TagVariable rate

Posted August 17, 2011 Mortgage Products

Stock market drop and slight recovery.

Did you know that between July 22nd and August 8th, the TSX index dropped 14%? Did you know that since August 8th, it has recovered 9% of that loss? What a roller coaster ride…But there’s good news here…

So how will this affect your mortgage rates?

Fixed mortgage rates are priced from the 5 year Cda govt bonds.. Bond yields also dropped like a rock.. from 2.27% to 1.35% during that same time period… that’s a 0.92% decrease. A visit to TD Bank’s website shows us their ‘5 year fixed rate Special offer’ is 4.19%... no drop at all. Call a Mortgage broker and you’ll see rates of around 3.49% today.

Sure, fixed rates are very low but they should be lower…. Fixed rates are usually priced around 1.30% to 1. 70% above the 5 year bond yield… Why haven’t you seen mortgage rates keep pace with the bond yield drop? That’s not hard to figure out… The Banks are maximizing their profits… same old story…Banks are infamous for hiking rates quickly and but slow to move when it comes to cutting rates.

How about Variable rates?

Well, not much to report there… The Bank of Canada meets 8 times a year. Last meeting was July 19th. Next meeting is Sept 7th. You can forget about any immediate rate hike. Economists have done an about-face with their forecasts…. We were expecting a rate hike this September or October… That’s now been pushed back to 2012… and there were even some rumblings about a possible BOC rate cut (but I’m not sure that’s gonna happen).

At 3.00%, the Bank Prime rate is still very, very low and makes borrowing very attractive… Current Variable rate mortgages are priced at between Prime less 0.65% to 0.80%… We may not see interest rates drop, but there is no reason for them to go up for the next little while…. Enjoy the low rates.

Posted June 24, 2011 Mortgage Rates

TD Economics forecasts no Variable rate hike til 2012

This week, TD Economics said the Bank of Canada probably won’t raise rates til 2012. How quickly things can change. Just a few months ago, most Economists and Financial Experts were calling for the Bank of Canada to raise rates this summer.. some said as early as May… Well, that didn’t happen.

There are many reasons but TD’s Chief Economist, Craig Alexander, said it was low inflationary expectations, the negative impact on the European financial instability (Greece, Ireland, Spain, Portugal) and the high $Canadian dollar. We can also through in Japan’s Tsunami and the Middle East political uprising.

Fixed rates have also not gone up as the Economists were forecasting earlier this year. Instead, they have come back down to historical lows, once again… The Bond market affects fixed rates and we’ve seen the 5 year Canadian Bond drop 80 basis points since mid April.

All this is great news for borrowers as there appears to be little pressure to raise interest rates anytime soon.

Posted June 6, 2011 Mortgage News

U.S. looking at Canada’s mortgage and banking yet again..

Found this article interesting….

Canada is the envy of the world when it comes to our mortgage and banking regulations. This article in the Huffington Post questions why is there a 30 year fixed rate mortgage term and points to Canada’s mortgage and banking system as a better, more viable option.

In case you didn’t know, 30 year fixed rate terms are the norm in the U.S. 5 year Variable rate mortgages are the more common mortgage product around the world, including Canada. 200 U.S. Banks have failed since 2008… NONE in Canada… and in 1985, almost 3,000 U.S. banks failed but only 2 Canadian Banks closed their doors....

Go ahead Canada, feel good about yourselves…!

Posted May 31, 20111 Comment Interest rates

Bank of Canada leaves Key Rate unchanged

This morning marked the fourth of eight scheduled meetings for 2011 by the Bank of Canada. No surprises, the BOC left the rate unchanged. This keeps the Bank Prime rate at 3.00% and keeps those Variable rate mortgages well under 3.00%. Great news for borrowers.

In their press release, the BOC noted concerns about the high Canadian $dollar… increasing the BOC rate would probably mean an even higher $CAD, putting more pressure on Canada’s exports. The $CAD is currently $1.02US. Still, the BOC is concerned about inflation and keeping inflation within the Target Zone of between 1.00% and 3.00% has always been one of the biggest factors that drive BOC policies. “…inflation expectations remain well-anchored.”

The next BOC meeting is July 19… right now, it does not appear as though we will see any hikes until September or later…

Posted May 27, 20112 Comments Mortgage Rates

Spring market means lower mortgage rates..and some more creative financing.

A funny thing happened on our way to higher interest rates…. They did an about face and went down.

Fixed Rates

The bond market drives fixed rates… and the 5 year Govt of Canada bond market has come down around 50bps in the last month… So far, we have seen lenders reduce fixed rates by around 30bps… We are seeing 5 yr fixed rates in the 3.89% from some better lenders… and we could see a few more drops.

But we are also seeing some very interesting programs for cashback deals that are worth a look at….there is a 5 year fixed rate at 4.29% with a 2% cashback.. this one is worth looking at as it puts some cash in your pocket and gives you a good rate…

Variable Rates

Fixed rates are good for those that don’t want to worry about rates going up or down and don’t mind paying a little more for the security of fixed payment. But we can’t ignore the lower variable rate mortgages… still hovering around 2.25%…

Earlier this year, most Economists and Experts believed the Bank of Canada was going to raise the rate at their next regular meeting on May 31st.. but with weak economic data coming out of the U.S., Europe and even Canada, most now believe the Bank of Canada won’t move until September or even next year in January.

Historically, Variable rate has outperformed Fixed rates…the product choice depends your risk tolerance, goals and objectives….