Yesterday, the bond yields hit their highest levels since January 14th where rates were higher (fixed mortgage rates are determined by bond yields). On January 14, 2014, 5 year fixed rates were in the 3.39% - 3.49% range. Compare that with today's lowest 5 year fixed of 2.84%. This puts SERIOUS upward pressure on fixed mortgage rates. If you haven't locked in a mortgage rate yet, now is a good time to do so without delay.
In addition to the 5 year fixed at 2.84% (for CMHC insured mortgages only - 2.89% for conventional), there is also a 3 year fixed at 2.49%, which is a great product and is also a great alternative to variable for those unsure. The lowest variable rate is prime -0.65% (2.35%), so the fixed is only 0.14% higher. A single increase, and you are behind on rate. At the end of three years, THEN take a look at variable again to see if there are better options at that time. It's a solid plan.
If you have a mortgage closing coming up, or are just starting to shop for a home, get a mortgage rate locked up as soon as you can to ensure you get the lowest rate possible.
Please visit www.easy123mortgage.ca for more information!
Subscribe To
Posts
All Comments
Thursday, 3 April 2014
Friday, 28 February 2014
CMHC to raise mortgage insurance premiums
CMHC (Canadian Mortgage and Housing Corporation) announced today that
they will be raising their premiums effective May 1st, 2014.
This does not affect current homeowners, only those who will be purchasing with less than 20% down payment.
Here is the link to the article: http://business.financialpost.com/2014/02/28/cmhc-mortgage-premiums/
The article doesn't state the percentage they will increase it, only that it will cost the average homebuyer requiring the insurance approximately $5 more per month. It sounds like this will result in an increase of between 0.25% and 0.50% to me. Currently, the premium with 5% down payment is 2.75%.
I think it is very unlikely this will have any impact on the real estate market and it is still expected that we will have a strong 2014.
For those looking to purchase and get in ahead of the increase, you will need to have your new mortgage set up prior to May 1st. This means anyone who has not made a decision on a property will need to do so by this time. The race is on!
This does not affect current homeowners, only those who will be purchasing with less than 20% down payment.
Here is the link to the article: http://business.financialpost.com/2014/02/28/cmhc-mortgage-premiums/
The article doesn't state the percentage they will increase it, only that it will cost the average homebuyer requiring the insurance approximately $5 more per month. It sounds like this will result in an increase of between 0.25% and 0.50% to me. Currently, the premium with 5% down payment is 2.75%.
I think it is very unlikely this will have any impact on the real estate market and it is still expected that we will have a strong 2014.
For those looking to purchase and get in ahead of the increase, you will need to have your new mortgage set up prior to May 1st. This means anyone who has not made a decision on a property will need to do so by this time. The race is on!
Thursday, 5 December 2013
Don't sign your mortgage renewal paper!
When your mortgage comes up for renewal, your bank sends you out a renewal agreement for you to sign to keep your mortgage with them. There is a large percentage of borrowers that will just sign the paperwork and return it to their bank without even thinking twice.
The bank knows this, so it is likely you won't the lowest market rate on your renewal statement if you are with one of the big banks. Often, they send it in at 'posted rates'. It is not uncommon for posted rates to be a full two percent higher than the banks discounted rates!
If you take a $300,000 mortgage amortized over 25 years and compare the banks posted 5 year fixed rate of 5.34% vs. today's lowest 5 year fixed rate of 3.25%, you get a difference of $31,696.89 at the end of the 5 year term! Can you say 'new car?'
You work hard enough for your money to just go and offer the bank a nice 'bonus' for essentially nothing. Just because you didn't shop around or so much as pick up the phone to ask them if they could do better. Just recently I had a client in the same situation where the bank was quoting them 1.5% higher than I was able to get them.... with the same bank!
When your mortgage comes up for renewal, make sure you take the time to find out if you are being offered a fair rate or if your bank is trying to gauge you. It can very often be the latter.
The bank knows this, so it is likely you won't the lowest market rate on your renewal statement if you are with one of the big banks. Often, they send it in at 'posted rates'. It is not uncommon for posted rates to be a full two percent higher than the banks discounted rates!
If you take a $300,000 mortgage amortized over 25 years and compare the banks posted 5 year fixed rate of 5.34% vs. today's lowest 5 year fixed rate of 3.25%, you get a difference of $31,696.89 at the end of the 5 year term! Can you say 'new car?'
