Mortgage Rates

Once again, mortgage broker Graham Conner provides this pertinent information on the latest mortgage rates.

Variable Rates
September 8th is the date set for the Bank of Canada’s rate announcement.  A third successive 0.25% rate hike this year is by no means guaranteed, but most commentators expect one further increase at some point this year. The common view is even if there is an increase in the Prime rate this week, then there will be a pause until in 2011 before further moves would be considered.

So, let’s assume the worst and Prime goes to 3.00% on Wednesday, then current discounts at 0.7% take the effective rate to 2.3%.  Existing variable rate clients need to review this figure in conjunction with the fixed rates below to assess whether now is a good time to lock in.  Remember, clients may lock in to any term which covers at least the remainder of the terms – so, if you have three years to run on an initial five year term, you may lock into a fixed rate of 3, 4, 5 years or more.  The fixed rates listed below are the best selected across a number of lenders.  Therefore, please contact me for the current broker rates associated with your current lender.

For those contemplating new purchases or renewals, variable rates still offer the prospect of short term savings, but the gap has narrowed, as expected.  Take for example the three year fixed rate at 2.90% and compare to a theoretical effective variable rate of 2.3% from this coming Wednesday.  The 0.6% difference may be a premium worth paying to insure against rate increases for the next 36 months.  Prime at 3.00% would still sit well below the 4.6% ten year average so variable rates are not necessarily the winners for next few years.

Fixed Rates
Today’s real estate values have been described as the result of buyers accelerating their purchase plans in 2009 & 2010 in anticipation of HST, tighter mortgage qualification and rising interest rates.

My experience was that buyers were knowledgeable enough to know HST does not affect the price of re-sale properties. Also, perspective buyers of owner-occupied residences were not significantly impacted by new rules imposing limits on refinancing properties with little equity and rental mortgage financing.  New Benchmark qualifying rates for variable rates and fixed rate terms of less than five years did little to affect qualification for those wanting to buy close to their maximums.  The factor which did seem to play on buyer’s minds was the looming end of record low fixed rate financing.  Buyers were not impressed at the thought of missing out on all-time low fixed mortgage rates.

In recent months, the Bond market has continued to react to unimpressive economic announcements.   Five year fixed rates are now at (or within 0.1%) record low levels we saw last year.   Whether buyers and sellers have yet impacted new rate lows into real estate pricing remains to be seen.   Either way,  now is great time to request a rate hold for purchases and to check renewal dates on existing contracts for your friends and family.

On the five year front, I can hold a rate at 3.79% with no obligation for 120 days with full pre-payment privileges.  Quick close offers from certain lenders take that figure to 3.59% or lower.  The three year rate at 2.90% offers a strong challenge to the variable rates as discussed.

Thanks Graham!