Mortgage Matters

The answer to the age-old question of whether to go long or short on your mortgage is unclear yet again.

The popular variable-rate product tied to prime that helped people buy a lot more house with more debt is going up. The prime rate at the major banks, which tracks the Bank of Canada’s rate, is now at 2.75%.

At 2.05%, a variable-rate product today may look as attractive as ever, but the five-year fixed-rate closed mortgage is falling fast. It can now be had for under 4%.

Bank of Montreal senior economist Sal Guatieri does agree that variable-rate products have worked out better than fixed-rate mortgages throughout history, but says the tide may be turning.

Bank of Montreal is forecasting another 25 basis point move in September and says rates will climb another 1.5 percentage points by the end of 2011. If Mr. Guatieri and others are right, by 2012, the variable-rate products out today would clock in at just above 3.75%, if the discounting remains the same.

“If you are still in that variable-rate product then, you’d have to sweat out the next three years because there would still be possibly more increases,” says Mr. Guatieri, who adds his bank sees the overnight rate eventually going to 4% in the following three years. Based on the present gap between the Bank of Canada and prime, that would place the variable-rate product you get today at 6% by around 2015.

Fears of such a scenario are driving people into fixed-rate products again. That, plus new mortgage rules that make it easier to qualify for a mortgage if you go for a fixed-rate product with a term of five years or longer.

For updated rates and more information on the right mortgage for you please visit www.designermortgages.ca/rates.htm or call 1-866-824-8057

Uncategorized Mortgage, Variable and Fixed Rate

Financial Post · Wednesday, Jun. 30, 2010

OTTAWA — Home prices in some of Canada’s biggest cities rose 0.8% in April, according the latest Teranet-National Bank house-price index released Wednesday.

That followed a 0.3% rise for March, and marked the 12th straight month that prices have risen.

“At the national level, April continues the best string of consecutive monthly price increases since September 2006,” Marc Pinsonneault, economist with National Bank Financial, wrote in a report. “Home prices are now 2.9% above their recession peak, a situation that contrasts with the one prevailing in the U.S., where prices are down 30% from their peak.”

The index takes into account price trends in six urban areas. Prices in Halifax were up 1.9% for the month, Montreal and Ottawa home prices were ahead 1.1%, Toronto was up 0.6%, and Calgary and Vancouver were both ahead 0.8%.

It marked the first time in five months all local areas saw monthly gains. Calgary, however, remains the only area among the six still short of its pre-recession high, which it achieved in August 2007.

For the year, the national composite home price index was up 12.9%.

Canwest News Service

Uncategorized Home Price

As a result of stubborn inflation and stronger then expected economic growth signs are becoming more clear that Canadians could be seeing interest rate hikes sooner then previously anticipated.

Bank of Canada’s Mark Carney did not directly state that higher rates were on the way however, he did issue his clearest indication to date that his year-old commitment to keep the policy rate at the record 0.25 per cent until July was “expressly conditional” on inflation remaining tame.

In a speech to a business audience, the bank governor noted that both underlying core inflation and economic growth have grown slightly stronger, although broadly proceeding as expected.

The tip-off to economists was that he changed his language on his conditional commitment on interest rates, which has led to historically low rates for both consumers and businesses in Canada and helped the country recover from recession.
“This commitment is expressly conditional on the outlook for inflation,” he told the Ottawa Economic Association.

It was the first time Carney has undercut the commitment in such pointed language.
“They still have considerable latitude, but the changes that would be required to their forecast are consistent with hiking rates sooner than markets are anticipating,” said Derek Holt, Scotiabank’s vice-president of economics. He said Carney may move as early as June 1.

But Holt stressed that Carney’s overall message to Canadians is that rates will remain low by historical standards for some time.

“No matter what, we emerge from this with lower rates at the end point of the hiking campaign than in past cycles. He’s saying the outlook is clouded with risks and there’s a number of reasons to expect growth to be lower than past cycles.”

For more interest rate information contact Verico Designer Mortgages Inc.

Source: Julian Beltrame, The Canadian Press

Uncategorized Bank of Canada, Economic Growth, Inflation, interest rates

On Tuesday, the Department of Finance announced three changes to the standards governing government-backed mortgages, that come into force April 19. Here are a summary of the changes.

QUALIFYING FOR A FIVE-YEAR RATE

The adjustments to the mortgage framework will require mortgage insurers to ensure that new borrowers qualify for a five-year fixed rate mortgage when calculating the gross debt service and total debt service ratios. The measure is intended to protect Canadians by providing them with additional flexibility to support mortgage payments at higher interest rates in the future.

LIMIT THE MAXIMUM REFINANCING

Borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95% of the value of the property. The adjustment will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high-ratio mortgage loan to 90% of the value of the property, consistent with the principle that home ownership is a tool for savings.

DISCOURAGING SPECULATION

This measure will require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation. At present, borrowers may purchase a residential property with a 5% down payment. The change will require a 20% down payment for small non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (such as a duplex) will still be able to access government-backed mortgage insurance with a 5% down payment.

