Posts Tagged ‘Bank of Canada’
Mortgage Qualifying Rates Explained
So you are looking for the best mortgage rate possible as well as how much you can afford. You are still undecided between the fixed and variable rate. Your mortgage broker tells you how much of a mortgage you can afford at the variable rate and the fixed rate.....but wait a second.....the amounts are different. Not only that, the variable rate option is a smaller mortgage amount even though the rate is less. How can that be? The answer is quite simple. When a lender qualifies you for a mortgage with a term of 5 years or greater, they use the contract rate to determine the affordability. In other words they use the rate quoted on the commitment. This is not the case for variable mortgages or terms less than 5 years. In these cases they use the MQR (Mortgage Qualifying Rate) rate which is the 5 year posted rate. So even though the quoted rate for a variable might be prime less .70% (currently 2.05%) they qualify you based on 5.49% (the current 5 year posted rate). Why do Banks use different rates to qualify my mortgage? Lenders ...
Bank of Canada Raises Rates – What Next?
Yesterday the Bank of Canada (BOC) finally made good on their promise to raise rates and they bumped the overnight lending rate up by .25%. If you are not familiar with the overnight lending rate....it is the rate the Bank of Canada charges Canadian banks to borrow money. In turn the banks use this as a benchmark for setting their prime lending rate. As a result of the BOC increase Canadian lenders have raised their prime rates from 2.25% to 2.50%. Can We Expect A Drastic Increase in Mortgage Rates? No. Sure we are going to see rates go up....after all we can't expect to keep rates at recent low levels indefinitely, but it is most likely not going to be a quick rise. Do Recent Events in the European Economy Have an Impact on Canadian Rates Yes. In today's global economy what happens in Europe, Asia, the US...etc does have an impact on Canada's economic decisions. In fact the reason we are expecting variable rates to climb slowly in the coming years is due to the impact of the US's financial situation. Although their economy appears to be recovering, ...
Variable vs Fixed – Take the survey
With the recent increase in fixed mortgage rates over the last month and the talk of an upcoming rate hike from the Bank of Canada, the battle between fixed and variable is tougher than ever. Personally, I have noticed more and more clients are sitting on the fence when it comes to choosing. I am interested to hear what you think. Please take a second to complete the poll below and see how others feel about this debate. Of course your answer will be completely anonymous. Be sure to check back often to see the latest results. [polldaddy poll=3259920]
Ottawa Considers Tighter Mortgage Regulations
It appears the powers that be in Ottawa read the newspaper. The media has been reporting for the last couple of months that Canada is in the midst of a real estate bubble and after what happened in the US, "Real Estate Bubble" is now a dirty word. Of course if you listen to the experts such as CIBC's Benjamin Tal you will get a more realistic view of what is actually happening. In short the Government's stimulus package is actually working. The lower interest rates we have been enjoying have increased home sales in Canada and in turn help boost the economy. Well, the Conservative Government is now worried that Canadians are piling on too much debt while interest rates are low and will ultimately get into trouble when interest rates increase. Is their fear valid? Maybe, but I personally find most of my clients ar not stretching themselves thin and are keeping a healthy cushion to allow for an increase in rates. The Finance Minister said in an interview with CTV that they are considering increasing the minimum downpayment from 5% to something greater....maybe 10%. As well they would get rid of 35 year mortgages. CIBC's Chief Economist Benjamin Tal ...
Bond Yields Are Up – Will Mortgage Rates Follow?
We have been enjoying falling mortgage rates over the last few weeks, but we might be in for a reversal. Strong economic data released on Friday in Canada and the US has resulted in bond yields increasing by .14%. As I have explained before fixed rate mortgages in Canada are driven by government bond yields so it is probably only a matter of time before we see lenders start to increase rates. At the very least we will see a halt to the falling rates and we will probably hover where we are for the remainder of the year. Right now 5 year rates are slightly below 4% which is well off the 10 year average of almost 5.5%. The Bank of Canada will be holding its last rate announcement of the year tomorrow and it is expected they will leave the prime lending rate were it is. The Bank of Canada has pledged to keep rates where they are until mid 2010, but if we see continued positive job creation in the coming months they might be forced to start increasing rates.
