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Posted 7 Comments on Interest rate hike coming… no need to panic… Interest rates

Interest rate hike coming… no need to panic…

We’ve seen a lot of media coverage about the interest rate hikes coming this summer.. yes, it’s true… The Bank of Canada will raise their overnight rate very soon.. By how much? Maybe 0.75% by the end of the year.. or maybe 1.00% like this these Economists are forecasting as reported in the Globe and Mail.

Think about it.. if you arranged your variable rate mortgage before Oct 2008, then you have been enjoying interest rates below 2.00%… WOW!…I mean come on, are you kidding me?  What’s wrong with that…?

So let’s assume rates go up by 1.00% or even 2.00% like some think it will over the next few years… that would still mean your mortgage is below 4.00%…. And the record low for a 5 year fixed mortgage rate is just below 4.00%…

That’s right… even if rates increase by 2.00%, you would still be in historical low rates when compared to a 5 yr fixed rate…..So why is this so bad or going to be such shocker??

And by the way, competition and improved investor confidence is bringing variable rate mortgage pricing closer to normal levels…..the good old days…!

To qualify for a variable rate mortgage you had to qualify at the 3 year fixed rate…posted rate for most lenders…

I hope you are seeing a pattern here…. the New Mortgage Rules coming into effect April 19 will mean you must qualify at the Chartered Bank 5 yr POSTED rate….Banks would love for all their clients to take a 5 yr fixed rate as these are the most profitable product for them…(would you rather pay 1.85% or 3.79%??)

Don’t be in too much of a hurry to get yourself into a higher rate…a fixed rate… you are only buying insurance… and very costly at that…..

For some of us, a fixed rate is worth the peace of mind and is important for us to know what our budget is … Discuss with a mortgage broker…. get the facts…

Posted 2 Comments on CIBC says..a hike in Bank Prime rate coming…and new mortgage rules won’t affect most of us. Mortgage News

CIBC says..a hike in Bank Prime rate coming…and new mortgage rules won’t affect most of us.

Just released….

BANK PRIME RATE FORECAST

The CIBC’s Senior Economist, Ben Tal, says Bank Prime rate will start to increase this summer… but only by 0.50% to 0.75% by end of the year… and then will pause in 2011 to see where the U.S. rates are headed….  click here Feb 26 2010 CIBC Forecast.

Mr. Tal thinks this is “risk move” pointing to similar Bank of Canada action in 1992 and 2002 when the Bank hiked rates only to reverse the decision a few months later…

Mr. Tal also points out that real inflation is around 1.5% and will continue to remain low into 2011.

Does this mean we should lock in our variable rate mortgages?  For most of us, probably not… but if you aren’t sure, then speak with your Mortgage Broker.

NEW MORTGAGE RULES EFFECT

Mr. Tal sees the new mortgage rules having little effect on most of us.  Here are his calculations…

  • Increase down payment requirement for refinancing: 7%-8%
  • Increase down payment requirement for non-primary residence: 2%-3%
  • Increase qualifying rate on variable mortgages: 5%-6%

This is the first outlook I have seen…and it’s really not bad at all…   Enjoy the weekend… and GO CANADA GO!