Canadian Mortgage Rates Rise

We saw all the banks raise the posted mortgage rates by .20% today. The banks are citing the credit crunch and the potential further loses from US sub prime market as the reason for the increase. If we look at today's bond rate for a 5 year Canadian mortgage the rate is 3.95%. The banks are now charging the consumer 7.54% for a 5 year term. As you can see there is a large gap in the Canadian 5 year mortgage rate. We can currently access a discount of around 1.55% off of that posted rate, which means the banks are still earning a 2.00% spread on the best mortgage rates. Now is a time to be looking at a variable rate mortgage as prime has dropped by.25% and expected to go down again by .25% in the new year.

Refiance Your Mortgage

I do get asked a lot about when is a good time to look at refiancing your mortgage. I believe you should review your mortgage at least once year, preferably twice year. This will give you two benefits; first is to make sure you have the current lowest mortgage rate along with the right mortgage product. The second will be to make sure your finacial picture is on track to match your family goals. You may wish to consolidate some accumlated debt and/or look at using your equity for other investment purpose's. By following this strategy you should be able to stay on top of your financial goals.

Prime Rate Drops

Well we knew this was coming. On Tuesday Bank of Canada dropped the prime rate by.25% to 6.00%. This is good news for the mortgage customers on variable rate products as they will see there payments drop. Based on the current economic data we should look at the prime rate going lower by .25-.75% heading into 2008. Watch for economic data to see the trends appear in the coming months.