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The Leaves Have Fallen...So Have Rates

Fall is fully upon us, but if it wasn't for the leaves on the ground you would swear it was summer with this patio weather! It is not only the weather that has been up and down the past few months.  In the mortgage market we have been witnessing two opposite trends.   The first has been three rate increases by the Bank of Canada that have had a direct impact on variable rate clients.  The second has been a free fall of fixed interest rates, especially with 5 year terms.   Although Prime has increased, larger discounts off Prime are now on offer from the lenders.  So, both fixed and variable products are good choices and the question is still a matter of risk tolerance more than anything else.

What does all of this mean to you?  Well, if you own a home with a mortgage, a current mortgage assessment is a capital idea.  There are likely different strategies that can save you thousands.  If you do not own, now is a prime time to capitalize on low rates and reduced pricing.  For most cases owning is once again less expensive than renting! 

Have a safe a Happy Thanksgiving!

Providing more than an interest rate since 1991

The flowers are blooming and we have been snow-free for a few days now- it looks like spring has finally arrived!   2010 has already been quite the year in the mortgage world.  We have seen rates hit all-time lows and then rebound at a fairly rapid pace. Top this off with new government sanctioned qualification requirements and you have a perfect recipe for people to hit the panic button!

However, there is no need to panic.  Rates are still extremely low and possible future rate movements in the variable market will likely be gradual.  This said, now is a great time to review your mortgage plan to ensure you are still comfortable with your strategy and in the best money saving product.

For those that are in Prime plus variables there are significant benefits to redoing your mortgage into a now available Prime minus product.  It is in your best interest to give Mortgage Connection a call to review your individual situation.  To give you an idea, if you are paying Prime plus .60% with 4 years remaining on $200,000.00, your net interest savings over the remaining term (after penalty) works out to $7400.00.

If you among the many mortgage holders that locked-in to a higher priced fixed rate a couple of years ago you may want to look at converting to a new variable.  With increased fixed rates we have seen a decrease in IRD penalty charges and now it is more profitable to break mortgages than it was only a few short months ago.  

As part of your spring cleaning we encourage you to contact our office for a mortgage review and make sure you are still on track.  We always enjoy discussing your mortgage plan and look forward to working with you on it.  

Enjoy the sunshine!

Up Again, Really?

Just last week we provided you information presenting reasons why the Bank of Canada should maintian the status quo when it comes to the overnight rate.  Howvever, our advise fell on deaf ears (no kidding!) as the Carney clan had other ideas and for the second time in as many meetings the overnight rate was increased. 

Obviously, the Bank of Canada feels pretty good about the economic state of the country and is concerned as always, with keeing inflation in check. Carney has acknowledged that global markets will be key indicators for future rate decisions and this is a good thing.  So much of Canada's ecoonomic activity is natural resource and trade based that a micro approach misses a lot of the picture.   

Clearly, we missed this one as we are in the same boat with the economists that have come out against the latest move.  They, like us, think "it is too much too soon as we are not out of this yet." Furthermore, The Bank of Canda is notorious for yo-yo rate movements, so this could be a case of overshooting that needs to be corrected in the future. 

Regardless, there is still no need to panic as even with the rate increase variable clients are looking at 2.15% mortgages coupled with near record low lock-in options.  This said rate news is always a good reminder to set up a mortgage review with Mortgage Connection and we encourage you to take advantage of this service.

What to Do?

Hello again,

We continue to beat the same drum, but the question on where rates are going is still the most asked question we receive from clients on a daily basis.  The answer is up. The better question is when or more importantly, by how much?

As expected the Bank of Canada raised rates in June by .25 basis points, but is this the start of the rate climb?  We do not think so.  In fact, we think rates will remain unchanged at the next meeting (July 20th).  Too many factors still indicate that the economy is not in full recovery mode.  With continued market losses and investor uneasiness remaining high, coupled with the US Fed vocally committing to keeping rates low, we do not see any reason why Canada would raise.  Really they shouldn’t have raised rates in June, but then they would have broken their promise!       

So, as a mortgage consumer what should you do (fixed or variable)?  More than ever this is a question of risk tolerance more than interest.  Either choice will have some benefits.  Short term, say over the next 18 months, the variable should continue to provide huge savings. After that it is a numbers game based on just where Prime ends up.  So what is more important to you savings or security?

If it is security, you may be leaning towards a 5 year fixed rate product.  During the spring and early summer the banks have been pushing 5 year fixed rate products on consumers, but even for those inclined to lock in, this may not be the best choice.  The best bang for your buck (rate and reasonable security) is likely found in the 3 year fixed product not the 5 year.
More than just rate you want to ensure you have a mortgage strategy that will help reach your financial goals during these ongoing uneasy economic times.  Please contact your mortgage professional at Mortgage Connection to put together the right strategy for your individual needs.

Happy Stampede!