Mortgage rates going up a little.. for now. What should you do?

Happy 150th Canada!  Mortgage rates are going up.  Hooray!  Ok, yes, I’m being sarcastic.

This isn’t the cheery message you wanna hear if you have a mortgage coming up for renewal soon. But, hold on.  What does this really mean?  It’s a great attention grabber.  And now that you’re reading, let’s cut through the bull!

It’s true.  Wholesale fixed mortgage rates have gone up.. around 0.15%.  Yup, that’s it.  Yet, reading all the media headlines would make you believe mortgage rates went up 1.00% or something like that!!   This just isn’t the case.   And Variable rates haven’t changed as of yet.. Mind you, we could see an increase of 0.25% on July 12.. That’s still putting most Variable rate borrowers at 2.25% and 2.40%.. That’s a ridiculously low rate.

Here’s what’s happening…We’ve seen the media take little snippets of the Bank of Canada Governor, Mr. Stephen Poloz’s comments and turn them into front page headlines.  Great for headlines but short of full disclosure.  Here’s a more complete picture. Read the rest of this entry »

Bank of Canada hints of rates hikes.. bond yields spike up

Bank of Canada Senior Deputy governor, Carolyn Wilkins, made headlines this week when she hinted of pending rate hikes.

The reaction by investors was swift.  Bond yields were up 20bps. Fixed mortgage rates are priced from Gov of Cda bond yields.  Variable mortgage rates are priced from Bank of Canada rate.  And the next Bank of Canada meeting is scheduled for July 12th, the fifth of eight scheduled meetings.  Many are betting we could see a rate hike then.

DON’T PANIC…. RATES ARE STILL RIDICULOUSLY LOW…   The media was quick to find ‘so-called’ experts to quote.  I’ve seen some saying we should all lock in our variable rate mortgages into fixed rate products.  And others say you should brace yourself for payment shock.

Here’s a reality check..   Variable rate mortgage are around 2.20% .. Some are higher, some are lower..    EVERY Canadian must qualify for a Variable rate, using the POSTED 5 year fixed bank rate.  That rate has been at or near 4.64% for several years.

If rates go up, we can expect a slow gradual increase..  around 0.25% at at time.  And here’s the thing..If you can qualify at 4.64%, what makes you think you can’t afford your mortgage at 2.45% or 2.70%??

The sky isn’t falling.   Many Canadians are already paying more than they have to by increasing their regular payments to accelerate the amortization and retire their debt sooner.  In fact, most of my clients are doing this because they can.   Don’t believe everything you hear or read in the media…  We are experiencing record low interest rates and yet, we’re made to feel like it’s a horrible time to have a mortgage..  Anyone else seeing something wrong with this?

By the way, I still like Variable rate mortgages today.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Time to stand up for Home Trust and Home Capital

Home Trust and it’s parent company, Home Capital, have been in the headlines for months.  Taking a beating in the media with US short sellers licking their chops waiting for them to fall… all for the sake of making a buck.

Finally, the Ontario Securities Commission has come out and made a statement.

Proposed fines and a settlement of around $30million will be levied against Home Capital and former executives for supposed misleading statements.  I say ‘supposed’ as there has been very little proof provided by anyone to suggest they was any misleading going on.

PROPOSED SETTLEMENT.. BUT NOT UNTIL AUGUST 9..?

There is actually more evidence of misleading statements by US vulture investors that have by trying to discredit Home Capital and their senior management via social media blasts.    The goal was to short the stock.   The goal was to see the stock price plummet and drop using conjured up hype and fear mongering.   The power of social media is dangerous.

Comparisons with the 2008 US sub-prime crisis.  Supposed non-disclosure of a handful of supposed fraudulent mortgage brokers (only 45 out of several thousand) that supposedly submitted false income documents to get mortgages approved.

Now, here’s the strange part.. All but 2 of those supposed crooked brokers were penalized by the governing Provincial regulator..  That’s right, only 2!!  And the fines were miniscule.

If this was as serious as we are made to believe, why wouldn’t there more severe action?  Why wouldn’t more brokers be reprimanded?  Why didn’t we see more more action?

BY THE WAY, HOME TRUST ANNOUNCED THE FRAUD ONCE IT WAS DISCOVERED..

It’s not like Home Trust was hiding anything. They discovered some mortgage applications were submitted with fraudulent information and documentation.  They investigated to ensure the allegations were true. Once discovered, they announced the findings.    IMPORTANT.. there has been no loss from any of those mortgages.. NONE!

Perhaps this wasn’t as big a problem as we were lead to believe?    $30million in fines and settlements is a lot of money but it’s nothing compared to $2billion loss in the stock value of the corporation.  The best thing that could have happened was a quick settlement.  Move on, as they say.

