Posts Tagged ‘variable rate mortgage’
Beware Sites Advertising “Low Mortgage Rates”
The Internet has given us unlimited access to information. As a small business owner, the Internet has also provided an affordable way to effectively market to millions of people. One of the ways some Mortgage Agents choose to market on the Internet is through lead generation sites. If you have searched for a mortgage rate on-line chances are you have visited one of these sites. They usually offer a choice of rates from several different Lenders/Brokers. This can be great for getting an idea of the best mortgage rates out there, but I caution most people when they are looking at these sites. There is much more to a mortgage than just a low rate. These sites do a good job of presenting several rate options, but they do not let the consumer know the terms and conditions associated with that rate. Mortgage rates have unfortunately turned into a commodity where lower is always perceived as better. Imagine you were shopping for a car and all the info the sites gave you was the price......wouldn't you have ...
Canadian Historical Interest Rates
Happy New Year! I trust you all had a great holiday season. I have been a little tardy in updating my Blog over the last month, but it is a new year and I vow to keep the content on my site relevant and current. The first post of the year will be short, but it illustrates the benefits of a variable rate vs a fixed rate. Thank you to my good friends at Firstline Mortgages for the graph. CLICK ON GRAPH TO EXPAND Pick any point on the graph and draw a straight line across. You can see if the variable rate would have ever crossed above the corresponding fixed rate. There are very few cases where it does......and it does not stay above long. As I have said many times, part of the variable vs fixed decision is based on your risk comfort level and not just savings. Speak with your mortgage provider to make sure a variable rate is right for you. Related articles
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]
Variable VS Fixed Mortgages
One of the main considerations when getting a mortgage if whether to lock in your rate or choose a variable rate mortgage. I always educate my clients on the pros and cons of each mortgage type and then help them make a decision that will be best for their financial situation and risk profile. I have mentioned before that historically a client you chooses a variable rate will be better off in the long run. Sure, there are ups with the downs, but on average they are paying less interest than their counterparts who lock in for extended terms. I think the graph below illustrates this point nicelyTo see what I mean, pick a point on the green line (fixed rates) and then draw a line straight across the page (to the right). See how many times the orange line crosses above the line you drew. This will tell you how many times the variable rate would have been equal to or greater than the fixed rate mortgage you chose. Most of the time the variable rate is well below. It will be interesting to see ...
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.
Thinking about a variable mortgage?
I was reading an interesting article in the Financial Post today written by Garry Marr. It talked about the historical advantages of a variable rate mortgage and if now is the time to choose a variable rate over a fixed rate. The article quoted a study done by professor Moshe Milevsky in 2001 which looked at interest rates over the previous 50 years and determined that 88% of the time you would have been better off to take a variable rate mortgage. Now, I don't think this is a surprise to most people. It has long been believed that you save significant interest expense by going with a variable rate. There will be times when your variable rate will be higher than the current fixed rate, but over the long run your variable rate will be lower more of the time. It was however, interesting to read the number is as high as 88% . The article goes on to say if you factor in the past 9 years that number jumps to 96%. That is pretty strong evidence that it pays to take a variable rate mortgage. But is now the best time to go with a variable rate mortgage? ...
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 ...
Is now a good time to go variable???
Variable rate mortgages are at the lowest rates in history at the moment and those of you that took a variable rate over a year ago and received a discount to prime are currently paying a little over 1% interest on your mortgage. However, those of you that are looking at getting a variable rate mortgage today are looking at paying a premium on top of the prime rate (anywhere from 30 to 60 basis points). Even with the premium today you are still paying a very attractive interest rate on your mortgage, but what happens when interest rates begin climbing. The Bank of Canada and the Fed in the US both plan on keeping lending rates low well into 2010 to ensure a steady and full recovery, but after that they will begin raising rates in an effort to control the inflation that goes along with any financial recovery. Keep in mind we have seen prime rates of 4.5% to 5% in the last couple of years and it would not be surprising to see them again.....or even higher. So, are we going to see large discounts to prime again in the near future? I don't like saying never, but ...
