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 Read the rest of this entry »

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 Read the rest of this entry »

New record low fixed rates… how low can they go?

record low rates5 yr fixed rates just got better.  With last weeks U.S. Fed chair, Janet Yellen, saying these low rates are the ‘new normal’, the markets reacted.

Bond yields are down and that has moved fixed rates lower.   The best full featured, no handcuffs 5 yr fixed rate is 2.49% (yes, some fast closing specials exist but 2.49% is the best today).  (oh, by the way, Yellen wasn’t the first govt rep to say this.  Our own Senior Deputy Governor for the Bank of Canada, Carolyn Wilkins, said this 2 yrs ago.. Go Canada!)

Hard to believe they keep going lower.  Does that mean we should jump into a 5 yr fixed?  For some, yes. But for many of us, no.    For over a decade, I’ve recommended Variable rate or a short term priced products.   History has proven that short term priced products result in lower cost to the borrower.

However, there is something to be said for peace of mind.  Many of us want to set it and forget it.   For those that can’t sleep at night or for those that are borrowing to invest, then perhaps, 5 yr fixed makes sense.

If you really want to know what’s best for you and your situation, you must speak with an unbiased mortgage professional.   A Mortgage Broker doesn’t work for any one Bank.  They work for you.  They will give you unbiased, neutral advice and they can offer hundreds of different 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

Mortgage rates went up…. but why? And will they continue to go up?

fearup down graph

A month ago, I said Fixed mortgage rates probably hit the bottom.   A week later, fixed mortgage rates started to go up… around 0.20% over the past 3 weeks.  Variable rate mortgage pricing has gone from Prime less 0.65% to Prime less Prime less 0.40%.

Now, here’s the thing….  I don’t think rates will skyrocket over the next 6 or 12 months, like the pessimists would have you believe.  I think mortgage rates hit the bottom….BUT, they probably won’t go up very quickly.

In fact, the forecast now is for the Bank of Canada rate to stay the same until 2017.   This is just another example of how the world has become a smaller place.  If someone sneezes in Germany, we catch a cold.  With most of the global economies just getting by, there isn’t much reason for mortgage rates to go crazy.   They should remain low.

The key driver for rates going up recently is nothing more than profit taking.  Banks have had a great year… In case you didn’t know.  That’s right.. we seem to forget that 2015 was one of the best years on record for real estate and mortgage volume…  and house prices have never been higher.    Funny how that seems to get lost in the media reports.

Look for Variable rate pricing to fall in the new year…  Fixed rates could also come down slightly, but don’t count on them hitting the record lows that we saw this summer.   Hey, that’s not to say rates are bad.   We are still well under 3.00%.   These are ridiculously low mortgage rates.    Enjoy them while you can.

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

Trudeau sworn in as new PM, and bond yields jump leading to higher fixed mortgage rates!

Trudeal Liberal majorityYesterday, our new Prime Minister gets sworn in.  Justin Trudeau is Canada’s 23rd Prime Minister.   Some interesting facts…  Bond yields have gone up significantly in the last 2 weeks, since the election.  Fixed rates are priced directly from the Govt of Cda Bond yields.  If the yields go up, then fixed mortgage rates go up.  If they go down, then fixed mortgage rates go down.

Since the election on Oct 19, the bond yields have made a steady climb upwards.  Going from around 0.80% to 0.97% today..     Investors seem to think the Trudeau govt will keep it’s promise and spend our way to prosperity.   The concern is that if the govt of Canada increases its borrowing, the borrowing costs will go up.  Meaning it will cost the govt more, which in turn affects personal borrowing costs.   That’s you and I.

Watch for fixed mortgage rates to climb over the next month or so.  Right now, the increase is expected to be minimal…. but that could change.

I’ll be watching and reporting how this plays out.   Let’s hope the campaign promise of increasing the deficit was one of those promises that doesn’t get honored.   If you want to keep borrowing costs low, then you also want less govt, not more.

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

Bond Yields are up… will Fixed Mortgage rates follow?

graph trend upFixed mortgage rates are tied closely to the Govt of Cda bond yields.   And bond yields are up…  Since mid April, the 5 yr Gov of Cda bond yield has gone from 0.75% to 1.07%.   That’s a 0.32% jump.   Normally, we would see fixed mortgage rates go up.

So far, no increase.  But that’s probably more to do with a competitive Spring housing market.   This is when most house sales and mortgage transactions take place.   The Banks need to maintain certain market share levels in order to keep shareholders happy.    They are willing to sacrifice a little profit margin (and I do mean little… they seem to make up for this with higher service fees as was recently reported, but let’s not get into that now…).

If the bond yields continue to increase, we will see fixed mortgage rates rise.  That’s an automatic.   The real question is how long will the bond yields continue their climb?   It will be interesting to watch the next few months.   We can expect to see some rate increases as the Spring market ends and Banks look to increase their profit…. A pattern that repeats itself year after year..   but here’s what you can do to protect yourself… Read the rest of this entry »

2.99% is back… does that mean we should take it?

record low rates5 year fixed @ 2.99% is back.   This is NOT a NO FRILLS product (for those of you that saw a similar rate elsewhere earlier this year) but there is tougher qualifying.   This seems to have become an annual event.  For the past 3 years, we’ve seen 2.99% or less, being offered each Spring.   So, why haven’t rates gone up like the Bank’s economists, government analysts and other so-called ‘experts’ had predicted?

There are several reasons but, to sum it all up, the global economies haven’t recovered from the 2008 recession.    The US recovery is slower than expected.   Canada’s inflation rate is below target levels.   There were even concerns we could see deflation, which would cause the Bank of Canada to lower rates… those concerns have gone away…. for now!

WHAT’S THE FORECAST NOW?

Read the rest of this entry »

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