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CategoryRate forecast

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 Case study

Looking back 5 years.. which mortgage product did your Banker recommend in 2008?

greedy bankerRemember 2008?  It was almost 5 years ago that the U.S. sub-prime mortgage scandal erupted.   October 2008, to be exact.  That’s almost 5 years ago…  And with October and November 2013 renewals being less than 120 days away, we can now lock in some rates for those upcoming renewals.  So I thought this would be a great time to see what sort of advice and recommendations the Banks were giving to their mortgage customers.

THE BANK’S ADVICE

The funny thing is, Banks have never changed their advice or strategy.  ‘Take a 5 year fixed rate’.  That’s all the Banks seem to want to promote.  And with good reason… it’s the most profitable product FOR THE BANKS.   But historically, it’s NOT the best product to take.   There is no historical data that I am aware of that shows taking a 5 year fixed is the best strategy.  But I’ll get into that in more detail later. Continue reading “Looking back 5 years.. which mortgage product did your Banker recommend in 2008?”

Posted Interest rates

When the U.S. sneezes, Canada gets a cold… I’m getting the sniffles…mortgage rates are headed up.

US sneezes Canada catches coldYesterday, the U.S. Fed Chairman, Ben Bernanke, announced he ‘could’ start to ease their stimulation of the economy later this year.   That small announcement has had a huge impact on the global stock markets and bond yields.   Stock Markets are down around 2.00% around the world as of 2.30pm today.

The U.S. has been buying around $85billion worth of bonds every month in an attempt to keep interest rates low.  And with that simple announcement yesterday, the world’s markets have reacted.   Bond yields have started to climb…

Our own 5 yr Govt of Cda bond yield is up to 1.75%.  That’s up around 10bps from yesterday, and up 60bps from the beginning of May.  In fact, we haven’t seen these levels since October 2011 and again in March 2012.   We already received warnings from our Lenders that wholesale mortgage rates are likely to go up.   Remember, bond yields affect Fixed mortgage rates.. but they will have an indirect affect on Variable rates, too. Continue reading “When the U.S. sneezes, Canada gets a cold… I’m getting the sniffles…mortgage rates are headed up.”

Posted Interest rates

5 yr Bond yields up significantly.. expect fixed rates to go up..!

big news 5 yr Govt of Canada bond yields are up over 30bps in May.   We should expect fixed mortgage rates to increase if they hold at this level.  If you are thinking of buying, refinancing or if your mortgage is coming up for renewal, I suggest you contact your mortgage broker and get some rates held.  This could be the beginning of the long-awaited mortgage rate hikes.

There is another chart you should look at if you want to see where Fixed mortgage rates are headed over the next 6 months.   The 2 year Govt of Canada bond yields are a good 6 month indicator of where rates are going…. and this chart shows the 2 year bond yields jumped over 25bps in May.

We’ll report any changes as they get announced.

Your best interest is my only interest.

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

 

Posted Consumer Debt

BMO caves in to Federal govt pressure and raises mortgage rate.

Bmo wide It was bound to happen.  BMO announced their so-called ‘low-rate’ (NO FRILLS) 5 yr fixed rate mortgage would be increasing to 3.09% from 2.99%.   This comes shortly after the Federal Minister of Finance, Jim Flaherty, said that he called BMO and asked them to pull their 2.99% ads.   Last week, the Minister’s office asked Manulife Bank to withdraw their recent ad promoting a similar low rate.  Flaherty i don't know

While, 2.99% isn’t the best rate today, it was the lowest advertised rate from the BIG SIX BANKs.    It was somewhat symbolic.    Of course, Mortgage Brokers have access to even lower rates through the wholesale mortgage market, but these lenders don’t have the deep advertising pockets that BMO or the other BIG SIX BANKs have.   So the publicity surrounding this rate and the increase will get much more air-time.   You can actually find full-featured 5 year mortgages at 2.89% today, through a good mortgage broker (a word of warning.. I’ve seen lower rates offered, and I have access to these products… but these products are not full-featured and come with some limitations that make them less attractive… just be careful when choosing your mortgage and your mortgage broker)… Continue reading “BMO caves in to Federal govt pressure and raises mortgage rate.”