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Tagvariable rate mortgages

Bank of Canada says no rate hikes, but possible rate drops!!

stephen poloz  Last week, the Bank of Canada governor, Stephen Poloz, held the first of 8 scheduled meetings to set the Target Rate.    This is the rate used to set the Bank Prime rate which currently sits at 3.00%.   No surprise, no change in the rate.  It has been the same since Sept 2010.

From 2011 to 2013, the previous Bank of Canada governor, Mark Carney, continually announced of a pending rate increase.   But late last year, Poloz changed the tide when he announced it could be a few years before rates go up.   One of the key drivers for rate hikes is inflation.  The BoC target for inflation is between 1% and 3%.  If inflation goes above 3%, we can expect rate hikes.

Inflation is not a concern.  In fact, there are concerns about deflation as the current inflation rate sit at 1.2%.  Some experts believe we could see the BoC rate drop.  Great news for anyone in a Variable rate.   We are also seeing the govt of Cda bond yields drop.   Friday’s close was down to 1.59% for 5 yr bonds.  Haven’t seen that level since June 2013.   This means Fixed mortgage rates will probably go down further. Continue reading “Bank of Canada says no rate hikes, but possible rate drops!!”

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.”

Real estate sales up 21% and 52% due to end of low fixed rates.

home-prices-upAugust 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.”

Choose short term money for long term gains.

short termOnly recently has 5 year fixed rate become a product worth considering when it comes to paying the least amount of interest on your mortgage.   Studies prove that short term mortgage funds are the cheapest way to finance a house.. this includes Variable rate mortgages.

Historically, Variable rate and short term fixed rates have had lower rates than long term rates.   And yet, the BIG SIX BANKS, the Federal govt, and several popular finance experts have preached 5 yr fixed.  ‘You must take 5 year fixed so you know what your rate is.’   That’s a load of nonsense.   It’s true, that over the past 2 years, 5 yr fixed did make more sense given that the spread between Variable and Fixed was less than my target of 1.00%.  (I like to see a 1.00% spread between Variable and 5 yr fixed before recommending Variable).    Continue reading “Choose short term money for long term gains.”

Time to look at Variable Rates again.

Variable rate mortgage

With fixed rates up around 0.60% over the last 4 weeks (currently at around 3.49%.. there are some lower rates but these come with conditions so we are using the more widely available rate) we must again take a look at Variable rates.   Today’s best Variable rate product is sitting at around Prime less 0.40% … there’s even a few promotional Variables at Prime less 0.50% for qualified applicants.   But for this article we will stick with Prime less 0.40%.  That’s 2.60% today.  We are almost at that 1.00% spread that I like to see.

Two years ago, the best Variable rate was at Prime less 0.75% with the option to lock into the BEST discounted fixed rate at any time (this option is important, don’t ever settle for a variable product that doesn’t have this clause).   And 5 years ago, we had Variable rate products as low at Prime less 0.90%. Continue reading “Time to look at Variable Rates again.”

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