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 »

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

Will Variable rates increase as Bank Prime drops?

where to invest  Here’s a warning to all….   Watch out for the BANKS to increase their Variable rate mortgage pricing.  History tells us that when the Bank of Canada lowers their Target Rate, and the Bank Prime falls, Variable rate mortgage pricing increases.

If you have a mortgage coming due in the next 4 months, speak with a mortgage broker to get you a rate hold immediately!

Today, you can get Prime less 0.65% on a Variable rate mortgage.  That’s 2.85% – 0.60% = 2.20%. THIS PRICE COULD DISAPPEAR!  2.20% is a great rate!   No one would argue that.  The BANKS are counting on you to be content with that 2.20% rate. On March 4th, the Bank of Canada meets again to set the Target Rate.  And all indications point to another 0.25% reduction.   Read the rest of this entry »

Variable rate increases again..

Lenders have begun to raise their Variable rate mortgages again…. The second increase in less than a month.  A look at the Bank websites and you will Variable rate pricing is now at Bank Prime less 0%….  that’s 3.00%…   And although ‘3.00%’ sounds like a good rate, a Variable rate at Bank Prime less 0% is not good.

The Banks have gone from an advertised rate of Prime less 0.65% to Prime less 0% in about one month’s time.   Of course, the best wholesale rates through mortgage brokers now sit at Prime less 0.50% and will probably go to Prime less 0.40% after the dust settles.

So what’s causing the Banks to increase their Variable rate mortgages?   They tell us there are “profitability concerns”.   In simple talk, that means they simply want to increase their profit margins now that rates are expected to stay low for some time to come.   They also want to force us to take the much mortgage profitable 5 year fixed rate mortgage, now sitting at 3.99% (RBC website special rate)..    Keep in mind, there are better rates to be had in the wholesale market…. 3.49% seems to be the best 5 year fixed rate today.

But even 3.49% is too high.  The spread between the 5 year govt of Cda bond (1.45%) and 3.49% is still over 2.00%.   Historically, this spread has been between 1.10% and 1.40%..    It’s simply math…. the Banksters are saying ‘ka-ching, ka-ching”.

%d bloggers like this: