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Rate Cuts and Pending Deals – A quick note

As the dust starts to settle on yesterday’s Bank of Canada rate cut, here’s some clarification on what happens next.

To all my pending clients or clients with something on the go, your rates will be automatically adjusted downward.

For new clients, prospective purchasers, or people that want to take advantage of these falling rates, don’t hesitate to reach out to my office today. I am happy to discuss how you can take advantage of this.

Your best interest is my only interest.

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

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Important week for mortgage rates

Important week for mortgage rates could cost or save you thousands.

Important week for mortgage rates

Mortgage rates fell by about 1% since January of this year. That rate drop has created a surge in real estate sales across Canada, with September and October seeing a greater than average number of real estate transactions.  We also saw consumers taking advantage of these low rates by refinancing their mortgages early.

The Five-Year Government of Canada bond yields have been going up and down like a yo-yo over the last three months, with a low point being 1.13% and a high of 1.58% just this past week. This uncertainty/volatility forced financial institutions to raise their interest rate by about .2% to .3%.  Having said that, interest rates are still very low. In my discussions with the major lenders, they are all telling me that it’s busier than usual for home purchases and refinance purposes. Continue reading “Important week for mortgage rates could cost or save you thousands.”

A beautiful gift wrapped box - When it comes to mortgages are you looking at the packaging or what is actually inside.

Are you looking at the beautiful box or what’s inside?

A beautiful gift wrapped box -

If I gave the option of choosing between two cell phones, which would you choose?   Both phones had similar specs and were identical in almost every way… except PHONE one came in a nicely gift wrapped box with a bow on it.   PHONE two came in a brown paper bag but was less expensive and also had slightly better options.

Most of us would choose PHONE two right?  Wrong!   When it comes to mortgages, most of us are focusing too much on the beautiful gift box and not paying enough attention to the contents.  They say around 47% of all mortgages go through a BANK and 39% go through a Mortgage Broker.   Broker share is up, but not enough in my opinion.

When it comes to mortgages, historically the BIG SIX BANKS have been charging higher rates than what can be had from MORTGAGE BROKERS. (see Bank of Canada study ‘competition in the Canadian mortgage market). And their inflated prepayment penalty calculations are now infamous (typical BIG SIX BANK penalties are around 4 times higher than other lenders).
Continue reading “Are you looking at the beautiful box or what’s inside?”

Why didn't the Bank of Canada Gov cut rates last week

Why didn’t the Bank of Canada Gov cut rates last week?

Why didn't the Bank of Canada Gov cut rates last week

WAS THIS A BIG MISTAKE?

Last week, Stephen Poloz, the Bank of Canada Governor, kept the Prime Rate as is during the 6th of their eight scheduled meetings for 2019.  The Current Target rate is 1.75%.  (Bank Prime rate is derived from this rate.  Today’s Bank Prime rate is 3.95%.  Over 99% of time, when the Target Rate is cut, the Banks will reduce the Bank Prime Rate by an equal amount).

This was a very calculated decision that has politics written all over it.  While the rest of the world banks have been cutting rates to combat a looming recession due to growing global trade wars and slowing global economies, our Government did nothing.  Apparently, the Canadian economy is ‘resilient’.  The next Bank of Canada meeting is set for October 30, 2019.  Oh, and there’s a Federal election on Oct 21, 2019.  Yeah, this has politics written all over it.

WHAT YOU SHOULD KNOW ABOUT MORTGAGE RATES TODAY.  Continue reading “Why didn’t the Bank of Canada Gov cut rates last week?”

Mortgage Rates have Dropped and Will Fall Further

Mortgage shopping

Rate forecasting isn’t rocket science – it’s more common sense than you think! But, it requires a clear mind to make sense of all the rubbish that’s being published these days.

I’ve been forecasting for a while now that interest rates would start to come back down this year. Currently, interest rates are down by around 0.4% and will come down further.

WHY ARE RATES FALLING?  Continue reading “Mortgage Rates have Dropped and Will Fall Further”

Remember when I said rates could go down, not up?!

saving money-young woman putting a coin into a money-box-close up

If you’re a regular reader of this site, you’ll know I’ve been very skeptical and critical of the Bank of Canada (BoC) for continuing to increase interest rates. It just hasn’t made sense.