You work hard enough for your money to just go and offer the bank a nice 'bonus' for essentially nothing. Just because you didn't shop around or so much as pick up the phone to ask them if they could do better. Just recently I had a client in the same situation where the bank was quoting them 1.5% higher than I was able to get them.... with the same bank!
When your mortgage comes up for renewal, make sure you take the time to find out if you are being offered a fair rate or if your bank is trying to gauge you. It can very often be the latter.
Wednesday, 4 September 2013
No change to prime rate, but fixed mortgage rates, whoa!
No
surprise at all that the The Bank of Canada once again maintains it's
overnight rate following their interest rate announcement at 10:00am
this morning (Wednesday, September 4th, 2013). The rate has been unchanged now since September 2010 adding to the longest unchanged streak since the 1950's.
This means the prime rate on your mortgage or line of credit will
remain unchanged at 3.00% and your payment will not change.
Here is an excerpt from the announcement made by the Bank of Canada and what they had to say about their decision:
"The
global economy continues to expand broadly as expected, but its dynamic
has moderated. In the United States, the process of normalization of
long-term interest rates has begun in the context of stronger private
domestic demand. Recent data, however, point to slightly less momentum
overall than anticipated. In Europe, there are early signs of a
recovery, and Japan's situation remains promising. In a number of
emerging market economies, financial volatility has increased, adding
uncertainty to growth prospects, although China continues to grow at a
solid pace."
The past few reports have all talked about growth and continued growth in our economy which is definitely great news as it points toward recovery. A light at the end of the tunnel!
The past few reports have all talked about growth and continued growth in our economy which is definitely great news as it points toward recovery. A light at the end of the tunnel!
This decision doesn't affect fixed mortgage rates, which have had significant increases over the past few months. While
variable rate mortgages and lines of credit are affected by prime
rate, fixed mortgage rates are determined by bond yields which have
been rising precipitously since the beginning of may. This is the reason
for the increases. You can still however you can still get a 5
year fixed mortgage for as low as 3.29% while market rates are between
3.59% - 3.69%. While these rates may even sound high due to where they
were over the past year, they are still extremely low by historical
standards. Will fixed rates go higher? If the bond yields continue to
trend upwards, then for sure they will.
We
are now starting to see deeper discounts to variable rate causing it to
become popular once again. You can now get a variable rate for as low
as prime -0.45%. It may also be a great time to consolidate any higher
interest debt into your mortgage to take advantage of such low rates
and lowering your overall monthly payment and amount of interest you are
paying significantly.
You
can read about the Bank of Canada's decision here:
http://www.bankofcanada.ca/2013/09/publications/press-releases/fad-press-release-2013-09-04/
Wednesday, 29 May 2013
Prime rate remains unchanged, but fixed mortgage rates to increase
The Bank of Canada once again (and to no surprise) maintains it's
overnight rate following their interest rate announcement at 10:00am
this morning (Wednesday, May29, 2013). This means the prime rate on
your mortgage or line of credit will remain unchanged at 3.00% and your
payment will not change. The rate has been unchanged now since
September 2010 adding to the longest unchanged streak since the 1950's.
Here is an excerpt from the announcement made by the Bank of Canada and what they had to say about their decision:
"In Canada, recent economic indicators suggest that growth in the first quarter was stronger than the Bank projected in April. For the year as a whole, growth is expected to remain broadly in line with the Bank's MPR forecast. Over the projection horizon, consumer spending is expected to grow at a moderate pace, business investment to grow solidly, and residential investment to decline further from historically high levels. Growth in total household credit is slowing and the Bank continues to expect that the household debt-to-income ratio will stabilize near current levels. Exports are projected to continue to recover, but to be restrained by subdued foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar."
The past few reports have talked about growth and continued growth in our economy which is definitely great news.
This decision doesn't affect fixed mortgage rates, which remain as low as 2.69% for a 5 year fixed. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which have been rising precipitously since the beginning of may. This places upward pressure on fixed mortgage rates, which have been virtually unchanged since early March, however some lenders have already made moves with some increases, and more may follow if this trend continues. The bond yields were up sharply yesterday pushing them through resistance. We could see increases to fixed mortgage rates as early as this week.
