Saturday, May 30, 2009

Fixed rate mortgage pricing on the rise

Rising bond prices are forcing many lenders to increase pricing on 5 year fixed mortgage rates.

Some lenders raised rates Thursday midnight and others joined through the day Friday with one or two holding out but probably joining the rest at some point on Monday or perhaps Sunday night.

Contact a licensed mortgage broker to review your options and make sure you get the best product for your circumstances. Believe it or not, rate is not the only thing you should consider ... ask a mortgage broker why.

Friday, May 29, 2009

5 year "Value Mortgage" pricing increases

A popular "value mortgage" product had a price increase last night due to pressure on rates from shrinking margins in the bond market.

The product offers no lump sum prepayment option and was priced at 3.54% for a five year term. With the majority of Canadian mortgage holders unable to or not taking advantage of prepayments, it was becoming a popular choice. Giving up an unused feature to get a lower price is not something new in the big picture however it is seldom seen in the mortgage world.

At midnight, the rate increased to 3.79% which is the same as other discounted mortgage rates available to mortgage brokers for a five year term product WITH a prepayment feature.

Some lenders have increased their 5 year offerings to 3.84% or higher in reaction to thinner spreads due to bond market pressure this week.

This news comes at a time when the variance over prime of the "adjustable rate" or "variable rate" mortgage pricing has come down to prime plus .4% (OAC). Although pricing for this product is all over the map with some lenders offering as much as prime plus 1.0% or artificially increasing their prime to 2.50% (the majority of banks are at 2.25%) while offering prime plus .8%, by consulting a licensed mortgage broker you'll avoid worrying whether you're getting access to the best rate available.

Thursday, May 14, 2009

Variable rate complaints

Courtesy of Julie Sanderson, AMP

I thought I would share with you something that has been bugging me for a while. I don't mean to offend anyone, but I am starting to get annoyed by all the people bemoaning the fact that, with current market conditions, lenders are no longer offering Adjustable Rate Mortgages at "prime minus x.xx%".

I don't know about you, but I hear this complaint a lot. I hear it in coffee shops; I hear it in the grocery store while waiting in line. I hear it from inexperienced mortgage professionals. I did a little research on the Adjustable Rate Mortgage over the past while and here is what I found:

November, 2006, you could get an Adjustable Rate Mortgage at prime minus .85% (some places even had better discounting)

April, 2007, you could still get prime minus .85%

Great deal, right?

The bank prime lending rate in November, 2006 was 6%

The bank prime lending rate in April, 2007 was 6%

This means the great deal you were getting at that time with prime minus .85% was 5.15%

Now, compare with today's situation:

Bank prime is currently 2.25% and Adjustable Rate Mortgages are priced at prime plus .75%

The rate you get today is therefore 3.00%


Anyone think Prime is going up next week? Next Month? Maybe ... next quarter? Maybe ... in 2 quarters? Maybe ... in 3 or 4 quarters? Well the Bank of Canada is signaling that it wants to hold the line on its prime until the end of the 2nd quarter of 2010 according to economists in case you're keeping score.

It's weird how so many people were so excited about the prime minus .85% product when prime was 6%, yet they are indifferent to a prime plus mortgage when prime is 2.25%. The difference is more than 2.0% in rate!

The opinions expressed are those of the author ... as always you should consult a licensed mortgage broker and discuss your own situation prior to making any decisions.

Tuesday, May 12, 2009

Think you are enviromentally friendly ?

What is your Walk Score ?

A handy little tool of interest to you, Walk Score is a neat little site that maps a location and points of interest around it then assigns a score (I am car dependent according to my score of 35 out of 100).

And yes, it works in Canada. No personal information to fill out, instant results at the click of a mouse.

Visit Walk Score and check it out.

Wednesday, May 6, 2009

Why so much fuss over the 5 year term mortgage ?

According to a recent Canada Mortgage and Housing Corporation (CMHC ) consumer survey, a whopping 71% of Canadian homeowners refinance their mortgage before the maturity date.

So this begs the question ... why all the fuss over taking out a mortgage for 5 years if 7 out of 10 times you won't see the maturity date and end up paying a penalty or settling for a blended rate instead ?

Another statistic to consider is from a real estate salesperson we know ... the vast majority of homeowners either consider selling or making a renovation after 3 years. If you think about it, it seems pretty reasonable. You scrape and save to move into a home and start making a list of projects ... some big and some small. When your budget is back under control from those moving costs maybe you'll start into a project and prioritize the others. Or maybe you'll start them all and finance them via lines of credit, "don't pay a cent event" or credit cards. When your cash-flow becomes a problem, you consider refinancing.

If you decide to sell and buy up/down into the right home for you either because of a job opportunity in another location, retirement, change in family size or simply because you hate the thought of a renovation project then why make it difficult and more expensive for yourself by shackling yourself to that 5 year term everyone is so in love with (but doesn't really know why) ?

So there you have it ... consider a 3 or 4 year term on your next mortgage. Odds are that you'll be thinking of if not actually doing a refinance around that time anyways. You may obtain a lower interest rate while retaining the option of early renewal but saving yourself from having to settle for a blended rate to avoid penalty or save the penalty altogether if the timing is right.

For more common sense tips on your mortgage financing options, contact a licensed mortgage broker who will work with you in an unbiased way to get you the best deal by asking about your priorities and shopping the market on your behalf.