The BoC raised rates FIVE TIMES between July 2017 and October 2018. That’s a 1.25% increase. For anyone with a $300,000 mortgage, your payment increased by $189 per month. Or, to put it another way, for every $100,000 of mortgage, your payment went up by around $63 per month.

Yet, we kept hearing that the BoC wanted to raise rates further. Economists and other experts were saying we should expect more rate increases by the end of 2018! Wow!

Continue reading “Remember when I said rates could go down, not up?!”

What’s the TRUE Impact of Policy Changes on the Canadian Mortgage Market?

Boc Mortgage Rule Impacts, Dec 2018

It’s certainly not what the Bank of Canada (BoC) is claiming!

The BoC recently released a document detailing what it believes to be a positive report on the Canadian Mortgage Market, but this article clearly shows how out of touch our government is.

The BoC is applauding their statistics… yet, these numbers show that the government appears to be measuring affordability as a multiple of one’s income – and not by the proven, standard method of debt servicing ratios. This is very odd and, quite frankly, I find it absurd.

Continue reading “What’s the TRUE Impact of Policy Changes on the Canadian Mortgage Market?”

Why Did the Bank of Canada Raise Rates Last Week?!

Canada Mortgage rate 20180509

Last Wednesday, the Bank of Canada (BoC) raised its overnight target rate to 1.5% – up from 1.25%. This is the fourth increase since last June, when the target rate was 0.5%.

The timing is suspect to me. Last year, we had an increase around this time, but that was coming off of the hottest housing market in 29 years. We’re currently on the heels of a brutally slow spring market, yet rates are still rising? I don’t get it… this is a poor decision, in my opinion.

When it comes to four rate increases in the past year, there are facts, realities and perceptions that come into play… Continue reading “Why Did the Bank of Canada Raise Rates Last Week?!”

Got a mortgage? Good news: Bank of Canada didn’t raise rates yesterday!

Blog Image, Your Best Mortgage is About More than Rate, Feb Mar 2018

Yesterday, Bank of Canada (BoC) Governor, Stephen Poloz, left rates unchanged. This kept the bank prime rate at 3.45%.

This also, indirectly, affects fixed mortgage rates. Great news for anyone with a mortgage. Go ahead, it’s okay to feel good about paying a low interest rate on what’s probably the biggest debt of your life!

ARE ECONOMISTS RIGHT?

For months we’ve heard economists forecasting 2-4 BoC rate hikes for 2018. So far, we’ve had one increase – in January. Should we be expecting three more increases? Only time will tell, since the BoC raises its rate when inflation rises above the target inflation rate… currently the range is between 1% and 3%, and sits at an acceptable 2.10%. Some believe inflation has increased temporarily, in part, due to increased minimum wage.

Continue reading “Got a mortgage? Good news: Bank of Canada didn’t raise rates yesterday!”

A 2nd Bank of Canada rate hike surprises many.. what’s it mean?

 The Bank of Canada Governor, Stephen Poloz, has been full of surprises since he took on his current role.  With a second 0.25% rate hike today in consecutive BoC meetings, he’s pushed the rate to 1.00%.  This should result in a Bank Prime rate of 3.20%.   The move has surprised many experts as the economic indicators don’t justify a rate hike.

The move comes following last week’s surprising positive stats showing the Canadian economy grew by 4.5% in the 2nd quarter, according to stats Canada.   Could this be a knee jerk reaction?

Usually, the Bank of Canada increases rates when inflation rises above the Target level of between 1% and 3%.  A quick search on the BankofCanada.ca website and we see the inflation level is just 1.2%.   So, why raise the rate now?   According to the BoC press release, it’s all about that recent positive economic data. Hmmm, you have to wonder is they jumped the gun on this one?

WHAT’S THIS MEAN FOR MORTGAGE BORROWERS IN CANADA?

