Late last week while I was away in Punta Cana for the Mortgage Centre Annual conference lenders announced their newest fixed rate mortgages. Lenders are now offering 3.15% for a fixed 5 year rate mortgage which has again set a new low for fixed rate mortgages. Some borrowers might be surprised that the new rates announced by lenders aren’t quite as close to BMO’s 2.99% as they might have hoped. The truth is that at 2.99% the bank is not making any profit from the mortgage after considering their borrowing costs and administration costs. So the question begs to be asked, why would the bank be giving money away for free? The answer is two fold.

1) BMO has been losing mortgage market share over the past couple of years. Mortgage market share is important to the bank because inevitably their mortgage borrowers will open investment, savings & chequing accounts which drive profits.

2) The move to give money away is very intentional this time of the year because it is the beginning of RRSP season. The more people to visit a BMO branch the more opportunity they will have to cross sell RRSPs and other products.

Son of a broker’s pick: You can’t go wrong with the fixed 5 year at 3.15% and if you are feeling particularily rate sensitive the fixed 4 year at 2.99% is the answer. You get all the bells and whistles with out the restrictions of BMO’s offer.

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CURRENT RATES

1 Year Fixed – 2.99%

3 Year Fixed – 3.09%

4 Year Fixed – 2.99%

5 Year Fixed – 3.15%

5 Year Variable P-.10 (2.90%)

10 Year Fixed – 3.99%

Prime Rate is currently 3.00%

Rates are subject to change and subject to the lender’s approval.

If you’d like more information connect with me below or call me directly at: 416.461.0204.

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The number of Canadians carrying mortgage debt into their 70s was the hottest mortgage topic this week. A recent RBC poll showed that one-third (33 per cent) of older Canadians over the age of 55, have 16 or more years left on their mortgage term. This statistic makes me wonder if these older Canadians aren’t better off concentrating their limited cashflow towards a retirement nest egg rather than paying off their mortgage? At the age of 70 what good is it to have a free and clear home with no other assets to live off of?  I’d love to know the statistics on how many of these older Canadians who finally pay off their mortgages will have to go straight back to the bank to request a reverse mortgage in order cover the cost of living in retirement? It’s extremely ironic when you think of the life time spent paying for a mortgage just to have a free and clear home for the bank to register another mortgage on at the end of your life. Good for banks, bad for hard working Canadians.

Mortgage interest rates have stayed relatively stable as there has been some stability in the Government of Canada bond market over the past 2 weeks.

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Son Of A Broker’s Pick Of The Week: If you require your mortgage in 2011 the 3.29% is a no brainer. I expect to see that rate continued into the new year.

1 Year Fixed – 3.08%

3 Year Fixed – 3.35%

5 Year Fixed – 3.49%

5 Year Fixed (must close by Dec 31st) – 3.29%

5 Year Variable P (3.00%)

50/50 Hybrid 3.25% (effective rate)

Prime Rate is currently 3.00%

The following graph compares the discounted weekly fixed 5 year rate vs. the discounted variable 5 year rate since January 2011.

Sourced from Ratehub.ca

This graph is sourced from my friends at Ratehub.ca and is sample of what type of mortgages visitors to their site were requesting last week.

Sourced from Ratehub.ca

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The mortgage interest rate roller coaster continues to enthrall its riders yet again. The latest twist came as Sheryl King, an economist at Bank of America, predicts that Europe’s worsening sovereign-debt crisis is going to push the central bank to cut its key rate down to .025% or 2.25% in consumer terms.  Her report predicted that the Bank of Canada would be forced to lower the prime rate by -0.75% in early 2012 to prevent Canada from slipping deeply in to recession. While there is nothing to indicate at this point that she is correct it will certainly be something to look out for as the year comes to an end.

In the mean time the Eruozone crisis has been putting a squeeze on bond yields and I would expect to see fixed rate mortgages ease down slightly over the coming week.

THE SON’S PICK OF THE WEEK:  If Sheryl King’s musings are correct then you may want a piece of the variable pie. A way to stay in the game but hedge your exposure is to consider a 5 year 50/50 mortgage where have your principal is charged 3.59% and the remaining half is charge Prime (3.00%).

1 Year Fixed – 3.08%

3 Year Fixed – 3.28%

5 Year Fixed – 3.59%

5 Year Fixed (must close by Dec 31st) – 3.39%

5 Year Variable P (3.00%)

50/50 Hybrid 3.30% (effective rate)

Prime Rate is currently 3.00%

Rates subject to change at lender’s discretion.

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As was widely expected the Bank of Canada announced that they would keep the prime rate unchanged this morning. In the BoC’s press release which you can read here, the bank observed that the global economy has slowed significantly. The mood of households much like banks and business is to avoid risk and there is a conscious effort to avoid debt. The final interest rate announcement for 2011 is scheduled for December 6th.

What Does This Mean To You?
The retail bank prime rate remains at 3.00% so if you are in a variable rate mortgage or line of credit your payments will not change. Given the economic uncertainty it doesn’t appear that interest rates will be increasing significantly in the months to comes so if you are in a variable rate mortgage there is no need to lock in.

Good Time To Refinance
Given the low interest rate environment the coming months present a good opportunity to  refinance your mortgage. Fixed rate mortgages are priced around 3.39%. You may want to consider a refinance if:

• you have a fixed rate mortgage above 5%
•  your consumer debt (credit cards, lines of credit, etc) are becoming unmanageable
• you are considering a large rennovation
• you want to tap into your equity for a large expense or purchase of an investment

Click here to start a quick and easy online application. I will follow up with you shortly.

