A few t
idbits following yesterday’s fixed rate increases:
- Various lenders raised rates yesterday, and more will do so in the next 48 hours. There’s still time to lock in a decent fixed rate…but probably not much.
- “[Yesterday’s 60 bps hike] is actually a fairly large increase reflecting what’s happening in the bond market lately.” – CIBC economist, Benjamin Tal (Vancouver Sun).
- Discounted 5-year fixed rates will probably land in the low 4% range once all lenders are done raising their rates. That’s still way below the 10-year average of 5.22%.
- ING’s self-serve online rate holds have been popular as people rush to secure a rate. If you get one, keep two things in mind:
- Once your application turns “live” with ING (i.e., once you submit a formal application), you’ll then need to qualify under ING’s normal lending guidelines. If you don’t meet its lending criteria at that time, you won’t be approved. That’s why it’s a good idea to work with an ING-approved mortgage planner to get yourself pre-qualified.
- If you don’t have time to consult a mortgage planner before submitting your ING rate hold, call one after. If you have an ING-broker close your rate hold, you’ll get professional mortgage advice and the potential for a slightly better rate.
- If you’re in a “prime plus” variable mortgage (like prime + .25% for example), talk to a mortgage planner about the options. If you’re committed to staying variable instead of locking in, have your advisor run the numbers to gauge the benefit of switching to a prime – .50% variable.
- “No one is expecting rapid rate increases from the Bank of Canada,” says BMO’s director of mortgages, John Turner. “But for those customers thinking about buying, interest rates are as low as they ever will be…” (Vancouver Sun)
- “It’s possible that we’ll get a 10 or 15 basis point correction, but the direction [of rates] is up, not down…This interest rate cycle has turned…The next move will probably be another increase, although it won’t be 60 basis points. It will be much more moderate.” – Peter Routledge, senior VP at Moody’s (CTV)
- “I can’t see any [rate] movement back down anytime soon.” – Judith Cane of the Financial Advisors Association of Canada (Money)
- If you’re thinking of breaking your fixed mortgage for a lower rate and you have an IRD penalty, now is the time to do it. You can lock in a sub-4% fixed rate today, and then when rates rise, your IRD penalty will drop and save you some money.
- Here’s a short primer on what influences mortgage rates.
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Market conditions can change in an instant. Therefore, as always, any statements that are rate-related are subject to change.
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Last modified: April 28, 2014
Hi Rob,
Are you sure about the point regarding IRD? I had to think about this for a bit, but doesn’t the lender calculate the IRD on the rate you’re locked in for, rather than the market rate at the time, as you suggest?
I might be way off here, but just had to check.
Rob,
CIBC jumped on the bandwagon and issued a press release.
http://ietheon.notlong.com
Three-year closed 4.35 per cent, up 0.20 per cent
Four-year closed 5.34 per cent, up 0.40 per cent
Five-year closed 5.85 per cent, up 0.60 per cent
The others won’t be far behind.
I’m on a VRM, prime + 0.85 (not the best but I lost my job last year and needed out of my fixed rate). If I’m planning on selling my place in the next year or two, does it make sense to stay variable to avoid the penalties?
National Bank issues press release announcing mortgage rate increases.
http://uyahnge.notlong.com
Note that the discounted 5 year fixed is moving from 3.95% to 4.55%.
Scotiabank joins the party…
http://vuenoh.notlong.com
BMO is last of Big 5 to make an announcement.
dont people remember that all these same banks raised rates several months back and then promptly had to lower them right back down again when it became apparant that the economy was still in the toilet?
Funny how short a lot of people’s memory is.
But no, for now, everyone and their mother is screaming that rates can only go up and everyone should lock in now.
Funny, when everyone thinks one thing, the world has a tendancy to do quite the opposite. Time will tell.
I haven’t locked in….no need to follow the herd.
Hi Gord,
IRD penalties are based on the difference between the borrower’s contract rate and the lender’s comparison rate.
The comparison rate is usually the current rate of the term nearest to the borrower’s remaining term.
As the lender’s rates increase, the comparison rate increases and the IRD penalty decreases.
Here’s a formula from TD that helps to explain IRD calculations a bit more: http://www.tdcanadatrust.com/mortgages/ird_calc.jsp
Note: Different lenders use different formulas for calculating IRD.
Cheers,
Rob
Thx JW. Yes, sadly the banks all follow like a herd. Kudos to BMO for keeping 3.75% around a bit longer though! – Rob
I’m at prime -0.70%, with another three years to go on this term. I’m currently at 1.55% interest.
I really don’t think anyone is expecting an interest rate hike of 2-300 basis points by 2013, are they?
that’s exactly what will happen
I have a TD mortgage of $99,000.00 that I just renewed last october @ 2.55%. It’s for 5 year term. I also have a HEL with a balance of $29,000.00 @ 3.25%.
TD just raised their 5 year rate to 4.55% as a ‘special’ rate.
Any thoughts as how I should proceed? Can TD give me a better rate? Can I ask for a ‘rate-hold?” Should I lock in now? If the bank raises rates again or prime is raised in the next few months is it worth it to stay put and face higher rates or lock in now?
Geeze I hate this stuff..sleepless nights and very stressful waking hours are thenorm for me these days.
help!
C.W.