Standing back, we need to look at where current interest rates are in relation to historical rates.  With an expected Bank Prime rate set to increase by 0.25% (Banks usually follow and match the BoC rate movement except 2 yrs ago when the Boc cut the Target rate by 0.50% in 6 months, but the BIG SIX BANKS only cut their Prime rate by 0.30%, pocketing the difference and stumbling to explain why they would profit off the backs of Canadian consumers and businesses during an economic recovery…nice, huh?) This means the new Bank Prime rate will be 3.20%.

REALITY CHECK.

Are rates high? Are they low?  Historically, we are still in record low territory.   Fixed Mortgage rates are still just over 3.00% today.  Variable rate mortgages are 2.45% to 2.55%.    Hey, that’s not bad at all. In fact, it’s still great!  Too much emphasis has been put on these rate hikes, as though they would paralyze consumers from being able to spend or make their mortgage payments.   This is just untrue.

Canadians have had to qualify at Bank Posted 5 yr fixed rates for years, if you chose and Variable rate mortgage.  That means you had to pass the stress test using a rate that was 2.00% higher than your actual mortgage.   And what’s not talked about enough is that Canadians don’t just pay their minimum required payment.  They accelerate and increase their payments.  They pay more to pay the debt off faster!.  Canadians pay their mortgages off in around 17 yrs on average….with many paying them off in 12 years.

Bet ya didn’t know that?!

FUTURE RATE HIKES

Not likely.. at least not for a while.  These 2 consecutive rate hikes will be closely monitored to see how the consumer and the economy can absorb them.   If we start to see negative economic stats, we could see rate cuts.  It’s not out of the question and it wouldn’t be the first time the Bank of Canada had to reverse their increases.

Remember, we have seen major mortgage rule changes that have made it harder than EVER to qualify for a mortgage.  This lack of access to mortgage money is having a negative effect on the housing market.  Sales are down.  Prices have fallen (price decrease isn’t bad but we don’t want a free fall)..  Put it all together and you end up with less money flowing into the economy.   A slower economy usually means sustained low-interest rate environment… stay tuned folks..

MY ADVICE

If you are in a Variable rate mortgage, I would stay there.  Your rate is less than 3.00%.  Why would you want to lock in at over 3.00%?   If you are worried that rates could skyrocket, it’s unlikely given the fragile global economy and even our own economic instability.  However, if you can’t sleep at night because you are worried about the rates, and don’t mind paying a higher fixed rate for the assurance of knowing what your payment will be, then lock in or choose a fixed rate.   I’ll be staying in short term priced products like the Variable rate or a 2 or 3 yr term.  These products have proven to be the lowest cost products.

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

Spring housing market in the Fall?

Fewer homes in the summer.  Lower average home selling price in the summer.  That’s this year’s headline.  But it could also apply to last year or the year before or the year before that.

What hasn’t been said much is that house prices almost always go up in the Spring and fall during the summer. 

This year isn’t much different.  Except that this Spring, we saw ridiculous price increases in the 20% range.

That’s just not sustainable.  Check out some of these graphs from Canadian Real Estate Association.

This summer, house prices have fallen a little more than average.   And sales are also down compared with the last 2 years.  But listings haven’t increased.  In fact, listings dropped in July signalling we could have reached the bottom.

Hey, if we were in a housing bubble, you would have seen new listings continue to spike up.  That’s when we know the market will have changed gears.

 

PENT UP BUYER DEMAND?

Some are speculating that we could see a busy Fall market this September or October.  The Fall has historically been the 2nd busiest housing market.    If we look at Vancouver in 2016, after they announced their 15% Foreign tax rule, their market went soft and was very quiet.  Many pessimists were saying it was the bubble bursting.

Six months later and Vancouver’s market is busier than ever. Fully recovered.  The initial shock of the Foreign tax rule came and went.   We could see that same sort of comeback for Toronto.

A WORD TO OUR FEDERAL GOVERNMENT AND REGULATORS…

To the Federal govt:  Please, no more mortgage rule changes.  Let the market absorb all the massive changes already made.  Listen, I’m telling you with 28 years of mortgage lending experience.. I can’t recall when qualifying for a mortgage has ever been harder… and I was around during the last real estate recession of 1990.

