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When the U.S. sneezes, Canada gets a cold… I’m getting the sniffles…mortgage rates are headed up.

US sneezes Canada catches coldYesterday, the U.S. Fed Chairman, Ben Bernanke, announced he ‘could’ start to ease their stimulation of the economy later this year.   That small announcement has had a huge impact on the global stock markets and bond yields.   Stock Markets are down around 2.00% around the world as of 2.30pm today.

The U.S. has been buying around $85billion worth of bonds every month in an attempt to keep interest rates low.  And with that simple announcement yesterday, the world’s markets have reacted.   Bond yields have started to climb…

Our own 5 yr Govt of Cda bond yield is up to 1.75%.  That’s up around 10bps from yesterday, and up 60bps from the beginning of May.  In fact, we haven’t seen these levels since October 2011 and again in March 2012.   We already received warnings from our Lenders that wholesale mortgage rates are likely to go up.   Remember, bond yields affect Fixed mortgage rates.. but they will have an indirect affect on Variable rates, too. Continue reading “When the U.S. sneezes, Canada gets a cold… I’m getting the sniffles…mortgage rates are headed up.”

Banks raise mortgage rates

RBC-BankRBC is raising their rates… As expected, fixed mortgage rates have gone up.  RBC is the first of the BIG SIX to raise their rates.  RBC’s 4 yr rate special will go to 3.09% from 2.99% and their 5 yr rate special will go to 3.29% from 2.99%.

Of course, these are NOT the best rates in the wholesale mortgage market, nor are they the best fixed rate products.  But RBC is the largest mortgage lender in Canada, so we must take note.   This rate increase is no surprise.  As reported on May 13th and May 28th, bond yields had increased over 30bps in May.  A rate increase was imminent.

Wholesale mortgage rates started to go up a few weeks ago.  And as of June 10th, all Lenders will have increased their rates by around 10bps.

Remember, 5 yr fixed rates are still below 3.00%.  I don’t think there is any reason to panic.  We can expect the other BIG SIX banks to follow with their own rate increases.  Fixed rates are closely tied to the Canadian govt bond yields.   And with the stock market in the U.S. hitting unexpected record highs, and the our own Toronto Stock market making significant gains, it was only a matter of time before rates moved.  Economists still believe rates won’t go up quickly.  It will take time for rates to go up significantly.

Your best interest is my only interest.

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Shhh…Interest rates are still at record lows… and Canadians are making huge prepayments.

 IT’S OKAY TO FEEL GOOD ABOUT LOW INTEREST RATES

I’m sure this isn’t what our Federal govt wants you to hear.   But it’s true… Fixed rates are in the low 3.00%s….  So why aren’t we feeling good about this?   Why isn’t everyone happy?   Record low interest rates means less interest cost to you… it means low housing costs…It means you are saving money.

A mortgage is the biggest debt most of us will ever have…  We all talk about mortgage rates with our friends, co-workers and family…. It’s a popular subject… But for some reason, we aren’t feeling good about these low rates…  It’s almost like we should be feeling a little guilty, like the cat that swallowed the canary… do you feel like that?

Could it be that we have been beaten to death with negative messages by the Federal Minister of Finance?   Housing Bubble coming!!!…. personal debt levels rising!!… higher interest rates coming…!!   Maple Leafs win Stanley cup (oops, had to throw that one in)… we’ve been talking about these same things for years… yet they haven’t happened!  I’m not saying these aren’t concerns but I think some of these have been overstated without providing enough proof or evidence.

The govt doesn’t want you to borrow at these rates…   They are afraid you would be too irresponsible and would borrow more than you could afford… (never mind the fact that you must qualify at BANK POSTED rates which are 2.00% higher than these wholesale mortgage rates…)

NEW STATISTICS SHOW WE ARE RESPONSIBLE AND NOT SHOWING ANY SIGNS OF TROUBLE

By the way… the strange part about all this “boy that cried wolf” noise from the govt, is that there really isn’t any proof that we are in trouble….  That’s right..  Mortgage Arrears are low and have been low for over a decade… Affordability is better than it was 20 years ago!   (low rates have helped but increases in income have also factored in)…

And how about this stat that just came out….Around 23% of Canadian mortgage borrowers have increased their regular mortgage payments by $400 to $500 per month.  19% are making lump sum payments of around $12,500 per year.   That works out to over $20billion in extra payments towards their mortgages.  Or put another way, over 1 million mortgage holders out of the estimated 5.85million mortgage holders in Canada are paying far more than the minimum payment.   Does this sound like a country of irresponsible borrowers? … (source Financial Post).

Either the govt’s message has sunk in, or there really wasn’t as big a problem as we were led to believe…. I’ll let you be the judge…

But we could be facing a ‘Made in Canada’ problem as this article states… .  With the govt planning to make the biggest changes in history with  mortgage and HELOC lending, they will be affecting a large segment of new borrowers but even more EXISTING borrowers… they will force a large percentage of Canadians to sell their homes, close their businesses or seek higher interest debt….  And why?  What purpose does it serve?  The stats tell us we are fine…

House prices are hot in Toronto but they are cold in the rest of Canada…  The govt is providing a solution to problem that doesn’t exist.

If you aren’t sure if you could benefit from today’s low rates,  or how these proposed new lending changes will affect you, give me a call or send me an email…  I’d be happy to discuss your options.

Steve Garganis

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