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Posted 2 Comments on What mortgage product does your bank want you to take? Case study

What mortgage product does your bank want you to take?

Here are some interesting stats…

-A Variable rate mortgage outperforms a fixed rate mortgage in over 88% of the time… According the Milevsky study done earlier this decade and updated in 2008….

-Variable rate mortgages have been at least 1.00% lower than the 5 year fixed rate mortgage over the past 25 years….and on occasion, better by as much as 2.00%.

-Canadians move every 3 years on average…meaning they must either refinance their mortgage or pay it out.

-a Variable rate mortgage has a fixed penalty of 3 months interest.

-a 5 year fixed rate mortgage has a penalty that is at least 3 months interest but has no limit…. and in the past 18 months, we have seen penalties of 6, 10 and even 14 months worth of interest.

-yet, 66% of Canadians have a 5 year fixed rate mortgage…

Is the 5 year fixed rate mortgage really the right product for 66% of Canadians?    Can the 5 year fixed rate mortgage be the right product for everyone?  Which mortgage product do you think your bank wants you to choose?

By the way, can you guess which mortgage product is the most profitable?…. you guessed it.. the 5 year fixed rate.

Make sure your Mortgage Broker does a needs analysis before they recommend a mortgage product for you…. There is no ‘one size fits all’ when it comes to mortgages….  Ask yourself, ‘who is this mortgage best for’…. my bank or me?

Posted Mortgage News

Don’t expect new mortgage penalty laws til next year…maybe.

Mr. Potter would be proud

Seeing that it’s near Christmas, I thought this old classic movie pic was appropriate for today’s topic.  “The house always wins” (in case you can’t read the small print).   And how true that is…

It sounds like the long-awaited Federal Govt’s Standardization of Prepayment Penalties won’t happen til some time next year at the earliest….maybe.    A good source told me that the Govt wants to put that Bill through together with several other Finance laws…..but I’m beginning to wonder if they will make any changes at the pace they are going.

The Bank lobbyist’s have done their jobs well.   Mr. Potter would be proud.   Record low mortgage rates brought us record high mortgage penalties.   6, 10 and even 14 months of interest were charged as prepayment penalties to Canadian borrowers in the past 20 months.   To put it another way, we have seen penalties of $10,000, $20,000 and more. Continue reading “Don’t expect new mortgage penalty laws til next year…maybe.”

Posted Mortgage News

Annual CAAMP conference Nov 21-23

The annual Canadian Association of Accredited Mortgage Professionals (CAAMP) conference is being held this weekend in Montreal.  CAAMP is the National association for Mortgage Brokers and Lenders with over 12,00o members representing over 1,700 companies.

The conference is a great place to see all the Lenders, Mortgage Insurers, Brokers and other industry product suppliers under one roof.   It’s also a great time to hear about new products, trends and Economist’s forecasts for 2011….  (forecasts are difficult to make during a recovery so I’m sure we’ll be paying attention to what is and what is not said).

To me, the best part of the conference  has always been the Trade show or the Expo.  This is where we can meet everyone in one room, at one time… and on a one on one basis….  One suggestion for CAAMP… expand the time of the Trade show…3 hours isn’t enough to visit all the booths…  perhaps cut out some of the speakers…no disrespect intended to the speakers….

For more information visit the conference website at http://www.mortgageconference.ca.

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…