8 Economic Insights from Benjamin Tal
CIBC's chief economist, Benjamin Tal spoke at a Mortgage industry event last week. He is always an interesting speaker and provides insight on not only the Canadian economy, but how the ripple effect of world economies will impact us. I have summarized Benjamin's key points below. The recession is over, but we will pay for what the US Fed is doing. Interest rates will rise and deficits will drag on Canada's economy The next wave of US mortgage resets will peak in 2011, but fortunately these mortgages mostly sit on lender's balance sheets and have not been securitized. This will help limit the global impact. We will see consumers spend and borrow less over the next five years. Part of this is due to fear and part is due to lending criteria becoming more strict The bank of Canada will have no choice, but to wait for the US to start raising their interest rates. If Canada were to increase rates earlier it would cause our dollar to appreciate and put our already fragile recovery in jeopardy We do not have the evidence to support we are in a housing bubble. The fact that people are taking advantage of low interest rates shows the government's ...
Why Bank of Canada is leaving rates alone
There has been alot of talk recently about the Bank of Canada and whether or not they should start raining interest rates. As the news we are hearing is starting to become more positive (strong Canadian dollar, Stock market rallies, Recession is over...etc), some are suggesting the Bank of Canada is going to start raising rates in order to keep the Canadian economy from experiencing extreme inflation. For those of you that read my site to keep on top of recent rates and pick up a few homebuying tips.....you can probably stop reading now. But for those of you that are interest to hear why interest rates and the economy are so closely linked, keep on reading. There was recently an article in the Globe and Mail that summarized this topic nicely so I thought I would talk about some of the main points in the article. As you will see, the Bank of Canada has quite a few good reasons why they are still holding to their promise to keep the prime lending rate where it is until next summer. Borrowing is still weak - Although interest rates are at all time lows, the demand for money is still weak. In ...
Bank of Canada Keeps Prime Rate Unchanged
The Bank of Canada announced today that it will leave its key interest rate unchanged and restated its commitment to holding this rate steady until mid-2010, conditional on the outlook for inflation. The Bank noted in its statement that a recovery in economic activity is under way in Canada, “supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence.” However the Bank expects a high Canadian dollar to offset recent favourable developments in the economy. Lenders are expected to keep their prime lending rate steady. Variable-rate mortgages, variable-rate credit cards, and home equity lines of credit are typically linked to a lender’s prime rate. Over the past week, the pricing of new variable-rate mortgages in relation to the prime rate has improved. A couple of lenders have started offering a slight discount to the prime rate on 3 year variable mortgages. While pricing for fixed-rate mortgages is not directly affected by today’s announcement, rates on some fixed products have been increasing in the past week.
Bank of Canada Keeps Rates Steady
The Bank of Canada announced this morning that it will leave its key interest rate unchanged and restated its commitment to holding this rate steady until mid-2010, conditional on the outlook for inflation. In its statement the Bank declared that “recent indicators point to the start of recovery in major economies, supported by aggressive policy stimulus and the stabilization of global financial markets.” Lenders are expected to keep their prime lending rate steady. Variable-rate mortgages, variable-rate credit cards, and home equity lines of credit are typically linked to a lender’s prime rate. However, in recent weeks the pricing of new variable-rate mortgages in relation to the prime rate has improved, especially in the case of 3-year and 4-year variable products. While pricing for fixed-rate mortgages is not directly affected by today’s announcement, rates on certain fixed products have been declining recently.
Variable Mortgage Rates Staying Low???
Is the Bank of Canada going to announce a rate hike on Thursday? Most analyst agree that the BOC will hold the prime lending rate steady at its current level. In the past the Bank of Canada has promised to keep the rate at .25% until June of 2010. This means if you have a variable rate mortgage you will be enjoying these record low rates for another 10 months. However, analysts also agree that if the Canadian dollar keeps climbing the bank might need to take action to keep the dollar in check. As we recover from the recession the last thing we need is to have our exports decline because our dollar increases in value making our goods less affordable to other nations. One way to control the value of the dollar is to raise interest rates. That being said, Canada's economic performance is growing in line with the Bank of Canada's forecast so they will probably not move the interest rate. So is now a good time to get a variable rate mortgage? The answer is maybe. As I mentioned in another post, the premium added to the current prime rate has fallen, but still exists. It is predicted variable ...
