Mortgage Bytes

• The big banks took their time to lower prime rates yesterday.  Some think they were sending a message to the Bank of Canada to slow the pace of rate cuts.  Many lenders' costs of funds have been increasing and the Bank of Canada's rate cut has put further pressure on profits.
• With the best variable rates near 4%, a $200,000 mortgage with a 40-year amortization is now just $832 a month.  If that whets your mortgage appetite don't bite off more than you can chew.  Make sure you have enough cash to weather a 2%+ rate hike in the next few years.  We're not saying it will happen, but anything's possible so plan ahead.  A rate increase like this could raise your variable payments 31% ($259) a month based on the above example.  You could always lock into a fixed rate, but your timing must be right, and your fixed rate might still be notably higher than today's low variable rates.
• 62% of first-time buyers are choosing 30-40 year amortizations according to Re/Max.  Last year, overall, 37% of buyers choose 30-40 year amortizations.
• 38% of first time buyers choose mortgages with no, or little, down payment.
• Canada's mortgage industry is a $77 billion a year business.  Canada.com
• "Not many are using [online mortgage applications]," says Joan Dal Bianco, vice-president of real estate secured lending at TD Canada Trust.  That statement likely refers only to branch banking customers at TD because we're seeing the exact opposite.
• Total Canadian mortgage debt was $821.4 billion in 2007, another record.
• Canada's economic growth is at it's slowest pace in 16 years, according to Bloomberg.
• Financial advisor Adrian Mastracci calls 40-year mortgages the "Freedom 95" plan. He says, "The banks will love you because you're going to be paying for life.  With a 40-year mortgage, you're not buying, you're just leasing long-term, and will spend the first 30 years making mostly interest payments."