This mornings interest rate announcement.... a disappointment?

There have been predictions that the prime rate will drop again before spring, however it looks like we'll have to wait a little longer to see if another cut actually comes to fruition. The Bank of Canada announced this morning that they will be maintaining their overnight rate, which is the rate prime is based on. The announcement came at 10am this morning. (March 9, 2016). There has been much speculation that there would be a cut this time around with many economists predicting a 50/50 chance. I interpret that as them telling us that our guess is as good as theirs!

There is still a chance that we will see a decrease to prime before the spring time, although I would say chances of this are dwindling. One of the reasons for their decision this morning is due to their expectations that global growth will continue throughout the year and into the next. 

For now, the prime rate remains 2.70%. 

While the discounts off prime have been shrinking since late summer, you can still get a variable rate as low as prime -0.60%.

Prime rate and fixed mortgage rates are unrelated. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which have declined steeply since the beginning of the year.

5 year fixed mortgages have now fallen as low as 2.39%

You can read about the announcement here:  http://www.bankofcanada.ca/2016/03/f...se-2016-03-09/

The next interest rate announcement will be on April 13th, 2016

The first of the year and most anticipated interest rate announcements in recent years came this morning at 10:00am  (January 20, 2016).  The decision is that the Bank of Canada will be maintaining it's overnight rate, which means there will be no changes to prime rate.  There was much speculation that there would be a cut this time around with many economists predicting a 50/50 chance.  Really just another way of them saying that your guess is as good as theirs. 

There is still a good chance that we will see a decrease again to prime before the spring time.  Even if they were to cut the rate, it will be interesting to see how banks react. There is some speculation that banks will simply ignore another rate cut.  We'll see. There were two cuts to prime rate early in 2015 and banks have yet to match the full cut.

For now, the prime rate remains 2.70%. 

There has not been an increase to prime rate since September 2010 which is the longest streak in history.

This discounts on variable rate mortgages have been shrinking since August, likely do to anticipation of another rate cut.  You can still get a variable rate as low as prime -0.60% with most banks being at around prime -0.10%.  A huge gap.

Prime rate and fixed mortgage rates are unrelated. While variable rate mortgages and lines of credit are affected by prime rate, fixed mortgage rates are determined by bond yields which have declined steeply since the beginning of the year.

5 year fixed mortgages are available as low as 2.49%

With mortgage rates at such ridiculously low levels, now 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 announcement here:  http://www.bankofcanada.ca/2016/01/fad-press-release-2016-01-20/

The next interest rate announcement will be on March 9th, 2016

Changes to down payment regulation

Rumours surrounding changes to minimum down payment requirements has now been finalized.  Finance minister Bill Morneau announced today that the changes will be implemented effective February 15th. 

The minimum down payment will remain 5% for any purchase up to $500,000.  For anything over $500,000, it will be 10%, but only on the amount exceeding $500,000. 

For example, if you are purchasing a home for $750,000, you'll need 5% for the first $500,000 and 10% on the remaining $250,000 making the minimum down payment on this purchase $50,000. 

You will still be able to purchase a home up to $1,000,000 with 5% down until February 15th.  Purchases over $1,000,000 still require 20% down.

The reasoning is to increase homeowner equity.  Personally, I think this move will have very little effect... other than making it more difficult for first time homebuyers especially.  

Fixed mortgage rates rising!

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!

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!

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.

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!

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/