    Continue reading “Choose short term money for long term gains.”

Posted Interest rates

Time to look at Variable Rates again.

Variable rate mortgage

With fixed rates up around 0.60% over the last 4 weeks (currently at around 3.49%.. there are some lower rates but these come with conditions so we are using the more widely available rate) we must again take a look at Variable rates.   Today’s best Variable rate product is sitting at around Prime less 0.40% … there’s even a few promotional Variables at Prime less 0.50% for qualified applicants.   But for this article we will stick with Prime less 0.40%.  That’s 2.60% today.  We are almost at that 1.00% spread that I like to see.

Two years ago, the best Variable rate was at Prime less 0.75% with the option to lock into the BEST discounted fixed rate at any time (this option is important, don’t ever settle for a variable product that doesn’t have this clause).   And 5 years ago, we had Variable rate products as low at Prime less 0.90%. Continue reading “Time to look at Variable Rates again.”