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CategoryRate forecast

Posted Mortgage News

More Banks raise their variable rates

BMO has joined RBC in raising their Variable rate mortgage pricing. The Financial Post reports that BMO raised their Variable rate mortgages from Prime 015% to Prime less 0%.

Can you say, ‘we want to force borrowers into the more profitable 5 year fixed rate products’???  That’s right.. The Banks would rather see you in a 4.00% rate vs. a 2.25% rate…  And why not?  They are a business after all.

We have also just received reports from other wholesale lenders that they will raise their pricing as well…  If you were looking at buying a house, refinancing your mortgage or had a mortgage coming up for renewal in the next 4 months, I would suggest you speak with your Mortgage Broker and get some rates locked in…

It’s important to understand, the Bank of Canada is not likely to raise their rate anytime soon.   Bank Prime remains at 3.00%.  We are seeing the Bank Economists tell us they think the economy will remain slow… The Banks do not make as much profit with the low Variable rate mortgages… They want and prefer you to take a 5 year fixed.. these are the most profitable mortgage products for them.

So  the bad news is Lenders will raise their Variable rates slightly, the good news is that we are probably going to continue to enjoy mortgage rates under 3.00% for some time to come…..

Posted Mortgage Products

Stock market drop and slight recovery.

Did you know that between July 22nd and August 8th, the TSX index dropped 14%?   Did you know that since August 8th, it has recovered 9% of that loss?  What a roller coaster ride…But there’s good news here…

So how will this affect your mortgage rates?

Fixed mortgage rates are priced from the 5 year Cda govt bonds.. Bond yields also dropped like a rock.. from 2.27% to 1.35% during that same time period…  that’s a 0.92% decrease.  A visit to TD Bank’s website shows us their ‘5 year fixed rate Special offer’ is 4.19%... no drop at all.   Call a Mortgage broker and you’ll see rates of around 3.49% today.

Sure, fixed rates are very low but they should be lower….  Fixed rates are usually priced around 1.30% to 1. 70% above the 5 year bond yield…  Why haven’t you seen mortgage rates keep pace with the bond yield drop?   That’s not hard to figure out… The Banks are maximizing their profits… same old story…Banks are infamous for hiking rates quickly and but slow to move when it comes to cutting rates.

How about Variable rates?

Well, not much to report there… The Bank of Canada meets 8 times a year.   Last meeting was July 19th.  Next meeting is Sept 7th.    You can forget about any immediate rate hike.   Economists have done an about-face with their forecasts…. We were expecting a rate hike this September or October… That’s now been pushed back to 2012… and there were even some rumblings about a possible BOC rate cut (but I’m not sure that’s gonna happen).

At 3.00%, the Bank Prime rate is still very, very low and makes borrowing very attractive…   Current Variable rate mortgages are priced at between Prime less 0.65% to 0.80%…    We may not see interest rates drop, but there is no reason for them to go up for the next little while…. Enjoy the low rates.

Posted Mortgage News

US govt debt crisis and a slower Canadian economy

It seems US has reached a compromise on the debt ceiling and another crisis avoided.    President Obama and the Republicans have come to an agreement.   read more here.

We already knew the US was on shaky economic ground… no one really knew how a US debt default would affect Canada or the rest of the world.   It certainly wouldn’t be a good thing.

But before we can breathe a sigh of relief, Canada’s Gross Domestic Product (GDP) fell by 0.3% in May.  The largest single month drop since May 2009.  This unexpected drop is good news for those of us with mortgages.

Interest rates are expected to remain low for this year.   And a Bank of Canada rate hike is less likely in September or even October.

Enjoy the low rates.

Posted Mortgage Rates

No surprise, Bank of Canada keeps rate the same

No real surprise here… Just about everyone expected the BOC to keep the Key Rate unchanged at today’s fifth of eight scheduled meetings.   This keeps the your Bank Prime lending rate at 3.00%…. Here’s

We can thank a slower than expected U.S. recovery and the European debt crisis…   With all this uncertainty in the global economy, it appears interest rates won’t go up until there is some positive news…

Most experts fee that no change will occur til later this year and some are even forecasting no rate hikes til next year.

The BOC did hint they do want to raise rates but are being cautious in their approach.  Here’s a report from CBC.ca.

Enjoy the low rates..

Posted Mortgage Rates

TD Economics forecasts no Variable rate hike til 2012

This week, TD Economics said the Bank of Canada probably won’t raise rates til 2012.   How quickly things can change.  Just a few months ago, most Economists and Financial Experts were calling for the Bank of Canada to raise rates this summer.. some said as early as May… Well, that didn’t happen.

There are many reasons but TD’s Chief Economist, Craig Alexander, said it was low inflationary expectations, the negative impact on the European financial instability (Greece, Ireland, Spain, Portugal) and the high $Canadian dollar.  We can also through in Japan’s Tsunami and the Middle East political uprising.

Fixed rates have also not gone up as the Economists were forecasting earlier this year.  Instead, they have come back down to historical lows, once again… The Bond market affects fixed rates and we’ve seen the 5 year Canadian Bond drop 80 basis points since mid April.

All this is great news for borrowers as there appears to be little pressure to raise interest rates anytime soon.