December 9, 2008
Interest Rates, News
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WOW!
One thing that continues to surprise me over and over in this profession is when things change in the mortgage industry they really change fast. Over the past couple of months (since late September) fixed interest rates went up and stayed steady. But over the past day or so the one, four and five year rates have all dropped quite a bit. One of the major lenders just dropped their four year to 4.89% and the five year to 4.99%. Wow!
No one has the ability to forsee the future but if these rates stay around and if housing prices stay steady then perhaps we will have a busy January in the housing market in Calgary.
Interesting times.
If you have any questions call me and we can run a few numbers for you.
Cheers.
October 21, 2008
Credit, Interest Rates, News
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According to the Globe and Mail the Central Bank of Canada has decided to drop their prime lending rate once again. This time by ¼ of a percentage point.
The last time they dropped the rate by ½ percent it took the big five chartered banks a little while to drop their key lending rate. Some banks even decided to hold back some of the rate cut.
So I will be keeping an eye out to find out how your lenders will react.
Please call if you have any questions.
http://www.reportonbusiness.com/servlet/story/RTGAM.20081021.wrates1021/BNStory/Business/home
October 8, 2008
Credit, Interest Rates
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“Should I fix my variable rate mortgage right now?” is a question that me and my collegues have been hearing quite a bit recently.
It is a good question. The finacial markets are in up heaval. Every time you turn on the radio or TV there is talk of recession. And people want to take some action to protect themselves.
This morning the Bank of Canada along with five other central banks reduced thier prime lending rates. Time will tell if this translates into banks reducing thier prime lending rates but it looks favourable.
If they do and you have a variable rate that is 0.6% below prime then your rate will go from 4.15% to 3.65%. Now lets compare that to a typical fixed rate right now of 5.8%. For every $100,000 you have borrowed right now by staying with the variable you will save $121 every month.
Economists are also suggesting that rates will continue to drop for the foreseeable future.
“The risk is that 50 basis points wasn’t enough, and that none of that will pass through to consumers and businesses as interbank funding pressures continue to worsen even after the rate cut,” said Derek Holt, vice-president of economics at Scotia Capital Inc. “This is not the last of the cuts, and both the Fed and the Bank of Canada could easily cut another 100 basis points.”
There may come a time where it will be prudent to fix your rate and you are welcome to do this at anytime but I would rather have that $121 in my pocket every month.
Call if you have any questions.
August 15, 2008
Interest Rates, Mortgages Over Malts
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On Wednesday night at my bi-weekly Mortgages Over Malts I was asked a question about whether the Fixed Interest Rate Mortgage was better than the Variable Interest Rate Mortgage. Good question. The answer is that both have their own advantages and disadvantages, it just depends on what you are looking for. Read on to find out more.
The Fixed Interest Rate mortgage defines the interest rate for the entire term of the mortgage from the outset. This creates a situation that you will know exactly what your mortgage payment will be for the entire term of your mortgage (1, 2, 3, 4, 5 or 10 years). For some people this is great. They can set up their monthly budget with certainty.
The Variable Interest Rate mortgage defines its interest rate in relation to the lender’s prime lending rate. So you may have a rate where your interest is for example 0.6% below prime. The prime lending rate for all lender’s fluctuates. So one month your payment maybe $1000 but the next month is can go up to $1025 if prime goes up by 0.25%. But the prime lending rate may also go down, so you may see your payment be reduced by $25 as well.
So what is the advantage of the Variable Interest Rate Mortgage? The advantage is that typically the variable rate is lower than the fixed rate and could save you money over the entire term of the mortgage if you can handle the potential fluctuations in payments.
One important thing to note is that with the Variable Interest Rate Mortgage you can fix your interest rate at any time to the best fixed rate mortgage available through that lender. So if you don’t like where the prime lending rate is going you may fix your interest rate.
So does the stress of your payments potentially going up justify the cost savings? If yes then go for the variable otherwise the fixed is probably right for you.
Call me and I would be glad to answer any questions you may have.
All the best,
Jason