Given this information, I would recommend anyone currently enjoying a deeper discount (prime -0.50 or more) to stay where they are, unless they are feeling uncomfortable with all the economic volatility. Anyone with less of a discount may want to consider switching to take advantage of today's historical low rates, which may be very similar to what you are paying right now, however it will give you protection against future rate increases. It may also be a great time to consolidate any higher interest debt into your mortgage to take advantage of such low rates and lowering your overall monthly payment and amount of interest you are paying significantly.
The next interest rate announcement will be on July 17th, 2013, at which point I will be in touch once again.
Here is an excerpt from the announcement made by the Bank of Canada and what they had to say about their decision:
"In Canada, recent economic indicators suggest that growth in the first quarter was stronger than the Bank projected in April. For the year as a whole, growth is expected to remain broadly in line with the Bank's MPR forecast. Over the projection horizon, consumer spending is expected to grow at a moderate pace, business investment to grow solidly, and residential investment to decline further from historically high levels. Growth in total household credit is slowing and the Bank continues to expect that the household debt-to-income ratio will stabilize near current levels. Exports are projected to continue to recover, but to be restrained by subdued foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar."
The past few reports have talked about growth and continued growth in our economy which is definitely great news.
This decision doesn't affect fixed mortgage rates, which remain as low as 2.69% for a 5 year fixed. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which have been rising precipitously since the beginning of may. This places upward pressure on fixed mortgage rates, which have been virtually unchanged since early March, however some lenders have already made moves with some increases, and more may follow if this trend continues. The bond yields were up sharply yesterday pushing them through resistance. We could see increases to fixed mortgage rates as early as this week.
Given this information, I would recommend anyone currently enjoying a deeper discount (prime -0.50 or more) to stay where they are, unless they are feeling uncomfortable with all the economic volatility. Anyone with less of a discount may want to consider switching to take advantage of today's historical low rates, which may be very similar to what you are paying right now, however it will give you protection against future rate increases. It may also be a great time to consolidate any higher interest debt into your mortgage to take advantage of such low rates and lowering your overall monthly payment and amount of interest you are paying significantly.
The next interest rate announcement will be on July 17th, 2013, at which point I will be in touch once again.
Thursday, 25 April 2013
It's mortgage rate war!
A mortgage rate war is enough to put a big smile on the face of
anyone needing a mortgage for purchase, renewal or refinancing and that
is exactly the situation we are in right now. It's actually crazy out
there right now!
Bond yields, which are how fixed mortgage rates are determined, have been trending downward steeply once again and have been doing so since mid-march and are just now starting to level off. The drop in the yields has placed downward pressure on fixed mortgage rates and has sparked a new rate war amongst banks and other mortgage lenders.
The problem banks are having right now as they can't promote lower rates without coming under scrutiny by our beloved finance minister Jim Flaherty (okay, maybe 'beloved' is a little strong). He lashed out at Manulife Financial last month for offering 2.89% for 5 year fixed even though TD had dropped their 5 year fixed to the same rate weeks before. Other lenders have had lower than the 2.89% even before that.
By castigating banks for dropping their rates below the three percent threshold, it forces them to keep their rates artificially high which of course comes at the expense of many unsuspecting consumers and can significantly boost profits for banks. I am sure the banks aren't complaining.
2.99% for a 5 year fixed is something that many consumers still get excited about, however this is a rate that has been available for over a year now and is nothing special in today's market. To the unsuspecting mortgage shopper, it can seem like their bank is giving them a 'discount' if they don't do their due diligence and at least take a small peak around. It isn't hard to find rates much lower than 2.99% and can currently be found as low as 2.64% on a 5 year fixed. Who would have ever thought we would have seen them quite that low?
Bond yields, which are how fixed mortgage rates are determined, have been trending downward steeply once again and have been doing so since mid-march and are just now starting to level off. The drop in the yields has placed downward pressure on fixed mortgage rates and has sparked a new rate war amongst banks and other mortgage lenders.
The problem banks are having right now as they can't promote lower rates without coming under scrutiny by our beloved finance minister Jim Flaherty (okay, maybe 'beloved' is a little strong). He lashed out at Manulife Financial last month for offering 2.89% for 5 year fixed even though TD had dropped their 5 year fixed to the same rate weeks before. Other lenders have had lower than the 2.89% even before that.
