CANADIAN MORTGAGE VIEWS

It’s been a great ride! Canadian homeowners have been benefiting from ultra-low interest rates over the last two years. Unfortunately the time has come: the rate climate is starting to heat up. As the Prime lending rate starts to gradually increase toward more normal lending rates of 5% to 6%, do variable-rate mortgages still make sense? Of course the answer depends on your own personal situation, but there are definite compelling reasons to choose variable. Fixed-rate mortgages play a significant role with many Canadian homeowners, particularly those who may lose sleep wondering what will happen next with rates. Fixed mortgages are also ideal for those on a very tight budget; a fixed rate gives you the security of knowing exactly how much your mortgage will be so you can plan accordingly. Many first-time homebuyers choose a fixed-rate mortgage for this reason For those who are not on a tight budget, a variable-rate mortgage can be a wise financial move, even in a rising rate environme...

Bank of Canada raises interest rate | Tuesday, 1 June 2010 After more than a year at a record low level, Bank of Canada Governor Mark Carney raised the benchmark interest rate for the first time since 2007 by one-quarter percentage point to 0.5 per cent. This is the first time since 2007 that that rate has increased and the Bank of Canada is the first in the Group of Seven to do so since the financial crisis and recession began in 2008. In a statement Carney emphasized that the increase should not be interpreted as just the first of more to come. "This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending and the uneven global recovery,'' the central bank said. ``Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and g...

The Canadian Press Date: Thursday Feb. 11, 2010 6:56 AM ET OTTAWA — The federal government should avoid major surgery and make only minor adjustments to deal with fears of overheating in Canada's housing market, a number of leading economists said Wednesday. Federal Finance Minister Jim Flaherty and the Bank of Canada have expressed concern that Canadians may be assuming too much debt in home purchases, debt that could rebound on them when interest rates rise. But some solutions being floated in advance of Flaherty's upcoming March 4 budget -- doubling the minimum down payment to 10 per cent, or reducing the maximum amortization period from 35 to 30 years -- could do more harm than good, the economists said. "We want some sort of micro-surgery, not (taking) a pickaxe to the problem," said Avery Shenfeld, chief economist with CIBC World Markets. Bank of Nova Scotia economist Derek Holt said such radical surgery could cause home prices to crash and shake confidence in t...

Two items of interest. 1) This past Tues. The Bank of Canada quarenteed to keep its trend-setting rate at 0.25% until the end of June. The implication was there to expect rates to rise after that. If you have a mortgage that is coming up for renewal or are looking to purchase soon, now is the time to give us a call to see how we can help. 2) Street Capital has rolled out the first nationally available 1-year adjustable rate mortgage. Paul Grewal, President of Street Capital, says the product is well-suited to those who expect that “discounts on ARM’s will increase.” It gives people “the flexibility to choose a shorter ARM term,” he adds. Therefore, if you think variable rates will be prime – 0.50% next year, for example, this 1-year variable lets you switch mortgages in 12 months without penalty--instead of waiting 3-5 years. Street Capital also lets customers convert to a 3-, 4- or 5-year fixed rate at any time, with no fee, and at discounted broker rates. Here are some of the key gui...

Canada Prepared For Rising Rates according to a recent surrvety bay CAAMP. Claims that Canadians are taking out risky variable-rate mortgages and borrowing more than they can afford “are not based on actual data” and “are misinformed.” That’s according to CAAMP , who issued this study of 40,000 mortgages from 2009: Revisiting The Canadian Mortgage Market… Despite rising home prices, first-time mortgagors took out “far less” than they could afford last year, says CAAMP. "The vast majority of Canadian mortgage borrowers are not taking on undue risks. They have factored rising interest rates in to their mortgage decisions," stated Jim Murphy, president and CEO of CAAMP. CAAMP ran simulations to estimate what would happen if the Bank of Canada hiked rates 3% over two years (and fixed rates rose 1.25%). It found that income gains should offset much or all of the increases in mortgage payments that most Canadian’s would experience. "The bottom line from the simulations is th...

Bank of Canada Governor Mark Carney again warned Canadians Wednesday not to borrow more than they will be able to handle when ultralow interest rates start to rise, urging households and lenders to be responsible while the risks that debt poses to the economy are "still manageable." "When risks are still manageable is precisely the best time to act," Carney said in the text of a speech he was delivering to a business audience in Toronto. "We must be vigilant, and all parties must fulfill their responsibilities." While saying lenders should "actively monitor risk" and not take "false comfort" from mortgage insurance and the past health of household credit, Carney implored Canadians to "ensure that in the future, when the recovery takes hold and extraordinary measures are unwound, they can still service their debts." Carney's remarks expand on the central bank's semi-annual review of the financial system last week, in wh...

Tavia Grant wrote an article in Dec 14th Globe and Mail stating that Canadians' net worth in the third quarter of 2009 rose, but house debt rose also. Canadians' net worth swelled in the third quarter, riding the crest of rising equity markets. But debt levels rose too, sending the household debt-to-income ratio to a record high. Household net worth climbed 2.3 per cent in the quarter, as Canada's benchmark stock index ( TSX-I 11,530.88106.950.94%) gained 10 per cent, Statistics Canada said Monday. Net worth hit $5.7-trillion, marking two quarters of gains after three straight drops. Debt, too, is rising. Household debt, as measured by mortgages and consumer credit swelled 1.6 per cent as low borrowing costs caused Canadians to buy more homes and renovate them. They also bought more cars, sparking a further increase in consumer credit, the agency said. Personal debt has been steadily rising in Canada since 1982. “Falling mortgage rates, along with increased sales of existin...