What’s this? RBC, BMO and National Bank have lowered their posted fixed rates? Yes, it’s true… the 5 year fixed rate is now 5.39%. Bond rates have come down over the past few weeks after some concerns about the speed of the recovery.
These are posted branch rates…some banks advertise lower special rates of around 4.09%…. of course, there are even lower wholesale or discounted rates through the mortgage broker market…. speak to your mortgage broker to get current rates.
Variable rates aren’t expected to move anytime soon… in fact, here’s one forecast for interest rates to remain flat for the entire year…. and I think this is very possible.. Happy Savings!!!
Here’s a good article from the Financial Times about Mortgage Lending in Canada…..and the lessons the U.S. can learn about prudent mortgage lending… The article points to 3 important differences between the 2 countries.
Here’s another article that points to a great study done recently by the Canadian Association of Accredited Mortgage Professionals (CAAMP). The study showed that Canadians more cautious than our American friends when it comes to taking on debt. And they chose fixed rates over variable rates in 86% of the cases…
It’s good to see that Canadians are perceived as cautious people, however, we shouldn’t assume that variable rate mortgages are a riskier proposition… there was a great study done by Professor Moshe Milevsky, in 2001, that compared fixed rates and variable rate mortgage….. in that study, Professor Milevsky concluded that variable rate mortgage borrowers were better off being in a variable rate mortgage….
The study was updated in 2008 and the findings were even better… the variable rate mortgage was a cheaper option than fixed rate in over 80% of the time. Of course, we each have different needs and risk tolerances… always seek professional advice.. speak with your mortgage broker.
It’s interesting to see all the forecasts in the media these days. Just last month we saw the bond market go up which caused Experts to forecast for an increase in fixed rates (bonds affect fixed rates, Bank of Canada rate affects variable rates). Economic recovery was going great…but then we saw some poor job creation data….. and less jobs means less cause for inflation (if inflation is lower than the bank’s target, then the Bank of Canada is unlikely to raise the Bank rate).
Looks like the recovery will be slower and take longer than expected…and this will be good news for borrowers as rates should remain low a little longer now…. maybe no increases til 2011? Financial Post
Hard to believe that we were or are in a recession when you hear reports like this one in the media. It’s easy to say that this market is interest rate driven…. there’s a lot of truth to that, but there must also be some level of consumer confidence… confidence in having a job, being able to pay the mortgage… We’ll have to watch and see how the Feds will view these numbers…
Remember, inflation will surely cause the government to raise rates.. up til now, no inflation concerns… Personally, I think it was partly driven by pent-up buyer demand…the market was much slower than normal in September, October and November… we’ll be watching and reporting…stay tuned..
Last year, variable rate mortgages were Prime plus 0.60%… a far cry from the Prime minus 0.90% that we saw 2 years ago. Today, one of our Lenders has just come out with a special promotion of Prime less 0.30%….wow! Prime is 2.25% less 0.30% gives us a rate of 1.95%…. gotta love it.