And why would the OSC announce this settlement now, when it won’t come into effect until August 9th?  This is highly irregular.  If Home Capital did so much harm and was so deceitful, why would the OSC let them off the hook with a token fine and announce it months ahead of settlement approval hearing?

This isn’t sounding right.  The pieces just don’t fit.

There was a great article written about the Home Capital witch hunt.  I suggest you take a minute and read it. click here to read the article.

The OSC was quick to throw Home Capital under the bus.  For what purpose or reason?  I sure would like to know.. We may never know what really prompted the OSC to announce their investigation and then just as quickly, announce a settlement.

It stinks.  And it’s really too bad.  Home Trust has served a huge segment of the Canadian population with their financing options.  In recent months, other Lenders have struggled to keep up with demand.  Rates and fees have increased, making it far more expensive for consumers to finance their residential and commercial properties.

We can only hope that this will pass quickly.  With all the recent govt intervention with tighter mortgage rules, 15% foreign buyers tax, new rent control rules,  and looming rate hikes, we will need Lenders like Home Trust.  They are a far better alternative to Private lenders or Mortgage Investment Corporations where interest rates are in the 10% to 18% range plus fees.   I’m not sure how this witch hunt helps the Canadian consumer?   We need Lenders like Home Trust.  They fill a big gap for consumers.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Housing market is active but will slow in summer as it ALWAYS does..

Much has been written about the Canadian housing market.  Even more about greater Toronto and Vancouver.  The pessimists are waiting for a collapse.  The optimists are hoping the prices keep going up.  Then there’s the realists.  They would like to see the market slow and maybe even for prices to go down, so that we don’t have a housing bubble. Which one are you?

When it comes to the housing market, I’m a realist.

Every Spring, for the last 10+ years, the real estate market in Canada heats up.  Prices increase, they sell faster, and supply can’t keep up with demand. It’s become the norm.  In June, July and August, the market gets very quiet and prices go down.  That’s right, they actually go down.

This year was no different except for 2 things..  Supply was very low in January, February and March, causing selling prices to jump as much as 20% over last year in some markets.   Now, let’s look more closely.. Read the rest of this entry »

Long term contracts have a price… nothing has changed from 2010

Originally posted in 2010…. some things never change..  enjoy and beware.

Here’s a great article written by consumer advocate, Ellen Roseman.  She points to different industries where signing in for the long term protection can be very costly and expensive.

Ever wanted to change cell phone providers?  How about internet providers?  Move your investments or rrsps?  Cancel that hydro or gas contract because you moved?

And how about mortgages?  When interest rates started heading downward about 12 months ago, thousands of borrowers in fixed rate mortgages wanted to get out of their higher rates and start benefitting from the record low interest rates we have been seeing.

But they were shocked to hear of unbelievably high early prepayment penalties… the example Ellen uses is about a $46k penalty on a $530k mortgage with a major bank…  I’ve seen dozens and dozens of situations like this.

Beware of long term mortgages… with the average person moving or refinancing about every 3 years, choosing a 5 year fixed rate term is usually not the best option.  It could cost you more than you think… always seek professional advice from a reputable mortgage broker before selecting your mortgage.

(Just a personal note… It sure would have been nice to see some mortgage relief given to the average homeowner during the recession.   CMHC used to cap their penalties to 3 months interest but removed this cap in 2000…quietly, all financial institutions are free to charge a higher penalty…and they all do.. the longer the term, the greater the penalty…)

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Toronto 15% Foreign tax, new Rent controls… it changes nothing!

15% Foreign home buyers tax, not a big deal

Last year, Vancouver introduced a 15% foreign homebuyers tax.  I predicted it would come to Toronto after 6 months.

Today, Ontario’s govt has copied Vancouver by introducing a 15% foreign homebuyers tax.   The hope is this will discourage foreign investors from buying and speculating on the Toronto housing market (by the way, there is no data to prove that foreign investors are a factor or contributing to the red hot housing market).

Vancouver tried this last year. But what happened?  The amount of sales slowed, but just temporarily. And house prices didn’t really drop.  This year, Vancouver house values are up over 3% and climbing.   Read the rest of this entry »

Housing bubble is coming… again?

You’ve seen them before.. but they went silent for a few years.  I’m talking about the housing bears.  The pessimists that say house prices are too high and will crash.  A housing bubble.

Are they right?  Maybe.  But here’s the thing.  We’ve been hearing that house prices are too high for over a decade.  One of the more vocal pessimists is David Madani, Economist for Capital Economics.

HOUSING BUBBLE?

Madani was on BNN this past week saying we are in a ‘Full blown housing bubble’.   Hmmm, that sounds familiar.  Let me think… when did I hear that before?  Oh, that’s right, 2011.   He said, we could see house prices drop by 25% in 2011.  And he was completely wrong. (hope you didn’t listen to him). Read the rest of this entry »

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