Five year fixed mortgage rates have dropped again this morning! This is a great opportunity for anybody in the market to purchase a home, refinance their mortgage, or have an upcoming renewal! Lock in today’s rates now! Protect yourself now by locking in to today’s low rates! If rates continue to fall you will always be able to take advantage of the lowest rate at signing. Take Action Now!

Don’t have cash for a down payment?  Don’t worry…if you have RRSP’s and you are wanting to purchase your first home…the Canadian Government has a program designed especially for you!  Watch the video below to learn how to use your RRSP’s to help purchase your first home.

For the detailed report, please click RBC Housing Affordability Report!

This episode of the Mortgage Minute begins to decode the language used when applying for your mortgage.  Knowing “mortgage” language gives you a leg up when trying to understand your mortgage and how to personalize your mortgage to your situation.  This video explains the difference between amortization and term as it applies to your mortgage!

August 17th – Canadian 5 yr bond yields -.03bps to 2.58. The spread, based on 5 yr rate of 4.29% is 1.71.

August 13th – Canadian 5 yr bond yields -.05bps to 2.61. The spread, based on 5 yr rate of 4.29% is 1.68.

What does this mean?  Essentially, the yield, or rate of return on a bond, can be read through a yield curve: a pattern of yields on bonds.  The increase in bond yields is what experts watch.  If the bond yield continues to increase, the spread will continue to shrink and this could be a trigger for interest rates to rise.  Typically, lenders are looking for a new spread between 1.80 and 2.00.

]]> http://themortgageblog.ca/2009/08/canadian-bond-yields-may-signify-an-increase-in-interest-rates/feed/ 0 http://themortgageblog.ca/2009/06/take-the-5050-wie-mortgage-from/ http://themortgageblog.ca/2009/06/take-the-5050-wie-mortgage-from/#comments Sun, 14 Jun 2009 03:08:32 +0000 Zach Silverman http://themortgageblog.ca/?p=352 Would you like to pay an extra $300 per month on your mortgage? Not likely. That hasn’t stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight.A fear of rising rates is driving the rash decision. But if you’ve finally managed to pin your banker to the ground, why on Earth would you let him off the mat?More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October of last year, chances are you are now borrowing money for as little as 1.35%. That’s based on deals that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%.

The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a five-year fixed-rate term and you’re probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04.

Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week. “It’s not a mass rush yet, but we are starting to see … people locking in. But variable rates are still so good,” says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these “deals” that are no longer available on the market.

Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%. The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms. “Bonds yields are going up rapidly and people are starting to realize the rates are going to go up,” Ms. Dal Bianco says.

Throw in the fact the Bank of Canada used the weasel word “conditional”(on inflation rates)when it promised not to raise rates until June, and you can understand why some
people think today’s record-low prime rate might not hold. But if you’re someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term. “I don’t understand why you would lock in,” says Jim Murphy, chief executive of CAAMP. “Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won’t rise, so you’ve got another year at that prime-minus rate.”

Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. “The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure,” Mr. Lawby says.

But at what price? If you’re using the “feeling secure” logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product.

There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt. Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time — it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month.

The bottom line is if you’ve got a deal on your mortgage, why would you give it back? Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a second receipt. In the interim, DW had to pay the second $56 charge.

Gary Marr, Financial Post Published: Saturday, June 13, 2009

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

Information received since the Bank’s April Monetary Policy Report (MPR) is broadly consistent with the Bank’s medium-term outlook for output and inflation in Canada. The economy is undergoing major restructuring in a number of sectors. The already significant output gap will continue to widen through the third quarter, putting downward pressure on inflation. The Bank continues to expect that the global and Canadian recoveries will be more muted than usual.

In recent weeks, financial conditions and commodity prices have improved significantly, and consumer and business confidence have recovered modestly. If the unprecedentedly rapid rise in the Canadian dollar (which reflects a combination of higher commodity prices and generalized weakness in the U.S. currency) proves persistent, it could fully offset these positive factors.

The outlook is subject to considerable uncertainty. While the underlying macroeconomic risks are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection remain tilted slightly to the downside.

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.

The Bank retains considerable flexibility in the conduct of monetary policy at low interest rates, consistent with the framework outlined in the April MPR.

The next scheduled rate announcement is July 21, 2009.

As long as our economy continues to experience the downturn that its in, the rates will remain historically low.  Eric Lascelles, chief economics and rates strategist at TD Securities: “My inclination is to say mortgage rates are likely to remain unusually low for some time.”  Will Dunning, chief economist for the Canadian Association of Accredited Mortgage Professionals: “I don’t really see rates moving a whole lot.”

Typically, five-year fixed mortgages are pegged at 1.1 to 1.2 basis points above the five-year Government of Canada bond yield.  With the financial crisis of the past 18 months, this difference has increased, to upwards of 3 points; however it is falling now to clower to 2 points and will continue to fall.  This allows room for further mortgage rate decreases.

Variable-rate mortgages are slightly different, they operate off of the Bank of Canada’s prime lending rate.  While 18 months ago and longer you could get variable-rate mortgages at prime minus, we have seen in the last 18 months move to prime plus.  However, as with the fixed-rate mortgages, the trend is falling back to pre-18 month ago trends.  Some Lenders are looking at variable-rate mortgages at rates closing to prime.

So, is now the time to lock in your variable-rate mortgage?  In short, no.  Because the Bank of Canada has committed to keeping is prime lending rate steady for as long as a year, while facing the worsening state of our economy, Lending institutions will also follow suit. However, if you have a more recent variable-rate loan, one with a rate of prime plus greater than 1, perhaps you should look at locking in to 5 year fixed rates.  Fixed 5 year rates are at about 3.75%, allowing people a very low interest rate to lock into for 5 years, versus floating with the variable-rate through the next 5 years.  This all depends on your financial situation and your risk-tolerance level.

With historically low rates, there are a number of scenarios that we should all be considering.  Penalties for breaking a mortgage term that is only a year or so old are very high, however this can often be rectified through blended mortgages, taking advantage of lower rates, and waiting until you are further into your term.  Just remember, that these rates are indeed historically low, never before seen interest rates, that will definately not last forever!