By castigating banks for dropping their rates below the three percent threshold, it forces them to keep their rates artificially high which of course comes at the expense of many unsuspecting consumers and can significantly boost profits for banks. I am sure the banks aren't complaining.
2.99% for a 5 year fixed is something that many consumers still get excited about, however this is a rate that has been available for over a year now and is nothing special in today's market. To the unsuspecting mortgage shopper, it can seem like their bank is giving them a 'discount' if they don't do their due diligence and at least take a small peak around. It isn't hard to find rates much lower than 2.99% and can currently be found as low as 2.64% on a 5 year fixed. Who would have ever thought we would have seen them quite that low?
Tuesday, 26 February 2013
Why 10 year mortgages don't make sense
About a year ago, 10 year mortgages dipped below the 4% mark, which led many to jump towards 10 year mortgages. As mortgage agents and brokers, we get paid more for selling these mortgages, so if you are considering a 10 year mortgage, make sure your broker or mortgage banker lays all the numbers out for you so you can make an accurate decision and never just go on a 'recommendation' without getting all the facts.
For example, let's say you are considering a 10 year fixed mortgage at 3.89% vs. a 5 year fixed at today's lowest rate of 2.84%. At the end of the first 5 years, you will already be $15,647.75 ahead with the 5 year mortgage than with the 10 year (assuming monthly payments and a 25 year amortization with no extra payments made). Edit: Based on a mortgage amount of $300,000.
The break even rate in the above situation is 5.41%. This means, for you to come out ahead with the 10 year mortgage, the 5 year fixed rate at the end of the first 5 years would have to be higher than 5.41%. If it is lower than that, then you lose. That is a pretty big gamble. If you end up breaking your mortgage at the 5 year mark (most don't even make it that far), then the 10 year mortgage just cost you over $15K PLUS your penalty to break the mortgage.
While 5 year fixed mortgages very well may be higher in 5 years than the are now, I wouldn't expect them to start skyrocketing anytime soon. Given the state of the global economy, it is going to take years before we climb out of this mess. The situation in Europe isn't getting any better, an Europe is just taking the focus off of the United States, who are in equally in bad shape. Could 5 year fixed rates be higher than 5.41% at the end of 5 years? Anything can happen, but there is a good chance that they won't be. If they are, then there may be other attractive options open to us at that time as well. Perhaps variable rates will start looking better again (they are already improving with rates as low as prime -0.50%), or even shorter term mortgages may be an option as well. Time will tell, but a 10 year mortgage would be quite a big gamble. You 'may' win, but you would have to stay in for the full 10 years to get any benefit, and that alone is a big gamble.
For example, let's say you are considering a 10 year fixed mortgage at 3.89% vs. a 5 year fixed at today's lowest rate of 2.84%. At the end of the first 5 years, you will already be $15,647.75 ahead with the 5 year mortgage than with the 10 year (assuming monthly payments and a 25 year amortization with no extra payments made). Edit: Based on a mortgage amount of $300,000.
The break even rate in the above situation is 5.41%. This means, for you to come out ahead with the 10 year mortgage, the 5 year fixed rate at the end of the first 5 years would have to be higher than 5.41%. If it is lower than that, then you lose. That is a pretty big gamble. If you end up breaking your mortgage at the 5 year mark (most don't even make it that far), then the 10 year mortgage just cost you over $15K PLUS your penalty to break the mortgage.
While 5 year fixed mortgages very well may be higher in 5 years than the are now, I wouldn't expect them to start skyrocketing anytime soon. Given the state of the global economy, it is going to take years before we climb out of this mess. The situation in Europe isn't getting any better, an Europe is just taking the focus off of the United States, who are in equally in bad shape. Could 5 year fixed rates be higher than 5.41% at the end of 5 years? Anything can happen, but there is a good chance that they won't be. If they are, then there may be other attractive options open to us at that time as well. Perhaps variable rates will start looking better again (they are already improving with rates as low as prime -0.50%), or even shorter term mortgages may be an option as well. Time will tell, but a 10 year mortgage would be quite a big gamble. You 'may' win, but you would have to stay in for the full 10 years to get any benefit, and that alone is a big gamble.
Subscribe to:
Posts (Atom)