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Variable rate is out, Fixed rates are in…. But, which term…?

Variable rate mortgageFor more than a decade, I’ve been recommending Variable rate mortgages, as the product of choice. My clients have saved $thousands.  It’s been a great 11 year run..   But now, the strategy has changed slightly.   Read on, to see my newest recommendations..

QUICK VARIABLE RATE HISTORY.

First, you need to understand the history..  Variable rate had lots of pluses.   It had a lower rate of interest, the penalty can never go over 3 months interest, and you have the option to lock into a Fixed rate at any time.

Being in a Variable meant paying lower rates.  In fact, the difference, compared with Fixed rates, ranged between 1.00% and 3.00%.  This translated to several $$thousand in less interest each year. Continue reading “Variable rate is out, Fixed rates are in…. But, which term…?”

Rates usually drop leading up to a Federal election!

Election 2015History tells us that mortgage rates usually drop leading up to an election. And 2015 has followed that trend.   It started in January of this year, when the Bank of Canada (BOC) Governor, Stephen Poloz, shocked Economists with his surprise 0.25% Bank Rate cut.

(CanadaMortgageNews.ca readers will remember, not all were shocked, as I had predicted a rate drop just days earlier).

Then in July, the BOC Govr did it again..  this time, it wasn’t as much a shock.  The Bank Prime was cut by another 0.25% after months of negative Economist data showed the Canadian economy was slowing.  Continue reading “Rates usually drop leading up to a Federal election!”

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.   Continue reading “Will Variable rates increase as Bank Prime drops?”

Bank of Canada Rate cut is positive news… don’t listen to fear mongers.

fear FEAR..!  They say fear motivates us to do things we shouldn’t.  If you’ve been reading the News Headlines for the past several weeks, you’ve been hammered with RATE HIKE FEARS!  Everyone was saying rates were gonna go up.

It wasn’t just speculation, it was a foregone conclusion.  Almost factual!   There were headlines even reporting how much of an impact these new ‘higher rates’ would affect our lives, our budgets, our house values, our savings, etc.    We saw so-called ‘Experts’ recommending we lock into long term Fixed rates!   There was one articles telling us we should consider selling out homes!   I mean if you didn’t know better, you would think the sky was falling!

Panic was starting to set in for thousands of Canadians.  I was getting calls from concerned consumers asking if they should be doing anything with regards to their mortgage, their investments, and other personal finances. Continue reading “Bank of Canada Rate cut is positive news… don’t listen to fear mongers.”

Stay away from mortgage cashback offers!

CanadianBills It’s the Spring market…  ok, the weather isn’t saying this but the real estate market is.  You’re gonna start seeing and hearing more ads on TV, radio, news sites, even finance blogs.    So here’s a some quick words of advice.  STAY AWAY FROM TODAY’S CASH BACK OFFERS!

There are a few different types of mortgage cash back offers.   The most common offer is one where the Bank or Lender gives you 5% of the mortgage balance on closing.  That’s right they give you 5% back in cash.  For example: a $400,000 mortgage would get you back $20,000 in cash.

This type of cash back does serve a purpose.  If you are a young home buyer with little or no down payment, but you have a good job and don’t want to wait to save up that down payment, then this isn’t a bad way to get in the market.  Just ask those that did this 5 years ago.   With real estate values up by around 35% to 50% in that time, this isn’t a bad deal.   Continue reading “Stay away from mortgage cashback offers!”

You heard it here first!… Rule of thumb for choosing Variable over Fixed.

First For the past few years, the Bank of Canada has warned us about the imminent interest rate hikes.   Reminds me of the boy that cried wolf.    “Interest rates are going up…  soon!…  real soon…. really, really soon!!”   But last week, the new Bank of Canada Governor, Stephen Poloz, surprised many experts when he said rates would remain low for quite a while.

This announcement prompted many advisors to jump on the Variable Rate bandwagon and start recommending Variable rate over Fixed rate.   I agree…  Variable rate is the obvious choice for most of us today.   But I also noticed a familiar rule of thumb being quoted in the media.   So I wanted to set the record straight. Continue reading “You heard it here first!… Rule of thumb for choosing Variable over Fixed.”

5 year Fixed rates are going up.. time to consider Variable rate.

graph trend upThe 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.”

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