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TagVariable rate

Posted Interest rates

Fixed vs Variable in 2011

FIXED RATES MAKE MORE SENSE TODAY.

If you were  in a Variable rate mortgage over the last 2, 3, 5, 10 years or longer….then you paid less interest than someone in a Fixed rate product.   You probably saved $$thousands each and every year.    Variable rate has been lower than the 5 year fixed rate in over 88% of the time.

But how about today….?  Well, the Banks have changed the mortgage landscape.   They have decided there isn’t enough profit in Variable rate mortgages.    Up until 6 months ago, anyone needing a new mortgage could get a Variable rate at Bank Prime (3.00%) less 0.75% and maybe even a little better..!    If you took a Variable rate 4 years ago, you might still be enjoying Prime less 0.90%!!   Today, a quick search on the net for Variable rate pricing and you’ll find Bank Prime less 0%…. some are actually charging Bank Prime + 0.15%.

But it’s not all bad news.   With the bond market hitting all time lows, we are also experiencing historical low 5 year fixed rates.   Today, the best 5 year fixed rate seems to be 3.39%  (WORD OF WARNING… there are some NO FRILLS rates of 3.19% or lower being advertised out there… these NO FRILLS products carry limited or no prepayment privileges and you cannot exit these product without selling your home.   We are not quoting those rates).

Any upward movement in the Bank Prime rate and you could actually be paying more for that Variable rate vs today’s 5 year Fixed rate.   Yes, today we must consider Fixed rate as a good option…. Just make sure you are choosing the appropriate term.   Anything shorter than 3 years does not seem to give enough of a rate guarantee for most of us.  Anything longer than 5 years is too costly.   5 years seems to be a good option in most cases.  But not for all… we are all different and have different needs… speak to a Mortgage Broker to review all available products and decide which one fits you best.

My guess is that Variable rate pricing will continue to be priced at Bank Prime for the next 6 months to 12 months or at least until Bank Prime moves up or until one of the Banks is losing too much market share and wants to attract more business.

We will be watching and reporting.

Posted Interest rates

BMO Economist forecast no rate hikes til 2013

More good news…. interest rates are not expected to increase til 2013, according to Bank of Montreal.

Really no surprise here.  The global economy is not doing well.  But here in Canada, the economy is performing relatively well.   The only reason our stock market and Canadian $ are down is because of the uncertainty of the European debt crisis.

5 year fixed rates are hovering at 3.39%… and they are even lower for qualified borrowers…. Variable rates are at around 2.60%…  We are in record low territory.

Did you know a $300,000 mortgage will carry for as little as $1199/month?   Hey, if you’re paying $1400/mth for rent, then why not consider buying place of your own…  And for those that want off the stock market roller coaster, a rental property may just be what you need…  Best thing is to talk to a Mortgage Broker, crunch the numbers and see how it looks.   It’s probably easier than you think.

Posted Interest rates

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”.

Posted Mortgage News

More Banks raise their variable rates

BMO has joined RBC in raising their Variable rate mortgage pricing. The Financial Post reports that BMO raised their Variable rate mortgages from Prime 015% to Prime less 0%.

Can you say, ‘we want to force borrowers into the more profitable 5 year fixed rate products’???  That’s right.. The Banks would rather see you in a 4.00% rate vs. a 2.25% rate…  And why not?  They are a business after all.

We have also just received reports from other wholesale lenders that they will raise their pricing as well…  If you were looking at buying a house, refinancing your mortgage or had a mortgage coming up for renewal in the next 4 months, I would suggest you speak with your Mortgage Broker and get some rates locked in…

It’s important to understand, the Bank of Canada is not likely to raise their rate anytime soon.   Bank Prime remains at 3.00%.  We are seeing the Bank Economists tell us they think the economy will remain slow… The Banks do not make as much profit with the low Variable rate mortgages… They want and prefer you to take a 5 year fixed.. these are the most profitable mortgage products for them.

So  the bad news is Lenders will raise their Variable rates slightly, the good news is that we are probably going to continue to enjoy mortgage rates under 3.00% for some time to come…..

Posted Mortgage News

RBC raises their Variable rate mortgage pricing.

Earlier this year, we saw a few lenders raise their Variable rate pricing from Prime less 0.75% to Prime less 0.50%…. Most other lenders did not follow.. But it made us wonder if there was some concern that the Bank of Canada might hold off on any increases in the  Bank Prime this year, as was widely forecast by most Experts….

Sure enough, the recent stock market collapse, the European and US debt crisis has put any potential rate hikes on the back burner with most Economists forecasting for no increases until next year…

Fast forward to today… The Financial Post reported that RBC would increase their pricing from Prime less 0.65% to Prime less 0.45%.   This move would indicate that the RBC Economists think the Bank of Canada is not in any hurry to raise the Prime rate…. or they believe the BOC may even lower the rate at some point…

Mortgage Brokers still have access to better priced Variable rate products through their wholesale channels but will other Lenders raise their pricing in the coming weeks?   We’ll be watching and will let you know…