Following a rate hike of .25% on September 8th, Prime is now sitting at 3% – the rate upon which all Variable mortgages are based.
So is it a good time to go Fixed or Variable? Give me a call to discuss. A good strategy now might save you big in the future.
As you may or may not have heard, we’ve recently seen a drop in Fixed Rates. Here are a few of the lowest Fixed Rates currently available to Canadians:
5yr @ 3.64%* – 3.79%
4yr @ 3.49%
3yr @ 2.90%
*some conditions apply (i.e. prepayment flexibility etc)
The Canadian government and the Bank of Canada both play a major role in setting fixed mortgage rates. Fixed mortgage rates are influenced by the major bond yields. Bonds have always been considered a safer investment than equities and stocks. This is especially true when considering Government bonds.
When an economy is booming, most investors will invest in stocks and equities because they will earn a higher rate of return. This causes demand for bonds to decrease. When this happens, the bonds must increase the yields of the bonds to entice investors.
When an economy is in a recession (much like today), investors will search for a safe place to store their money. Stocks will decrease or have a negative yield, which will cause investors to put money into bonds. This will cause bond yields to go lower because of the increased demand.
When the economy changes, the government of Canada is forced to increase or decrease long term bond prices. When this happens, it will reduce or increase the lending costs for banks. The banks will then pass on these new rates to borrowers by increasing or decreasing fixed mortgage rates.
For more information about rates and where we currently stand in the grand scheme of things, please don’t hesitate to give me a call.
The Bank of Canada has lifted its key lending rate by 1/4 percentage point, to 0.75%. The bank said any further increases “would have to be weighed carefully against domestic and global economic developments.”
Meaning what? The BoC will now (more than likely) leave well enough alone for the foreseeable future. Although… we’ve heard that before. The next interest rate meeting is September 8th. Below is a chart of where we’ve been over the years. (Click on it for a bigger view)
Lowest rates of this beautiful day:
5yr Fixed @ 4.04%
3yr Variable @ 1.80% (Prime -.70%)
If you’re renewing, refinancing or purchasing… Call me NOW to hold these great rates!
I hope you’re enjoying a great summer so far!
Ever wondered where we stand in the grand scheme of things as far as Interest Rates are concerned?
Please enjoy the following: Historical Rate Charts – Fixed and Variable. (Please click on graphs to open in full-sized window)
(Courtesy of Firstline Mortgages – A Division of CIBC)
After more than a year at a record low level, Bank of Canada Governor Mark Carney raised the benchmark interest rate for the first time since 2007 by one-quarter percentage point to 0.5 per cent. This is the first time since 2007 that that rate has increased and the Bank of Canada is the first in the Group of Seven to do so since the financial crisis and recession began in 2008.
In a statement Carney emphasized that the increase should not be interpreted as just the first of more to come.
“This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending and the uneven global recovery,” the central bank said. “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.”
What does this mean for those with Variable Rate mortgages? If lenders raise prime rate by 1/4 point, as expected, homeowners with variable mortgage payments will see roughly $12 of monthly payment increase per $100,000 of mortgage. A little higher than record lows, but certainly still manageable.
On a positive note, the BoC also reassured Canadians in its statement. It said, “This decision still leaves considerable monetary stimulus in place.” Variable mortgage rates, for example, are still under 2%. That’s just a tick above their all-time bottom.
The new CMHC rules for self-employed (Business for self or BFS) borrowers take effect tomorrow and pose new challenges for this category of client.
First off, self-employed borrowers with more than three years in the same business who apply for a mortgage using stated income, as well as commissioned-income borrowers, are now required to provide to provide traditional proof of income (or “third party validation”) through regular income documents like financial statements, contracts and T4s.
Those who have recently become self-employed and don’t have third-party validation can still apply for a mortgage, but have to come up with a 10 per cent down payment instead of five per cent. Refinancing will also be cut to 85 per cent loan to value instead of the previous 90 per cent.
Please call to discuss.
