Mortgage Bytes

  • low-mortgage-rates Variable-rate mortgagors are now a little happier.  The big 6 banks have each fallen into line and lowered their prime rates to 4.00%
  • 7 of 24 economists surveyed by Bloomberg predicted the 1/4% BoC cut yesterday. 13 forecast a 1/2% cut.
  • Some economists, like Scotia’s Derek Holt, are now forecasting a 1/2% rate cut at the Bank of Canada’s next meeting on December 9. If he’s right, it would take the overnight rate below 2%–something that hasn’t happened since 1960. The record low is 1.12% in 1958–a time when it was based on treasury yields rather than actions by policy makers. (Bloomberg)
  • “If you are still looking for the Prime – .90 variable mortgage that you got on your property last year and your crying because no one is offering it – Get over it and learn to adjust to the new realities of the marketplace!” – Canadian Mortgage Team’s Peter Kinch
  • The government is buying back another $7 billion of Canadian mortgages on Thursday after strong demand in last week’s auction. (Globe)
  • Skitish commercial lenders may not be loosening up the reins anytime soon.  57% of real estate executives surveyed predict that Canada’s commercial mortgage market will be “substantially or moderately” underfunded next year.
  • 36% of new immigrants take out a mortgage to buy a home within one to three years, according to RBC. (Investment Executive)
  • The Canadian dollar is at a 3-year low.
  1. I hope you do dance for four more years and the rate stays down! I bought my first house as a single mom at 39 years old. I had cmhc originally and did a new mortgage last spring in May 1.01 below for 9 months then .25 below for the balance of the mortgage. four years with prime 4% or less will help me a lot that is for sure. Maybe I will actually live to see the end of paying my mortgage off!

  2. I’m up for a renewal in Apr 2009 at TD, I’m in a fixed rate 4.7% until then. I can’t do anything until Jan 2009 (3 months prior to renewal). Does it make sense to consider renewing with a variable when it’s above prime or has that boat sailed, and do I stick with fixed and hope for a single digit rate? I’ve not seen any of the fixed rates budge at TD at all, I’m not sure how this is suppose to help those of us needing to renew. I can see how this helps those already locked into variable mortgages, but what about those who usually go fixed. Thanks for any advisement.

  3. Is there any word on MCAP’s prime? They have a posted of 4.5% and BMO (which I am guessing is who they generally follow) is listed at 4.25%. The BIG 6 may have moved but what about all the other lenders?

  4. Hi Fred: Yes, that’s right.
    Hi Cora: Fixed and variable rates frequently do not move together. Also, there are variables mortgages right now better than prime+. So depending on your profile, it may make sense to consider a variable. Talk to a mortgage planner 120 days before your renewal and they can quote you terms at that time.
    Hi Mark: Non-bank lenders often move their prime rates after the big banks. This does not necessarily mean you don’t benefit as quickly as a bank borrower. Each lending institution has different policies on when they raise/lower your payment or interest after a change to prime. In addition, payments are on a fixed schedule. Borrowers will therefore not see any changes until their next payment regardless.
    Lately, some non-bank lenders have chosen to keep their prime rates as-is. This is because their capital costs exceed the revenue of their variable mortgages. (i.e. they’re losing money) Mind you, this is an extraordinary event and one that will likely (hopefully) not happen again for many years after our current credit market debacle has passed. Lenders are keenly aware how customers feel about this practice and would avoid it if they felt they could.

  5. Hi Reb, If you can’t find the info you need, any mortgage planner should be able to tell you. Alternatively, feel free to email me or Melanie. I try to avoid quoting lenders in this forum because rates change so often and really depend on the borrower’s qualifications.

  6. I thought banks were making record profits over the last few years. What happened to those profits? Weren’t they enough to sustain them through tough economic times?

  7. My question is what causes fixed mortgage rates to change? I came across the article I quote below that mentions “fix rates follow medium term bond rates”. What does that mean? No one discusses fixed mortgages in a favourable light, ie coming down in future.
    October 21, 2008 at 1:00 PM EDT Where’s the economy headed?
    QUESTION: “Sharon Lyn from Toronto Canada writes: Based on the economic outlook for 2009, what does this mean for anyone renewing mortgages? Will interest rates be higher or lower? ”
    RESPONSE: “Dale Orr …as the economy picks up in late 2009, I expect the Bank of Canada to start a steady and prolonged trend of rate increases, taking their policy rate from the 2.00% level to the 4.25% level . It is most likely that the prime rate will follow this pattern fairly closely. So that is some guidance on variable rate mortgages. The relationship between the prime and fixed rate mortgages is rougher. They are more related to medium term bond rates.”

  8. MCAP has refused so far to drop their prime even though they had no problem selling variable rate mortgages when rates were going up. I am going to raise hell if MCAP does not match the BMO prime. They are being referred as “non-bank” lenders but the reality is that they are simply a partnership between ING and BMO. I suggest everybody raise your concerns to the lenders and to the media to not let this go unnoticed. The consumer should be pissed!

  9. I won’t claim to have all the answers and judging by the economists varied predictions, neither can they.
    My advice is only get the mortgage that you can afford to pay off as quickly as possible. If you can’t afford the payments at today’s low rates, keep renting.
    The variable rates available today,@ Prime or Prime -, can’t get much lower and will only go up from here.
    Just because a mortgage broker can get you a large mortgage does not necessarily mean that you can really afford what they are offering.
    Canada has it’s own dirty little “subprime” secret, it was the 40 year mortgage, and in my opinion, anything longer than the “conventional” 25 year mortgage. Unlike current popular opinions, real estate does not always appreciate at the rates witnessed in the last decade. Historically, typical returns were much more modest.
    But along came easy credit, in both the U.S. and Canada, and now everyone could qualify for and stretch out an oppressive mortgage over 35-40 years. I guess it sort of makes sense in a rapidly appreciating market??? What happens in a correcting market or falling market? How long could you stomache to stay in a negative equity position. 35-40 years? Combine this with interest rate risk and we have our very own recipe for foreclosure.
    What mortgage do I have? Currently a variable prime -.5, fully open. I can sell (if I can find a buyer), lock in, or refinance with another institution with no penalties. My research showed that I would have saved a few thousand $ if I had went this variable route in my first 5 year term. If you want to gamble, just do your research ahead of time and find a mortgage that has options that allow you some flexibility (if the banks are still offering them!)

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