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Bank of Canada dates for 2011

Happy New Year!  Wishing you all the best in 2011….

Here’s the Bank of Canada’s schedule for key interest rate announcements in 2011.

January 18, March 1, April 12, May 31, July 19, September 7, October 25, December 6.

The Bank meets eight times a year to set the Target Interest rate.   This rate directly affects the Bank Prime rate and Variable rate mortgages.  It also affects Fixed rate mortgage indirectly.

Historically, the Bank adjusts this rate up and down between 2 and 3 times a year.   In 2010, we had 3 rate increases of 0.25% each after a full 12 months of no changes.  And most experts were forecasting for even greater rate hikes…   This all changed when the economic recovery stumbled in many parts of the world, raising fears of a double dip recession.

Even today, there is still uncertainty about the economy in many parts of Europe and the U.S.   At home, in Canada, we seem to be doing well….not great, but okay.

This uncertainty is delaying the expected interest rate hikes that so many experts were calling for in 2010….  Best guess now is for rates to remain stable until April or even July.

Enjoy the low rates…!

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Bank of Canada doesn’t raise the rate

Today was the last of eight regularly scheduled meetings by the Bank of Canada (BOC).  The BOC didn’t raise their Target rate.. no surprise here.   With uncertain economic data in the U.S., Ireland and even a little shaky news in Canada, there was no chance of a rate hike.

It’s widely believed that Governor Mark Carney will not raise the rate until March 2011 at the earliest, or maybe even May 2011… possibly later…  read more here.

One thing is for certain, the longer things remain uncertain, the longer we will be enjoying these record low rates… Variable rate mortgages can be had at 2.25% and a 5 year fixed is around 3.69%.   Borrow wisely…

Posted 2 Comments on What mortgage product does your bank want you to take? Case study

What mortgage product does your bank want you to take?

Here are some interesting stats…

-A Variable rate mortgage outperforms a fixed rate mortgage in over 88% of the time… According the Milevsky study done earlier this decade and updated in 2008….

-Variable rate mortgages have been at least 1.00% lower than the 5 year fixed rate mortgage over the past 25 years….and on occasion, better by as much as 2.00%.

-Canadians move every 3 years on average…meaning they must either refinance their mortgage or pay it out.

-a Variable rate mortgage has a fixed penalty of 3 months interest.

-a 5 year fixed rate mortgage has a penalty that is at least 3 months interest but has no limit…. and in the past 18 months, we have seen penalties of 6, 10 and even 14 months worth of interest.

-yet, 66% of Canadians have a 5 year fixed rate mortgage…

Is the 5 year fixed rate mortgage really the right product for 66% of Canadians?    Can the 5 year fixed rate mortgage be the right product for everyone?  Which mortgage product do you think your bank wants you to choose?

By the way, can you guess which mortgage product is the most profitable?…. you guessed it.. the 5 year fixed rate.

Make sure your Mortgage Broker does a needs analysis before they recommend a mortgage product for you…. There is no ‘one size fits all’ when it comes to mortgages….  Ask yourself, ‘who is this mortgage best for’…. my bank or me?

Posted Interest rates

180 day rate hold at 3.73%… CMHC 2011 housing forecast

As reported earlier today, TD was the first to raise fixed rates… they are up by 0.25%.. The TD Canada Trust Broker rate is 3.94% and can be held for 120 days…  TD has been out of the game with their 5 year fixed rate for some time… Most Lenders are offering 3.49%….. But this will most definitely go up as the Bond yields are over 2.30%…click here for the chart.

There is another option that is less talked about.   A major Bank is offering a 180 day rate hold on a 5 year fixed rate for 3.73%… this may not be for everyone, but it’s an option for anyone looking to buy but hasn’t found a house… or for those with a long closing…

Interesting, CMHC released their 4th quarter forecast and were calling for moderate activity in 2011… but they also said low mortgage rates will help to drive the housing market….This latest increase shouldn’t cause panic…these are still record low interest rates…  But we’ll have to follow the trend and see if CMHC makes any adjustment in their forecast…

Posted Mortgage Rates

Banks slow to lower rates…but quick to raise them

Some things never change…..On Oct 19th, 2010, the 5 year Canadian Bond yield was 1.85%… It fluctuated up and down but staying below 2.00% until Nov 5th when it closed at 2.053%…  We were expecting the Banks to adjust their Fixed rates downward but it didn’t happen..

Since then, it has kept above 2.00% and is currently at 2.27%….  This increase in the Bond yield usually means Fixed Mortgage Rates will go up..  See the chart here.

But earlier this week, the Big Six Banks lowered their posted 5 year mortgage rate to 5.19% from 5.29%…  This is just a delayed reaction the low bond yields.. but it just goes to show that the Banks continue their pattern of reacting slowing to lowering rates but move like Formula 1 race car to raise rates..

Of course, Posted Mortgage Rates really don’t mean much as the Wholesale Market or Broker Market deals with the true rates.. And Fixed rates dropped late last week to their lowest levels ever. … 5 year fixed rates are now at around 3.49%… with some Lenders even offering 3.39%…  WOW!

Watch for Fixed rates to move upward slightly as the Bond yield is now high enough to warrant an increase…