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What does the Bank of Canada interest rate mean for YOU!

April 23rd, 2009 Leave a comment Go to comments

It means that you can get a 5 year fixed rate Mortgage for as little as 3.69% Quick Close Special (the lowest in Canadian history) and a variable rate at 2.85% (Prime plus 0.60).

Another important point, never before made, is that the Bank of Canada is going to hold the overnight lending rate steady until June 2010.  

So if you currently have a variable rate, now is not the time to lock in if the Bank holds true to its promise.

Many people who are in fixed rates are looking at refinancing their mortgages into lower rates.  The penalty to break an existing mortgage is the greater of three months interest or what is called the interest rate differential. The interest rate differential is the lost interest between your current rate and market rates.  Whether this is worth your while can only be decided on a case-by-case basis.

I listened to Benjamin Tal, chief economist of CIBC and his comments regarding the variable rate mortgages where as follows:

“You might do better the first two years [of a five-year mortgage] but not the remaining three. I’m convinced long-term interest rates will rise. I can see [long-term] rising 200 basis points. These are emergency rates and at some point this emergency will end,” says the economist.

The banks and the mortgage insurers are becoming more stringent on their lending criteria; minimum credit score requirements have increased, if you are self-employed they are wanting more documentation and appraisals are getting harder too – they look at the appraised value as opposed to the purchase price.  If your credit is less than perfect, this can also be challenging, that is why we are finding more and more people seeking out the expertise of an accredited mortgage professional.

Written by:  Charmaine Idzerda, (AMP) Mortgage Broker   FSCO# M080000747
Verico Designer Mortgages Inc. 
www.DesignerMortgages.ca    FSCO# 10194
Tel: 905.336.5997, Tollfree 1.866.824. 8057

 

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