For more information please contact Verico Designer Mortgages Inc at 905-336-5997

Source:
Paul Vieira, Financial Post  Published: Tuesday, February 16, 2010  

Uncategorized

Relief for Homeowners During Difficult Times

Genworth Financial Canada has expanded its Homeowner Assistance Program to help

Canadians keep their homes when confronted with job loss or other life challenges such as a serious illness or marital separation.

The company works with homeowners and their lenders to find ways to bridge the gap between current circumstances and a long term solution.

Genworth has recently expanded its program to offer a new Homeowner Assistance

Evaluator, an online tool which prompts the homeowner to input details of their current situation. The Evaluator then provides potential solutions that can be discussed with their lender or a Homeowner Assistance Specialist to determine the best course of preventative action.

Homeowners are encouraged to be as proactive as possible when faced with a financial hardship as no one benefits from a mortgage in default. When it comes to prevention strategies, there’s no substitute for being educated and knowing all of your options.

The Homeowner Assistance Program is an integral part of every Genworth-insured mortgage, and is available at no additional cost.

CMHC’s Guide to Dealing with Mortgage Payment Difficulties

When unforeseen financial circumstances impact your ability to make regular mortgage payments, it’s important for you to take quick action. With early intervention, cooperation, and a well executed plan, you can work together with your mortgage professional to find a solution to your financial difficulties.

For mortgages insured by Canada Mortgage and Housing Corporation (CMHC), CMHC provides mortgage professionals with tools and the flexibility to make timely decisions when working with you to find a solution to your unique financial situation. These tools include:

Converting a variable interest rate mortgage to a fixed interest rate mortgage in order to protect you from a sudden interest rate increase, should one occur. Offering a temporary short-term payment deferral. Additionally, extending the original repayment period (amortization) in order to lower your monthly mortgage payments may be an option.  Adding any missed payments (arrears) to the mortgage balance and spreading them over the remaining mortgage repayment period, or offering a special payment arrangement unique to your particular financial situation.

CMHC is also willing to consider other alternatives proposed by the mortgage professional to resolve or avoid mortgage payment default. In every case, the options available will depend upon your individual financial circumstances.

For more information on getting help with your mortgage payments please call Verico Designer Mortgages Inc at 1-866-824-8057.

Uncategorized

OTTAWA–Citing weaker-than-expected growth in the July-to-September period, the Bank of Canada on Tuesday left its overnight rate unchanged at 0.25 per cent.

In the wake of that announcement, TD Bank said Canada’s recovery is so fragile; the central bank’s Governor Mark Carney will have to hold the overnight rate at an all-time low until late next year.

That’s several months longer than Carney has previously said the bank would wait to help stimulate business activity.

TD Bank said current trends indicate a return to full economic output will be delayed until the April-through-June period of 2012, six months later than the central bank is predicting.

“As such, we believe that the Bank of Canada will stay put past its conditional commitment of June 2010, and the first rate hike will not come until the fourth quarter of next year,” said Diana Petramala, a TD Bank economist.

Canada emerged from the recession but only just barely, with growth of 0.4 per cent in the July-through-September period. That was considerably less than the central bank’s 2 per cent growth prediction.

Looking ahead, “the main risks are a more protracted global recovery and persistent strength in the Canadian dollar that could act as a significant further drag on growth,” Carney stated.

The next scheduled date for announcing the bank’s overnight rate target is Jan.19.

For more information on bank rates please contact Charmaine

Uncategorized

Bond yields usually rise on good economic news and last week was no different. The 5-year bond yield jumped 0.14% on strong jobs data from both sides of the border.  (Canadian Jobs Report / U.S. Jobs Report)
Canada added 79,100 jobs in November. Traders had expected only 15,000.

With rebounding yields, fixed mortgage rates will probably halt their drop, at least for the time being.  As of now, discounted 5-year fixed rates are just under 4%—well below the approximate 10-year average of 5.36%.
The 5-year yield, which influences fixed mortgage rates, now stands at 2.53%.  It seems to be putting in a floor in the 2.35% to 2.40% range.  It may be tough to penetrate that floor in the near-term without weaker economic news, or some other economic shock.
The Bank of Canada holds its last interest rate meeting of the year on Tuesday. 19 of 19 economists polled by Bloomberg predict no change to the Bank’s 0.25% overnight rate.

Nevertheless, analysts will be watching to see if the BoC surprises the bond market with any optimistic outlooks.
For more market information contact Charmaine

Uncategorized

* TSX -248.21 to 10,805(Reuters) every stock market in the world was down yesterday on doubts about the strength of the US economic recovery. TSX closed to its lowest level in 2 months dipping below the 11,000 pt mark

* DOW -119.48 to 9,762 dipped below 10,000 pts as sales of new US homes fell 3.6% last mth against an expected 2.6% rise

* Dollar -1.08c to 92.72 fell to its lowest level in 3 weeks influenced by a dip in oil prices

* Oil -$2.09 to $77.46US per barrel.

* Gold -$4.80 to $1,034.70USD per ounce

* Canadian 5 yr bond yields -.03bps to 2.70. four weeks ago the yield was 2.57%.  This is the rate that effects the fixed interest rates

* http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Article from US Mortgage Brokers Association

Uncategorized Housing Prices