In order to fully understand how to take advantage of record-low variable rates, it’s important to learn some mortgage history.
BMO came out swinging first a week ago with a variable rate of Prime minus 1.00%. Historically, when a BIG SIX BANK comes out with a huge price decrease, it’s only for a very short time – likely 2-3 weeks. But, during that time, they can gain massive volumes and satisfy their market share requirements from the average borrower.
With all the talk of interest rates going up, this is welcome news for borrowers. Last week, I wrote about Variable rates at Prime minus 1.09%. This week, the banks have caught on.
Continue reading “And the Variable Rate price wars begin… Here’s how you can benefit!”
The surprise Donald Trump US election win has caught many off-guard. The pollsters have been quiet to comment after they all predicted a Clinton win.
Here’s what week 1 looks like, after the Trump win. The first few days saw some chaos in the stock market. Stock market went down and so did Govt of Canada bond yields.
However within a day, the stock market began to rise. The Dow Jones hit all time record highs. The Toronto market was up also, but not as much as the US. The Canadian $ took a bit of a beating. And the Govt of Canada bond yields started to rise. This last one is important to watch.
Fixed mortgage rates are closely tied to govt of Canada bond yields. We’ve now seen Bond yields increase by over 0.35%. that’s a huge increase in such a short period of time. Banks and Mortgage Lenders have begun to increase fixed mortgage rates.
Investors are betting on Trump stimulating the US economy and taking no foreign prisoners. That’s caused some jitters in the markets. I’m watching the markets closely. This could just be a short term reaction. Or, it could be an adjustment to the record low mortgage rates.
MY VIEW… Continue reading “Unexpected Trump win on Canadian mortgage rates and market.”
Fixed mortgage rates went up this week on the wholesale market. Only about a 0.10% increase… We are still way below 3.00% for 5 yr fixed rates. Hey, that’s pretty good! (watch for the media to blow it out of proportion soon.. they seem to love feeding on negativity).
Thought I’d share some quick numbers.. Did you know that a $300k mortgage will still carry for $1380/mth? And that’s with a 25 yr amortization. If we go to a 30 year amort, the payment drops to $1221/mth.
Let’s increase the mortgage to $400k.. payments are $1840/mth and $1628/mth for a 25 and 30 year amortization, respectively. Hey, these are still incredibly low mortgage rates. Anything under 4.00% should be considered a gift. (I’ll get into what Canada’s wealthy are doing in a few moments) Continue reading “Mortgage cost today is $1380/mth for every $300k… and sharing high net worth secrets.”
Fixed 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… Continue reading “Bond Yields are up… will Fixed Mortgage rates follow?”
August real estate resale numbers are in…. and what a jump! Up 21% in the Greater Toronto Area and an incredible 52% in Vancouver. And here’s another interesting stat. The average home price in Toronto is $505,000. That’s a 5.5% increase from the previous month.
REAL ESTATE SALES DRIVEN BY HIGHER RATES..
But here are my thoughts on what caused the increased sales. I think it has more to do with the steady mortgage rate increases that we’ve seen since May. You see, most Lenders and Banks will offer rate holds of 120 days. So that means you could have got a 5 year fixed rate mortgage preapproval in May for under 3.00%…. Those record low Fixed rates definitely forced many homebuyers to buy for fear they could miss out on the low rates. Continue reading “Real estate sales up 21% and 52% due to end of low fixed rates.”
The 5 yr Gov of Cda bond yields hit a 2 yr high on Friday reaching just over 2.00%. That’s up around 0.35% since mid July and up around 0.75% since May. The increase started in May when the U.S. Federal Bank Chair, Ben Bernanke, made some comments about possible easing of the Fed’s stimulus program beginning as early as September.
Fixed mortgage rates are closely tied to the Gov of Cda bond yield. When the yield goes up, mortgage rates are sure to follow. With 5 yr fixed rates expected to rise, it makes for an interesting mortgage market. Which product and term is best to choose today? The answer is different for everyone. We all have different needs, goals and risk tolerances. Continue reading “5 year Fixed rates are going up.. time to consider Variable rate.”