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.

Mortgages For Buying Homes

In today's marketplace we are seeing more people buying homes without having the mortgage in place. This really dangerous for clients. Once clients have bought a home and made the deal firm, they are under legal obligation to purchase that home. Clients need to make sure that they can fiance two homes before they go out buying another home. We need to help clients arrange mortgages for both purchase. we are finding in today's marketplace homes can take longer then 90 days to sell, so even with a long completion date, your home needs to be listed with a professional realtor that can advise you on the right price to move your home.

Buying Rental Properties

There is now the availability to purchase rental properties with only 5% down payment. That means on $200,000 purchase price, clients only need $10,000 as a down payment. Mortgage insurer with use 80% of the rental income for qualifying. There is also the potential to go with a 40 year amortization as well. Based on the above example mortgage payments would be $1089 per month. This a great product for investors to start accumulation an investment portfolio.

Mortgage Fixed Rates Lower?

Right now we are seeing the fixed rates being artificially higher for consumers. Fixed mortgage rates are determined by the bond market. Today, the 5 year bond rate is 3.89% and the best discounted mortgage rate is 5.89%. This means there is a 2.00% override for the banks. Normally the spread is about 1.40% above the lowest bond rate. So in theory the 5 year fixed rate should be 5.29%. Watch for lower fixed rates in the future or higher bank profits.

Bank of Canada To Lower Rates?

The tide is changing direction's as we speak. In June we thought the Prime rate set by the Bank of Canada was going to keep increasing and cause a lot of pain for consumers, Now with the Cdn dollar rising 25% this year against the US dollar, the calls are now coming for the Prime rate to be lowered. Today we had several economists from the major banks and financial securities calling for rate cuts. We also heard from the deputy governor of the bank of Canada saying the rising dollar is curbing inflation. Look for Prime rate to be lowered from .50-1.00% in the next six months. Now more then ever consumers need the help of independent accredited mortgage professionals to help make the best mortgage decision for them.