At risk of sounding like a broken record, this week variable rate mortgages have continued with their upwards trend towards prime. This is a trend that has developed over the past 30 days and has caused the 5 year variable rate to rise 65 basis points inside of a month. We also saw a slight increase of +.10% to fixed rate mortgages. This time its not because Government of Canada bond yields have increased. Lenders are citing that uncertainty in the bond market is forcing wider than normal margins until stability returns.

Pick of the week: The fixed 4 year rate mortgage at 3.09% remains an attractive option in face of all the other rates available in the market.

Disclaimer: The circumstances of individuals are unique and mortgages are not one size fits all. Always consult a professional.

1 Year Fixed – 3.09%

3 Year Fixed – 2.99%

4 Year Fixed – 3.09%

5 Year Fixed – 3.49%

5 Year Fixed (high ratio only) – 3.29%

5 Year Variable P-.52 (2.48%) Offered through a Credit Union

5 Year Variable Prime (3.00%)

50/50 Hybrid 3.17% (effective rate)

Prime Rate is currently 3.00%

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It seems like the trend of the shrinking spread is continuing this week. (Say that 3 times fast) Today, a number of lenders indicated that the spread on their variable rate mortgages was poised to shrink again pricing variable rate mortgages at prime (3.00%).

The culprit seems to be narrowing spreads. The spread is essentially the difference between the rate offered by a lender to a client minus the lender’s cost to fund your mortgage. The lender’s base cost for variable rate mortgages is typically a 30 day bankers’ acceptance (BA) yield. The following graph from Bloombergs.com shows that since early September those yields have increased.

Where could we go from here? We usually think of variable rate mortgages as prime minus x however there is nothing preventing lenders from being forced to increase the spread to prime plus in the current rate environment. Stay tuned for further developments.

This week, mortgage interest rates have continued a trend that we’ve seen developing over the past 4 weeks. Mortgage lenders are effectively enticing mortgage borrowers to take fixed rate mortgages by lowering their fixed rates and increasing the spreads on their variable rate mortgages.  This has created a convergence of fixed and variable making fixed rate mortgages more attractive in the current market.

Pick of the week: I’m liking the fixed 4 year rate at 2.99%. Yes it’s 12 month less than the 5 year however the discount to the rate is too good to pass up. I believe it will prove to be a rate you will reminisce about in the future when rates head up to more “normal” levels.

Disclaimer: The circumstances of individuals are unique and mortgages are not one size fits all. This is just my opinion.

1 Year Fixed – 2.50%

3 Year Fixed – 2.89%

4 Year Fixed – 2.99%

5 Year Fixed – 3.39%

5 Year Fixed (high ratio only) – 3.29%

5 Year Variable P-.25 (2.75%)

50/50 Hybrid 3.17% (effective rate)

Prime Rate is currently 3.00%

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The Bank of Canada left the prime rate unchanged today. In explaining the decision to leave borrowing costs alone for an eighth meeting, as expected, the central bank said it believes Canada’s economy is growing again after stalling in the second quarter, but painted a troubling picture for the United States and Europe, and said exports will be a “major source of weakness.” You can read this morning’s press release here.

What does this mean to you?
If you are currently in a variable rate mortgage or have a line of credit your rate will remain unchanged. The retail bank prime rate will stay put at 3%.

Should I lock in?
If you are currently in a variable rate mortgage we see no reason to lock into a fixed at this point in time. The prime rate looks to be stable and fixed rate mortgages are also at all time lows.

Thinking of refinancing?
Now would be a good time to consider refinancing to consolidate debt or take advantage of a lower interest rate on your mortgage while rates are low.  Fixed rate mortgages are being offered as low as 3.39% for a fixed 5 year.

Mortgages are very dynamic and the guidance that we offer is based on the circumstances of each individual. If you would like to review your mortgage to make sure that you are still on track please call we’d love to hear from you.

Late last week, RBC suddenly triggered a move to reduce the spread on their variable rate mortgages and it didn’t take long for the rest of the market to follow. Previous to the change the average spread for a 5 year variable was P-.75%. Today the spread has narrowed to P-.50%. There was tremendous competition between lenders for variable rate business which really squeezed their profit margins. It has also been interesting to observe how many clients are flocking to variable rate mortgages.  Not too long ago it was difficult to educate borrowers of the benefits of variable, today there is a very obvious shift in the way borrowers are understanding their mortgage financing options.

These are a selection of my current rates. If you are shopping around feel free to give me a call to give me an opportunity to earn your business.

1 Year Fixed – 3.15%

3 Year Fixed – 3.45%

5 Year Fixed – 3.49%

5 Year Fixed (45 day) – 3.39%

5 Year Variable P-.50 (2.50%)

5 Year Variable P-.75 (2.25%) Credit Union Rate

50/50 Hybrid 3.02% (effective rate)

Prime Rate is currently 3.00%.

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Greetings from poolside! I couldn’t stand the thought of being cooped up in the office with this historic summer day in Toronto. Conveniently all of my gadgets are working and I like the idea of doing this mobile office more often. Rates seem to be settling down and the expected July Bank of Canada prime rate hike never precipitated as the BOC remain cautious about making any changes to a fragile economy. If you’d like to talk rates with me or get a quote fill in the contact form below, email me privately or give me a call 416.461.0204. Remember my service doesn’t cost you!

1 Year Fixed – 3.19%

Bank of Canada Qualifying rate 5.52%

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