Non-bank lenders are being penalized as their cost of funds are higher than BIG SIX BANKS (thanks to the new Fed govt mortgage rules), hence driving more customers towards the BANKS… THE WINNERS:  BIG SIX BANKS.  THE LOSERS: CONSUMERS. Let’s bring back competition among Mortgage Lenders… and let’s make mortgage financing accessible again.  The pendulum has swung way too far to the conservative lending side.

BANK OF CANADA RATE HIKES ON HOLD?

The Bank of Canada hiked the Prime rate by 0.25% in July.  It was headline news for weeks.  Many said this was the 1st of many hikes to come.  Today, the forecast is for a possible October hike.  But that isn’t a sure thing.  And if the uncertainty with the housing market continues or if the NAFTA trade agreement gets turfed like President Trump says, you can bet the Bank of Canada governor will think twice about raising the rates.   More likely a rate drop!

Stay tuned.. Maybe we’ll see a Spring market in the Fall?

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

Bank of Canada rate hike.. it’s really not a big deal.

BREAKING NEWS… BANK OF CANADA RAISES RATE BY 0.25% AND THE SKY HASN’T FALLEN!!

Stephen Poloz, the Bank of Canada Governor, raised the Target rate by 0.25% to 0.75%.   Maybe now the media will move on to other news.

Seriously, aren’t we all kinda tired of hearing how rates are going to skyrocket,…how this is going to make our mortgages unaffordable… how we have record debt levels.. how we are going to default our mortgages, lose our homes and go into a recession…it’s doom and gloom?  This isn’t happening.

SOME FACTS ABOUT THE RATE HIKE Continue reading “Bank of Canada rate hike.. it’s really not a big deal.”

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. Continue reading “Mortgage rates going up a little.. for now. What should you do?”

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

Enjoy the low rates..No rate hike with Bank of Canada

The Bank held their third, of eight, scheduled meetings this week.   As widely predicted, the Bank of Canada announced that it is holding the key rate steady.

While noting that “economic growth has been faster than expected”, the bank said it’s too early to determine if the economy is on a “sustainable growth path”, citing weakness in export growth, business investment and employment.

The Bank’s three measures of core inflation, taken together, continue to point to material excess capacity in the economy. While there have been recent gains in employment, little growth in wages and hours worked continue to reflect economic slack in Canada, in contrast to the United States.

The bank also took into account uncertainties that include the potential impact of U.S. trade policies. The next rate-setting day is May 24.

This announcement means there should be no change to the prime rate. Great news if you have a variable-rate mortgage or line of credit, need a new mortgage, are renewing, or want to save thousands by consolidating debt at the lowest-cost funds. Or perhaps you are thinking of using home equity to invest in a rental property or second home, or cost effectively complete renovations.

Given the uncertain economic outlook, we continue to expect interest rates to stay low in Canada well into 2020, although the new mortgage rules have caused mortgage rates to be very complicated. Quick rate quotes are not very reliable! That’s why it’s so beneficial to work with an experienced mortgage broker who has access to a wide range of lenders and knows the right questions to ask to assess your situation and provide the best mortgage for your needs. Save yourself time and stress; don’t just ask what the rate is, have a conversation instead.

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

Mortgage rate outlook 2017.. Expect Fixed mortgage rates to go up…Expect Variable rate pricing to drop.

trudeau-trumpFixed mortgage rates have increased by about 0.40% in the last 6 weeks.   Today’s 5 year fixed rates are at around 2.89% and will could continue to go up in 2017.   There are political and fundamental reasons why rates have gone up. (oh, by the way..  it’s not panic time.. who ever said that 5 yr fixed rates were the best product to choose anyways? more on this later.)

FUNDAMENTAL REASONS

Govt of Cda bond yields have gone up around 0.55% since October (fixed rates are priced from govt of Cda bond yields).  It’s more expensive for Lenders to fund mortgages due to stricter government regulation and higher Capital holding requirements.  These increased costs are being passed down to the consumer.

Okay, this is the “how” the rates are higher.. but what’s prompted these fundamentals?  Why are rates higher?

POLITICAL REASONS.. IT’S ALL POLITICS Continue reading “Mortgage rate outlook 2017.. Expect Fixed mortgage rates to go up…Expect Variable rate pricing to drop.”

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