An update on mortgage interest rates from my colleague Pauline


To learn more about Pauline please click on her picture:


Pauline Tonkin


Last week there was news that the banks had dropped their fixed rates.  In fact they were simply reducing their rates to match those of non-bank lenders which have been in place since last fall.


5 year fixed rates now settling around 3.35% or a bit lower but some lenders still around 3.39% or higher.  So there is a spread and different rates available depending on the client application.  If we have business for self or rental income we can be competitive with options they may not be able to get with their current lender--- always good to have options for your clients.


On the variable rate side we have seen an increase on discounts to P-.55% and may see that go a bit lower still.


For clients who have trouble qualifying but have sufficient down payment--- we are seeing very solid rates on the B side lending around the mid 4% range which is really great.


As always, I am happy to talk to any clients who need to understand their financing options.  Take care and have a great week!




Till next time ...


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I received some great information on Preparing for Rising Mortgage Rates, and wanted to pass that on to you today, and also to thank Christopher Collins for this great information! You can find out more about Christopher here.


Christopher reports:


"The interest rate party for borrowers is almost over. Following almost five years of historically low rates, we’ve started to see some upward movement in the cost of money.


Most people watch the central banks for indications that rates are about to take off. But that’s not where the real action is for fixed-rate mortgage holders. This actually takes place in the rarefied world of the bond market, where institutional traders like banks and pension plans operate. By the time the Bank of Canada gets around to acting, the bond market will have left it in the dust.


In order to save as much money as possible, a proactive approach is recommended when dealing with rising interest rates:


1.     Budget for future plans. Many borrowers opt for the maximum mortgage for which they can qualify. The problem with this approach is that life happens. It’s important to plan ahead for future changes such as starting a family, maternity leave, relationship changes, health issues, career changes, and so on.


2.     Ensure you would still qualify for your mortgage if rates continue to increase. For instance, if the five-year rate reached 5.2%, could you still afford the payment? We can sit down and run the numbers to ensure we build a buffer zone into your mortgage.


3.     Use your prepayment options. This will enable you to increase your payment in relation to the increased rate. For instance, if you have a five-year fixed mortgage at 2.89% and rates increase to 3.49%, increase your monthly (or bi-weekly) payment to the equivalent. That way, you won’t experience “rate shock” when your mortgage is up for renewal. It’s important to remember that any extra payments you can make will go straight towards paying down your principal faster, which means you will be mortgage-free quicker!


It may be worth your while to take advantage of a free mortgage check-up before rates increase any further. This will help you determine if it makes sense, for instance, to renew your mortgage a few months early if this means being able to lock in to a new five-year term before rates increase even more.


With rates on the rise, it’s more important than ever to take advantage of mortgage brokering services, since we can shop different lenders and advise which ones not only have the best rates, but also which lenders have the best prepayment options and mortgage offerings to suit your individual needs."


Do you have any questions for Christopher?  Please contact him here.



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Negotiating your Mortgage in Vancouver


Independent mortgage consultants are more likely to give you better deals than your bank.


As with property prices, shopping for mortgages is changing. New mortgage options and features are introduced on a daily basis. It is also more complicated to know how much you will have to pay and what is right for you.


Maybe this is why mortgage consultants now negotiate most BC mortgages these days. The stigma previously attached to mortgage brokers no longer holds. Actually, trends show that Canadians now prefer to work with mortgage consultants while looking for investment advice, pre- payment options and the best rates. What is more, the services are free of charge.



The mortgage process may turn out to be intimidating. You will have to get in touch with different branches and compare the available options and rate structures. Based on the circumstances you find yourself in, one mortgage may be better than another.


On the other hand, financial institutions only use their sales force to sell their products to interested customers. As a result, you will not get unbiased advice or a wider variety of products. This is why most people are opting to work with mortgage consultants.


Today, mortgage news items will inform you that most consultants deal with different lenders – including top banks in Canada. They have the ability to search around for different products on offer by the credit unions, insurance companies, trust companies and major banks.


The primary objective of the mortgage consultant is to help you find the best product, terms and rates depending on your particular needs. They will also be able to structure deals to meet the criteria set between you and the lenders, while negotiating on your behalf.


Banks always look out for themselves. Actually, the bank rewards representatives for offering clients rates that are higher than the lowest discount rate. However, since the consultant does not represent any profit making bank, they are more likely to consider your interests first.


To attract customers through individual brokers and mortgage consulting companies, most lenders pay finders’ fees for referred business. This way, consultants can among different financial institutions at no cost to borrowers. At times, they can complete the entire application process in a couple of hours.


Lenders are also looking for new business; minus the cost and stress of dealing with customers directly. Essentially, they find it more convenient to pay independent brokers to get them clients.


Additionally, if you deal with a financial institution and the application for a mortgage is declines, you will have to restart the entire process again with other lenders. However, while dealing with consultants means that your application can be redirected easily to other lenders for consideration.


While negotiating another mortgage, watch out for the following things:


1. ‘Free Offers’

Some branches will offer to pay the appraisal costs and legal fees. Most of the time, these costs will be clawed back to you in terms of a higher rate. On the other hand, consultants sometimes use their commissions to help you offset either of these on your behalf.


2. Loyalty Program

You should also not expose yourself because you were loyal to the branch. Even with GIC’s, RRSP’s, chequing and savings accounts, the bank will always want to make a higher profit from your mortgage transactions.


Overall, it is clear from mortgage news that consultants are more likely to get you the best deal on your mortgage.


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Thank you Globe and Mail for the inspiration for today's post:


Ever heard of mortgage cancellation fees? You soon might.

You are probably used to seeing cancellation fees from hotels, airlines and cellphone providers, but not when you’re getting a mortgage.


Such fees are slowly becoming more common as a small but growing number of discount mortgage brokers are tying cancellation fees to rock-bottom rates. Here’s why.


Many Canadians use mortgage brokers, who have access to multiple lenders, to get the lowest possible mortgage rate. To get the best terms, lenders require brokers to maintain high “closing ratios.” That means brokers must generally complete three out of four mortgages that they get approvals for.


But as mortgage shoppers become more informed and more rate sensitive, many become less loyal. And that is leading to an increase in costly cancellations, as borrowers use one lender’s approval to get a better deal with another lender or broker.


One may rightly ask, “What’s wrong with that?".


You can read the answer to that question here.


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Are you a little confused about the bond market lately and the fast climb in fixed interest rates? Over the past 2 weeks there have been over 4 increases. One of my mortgage references, Karen Dennehy, has this to say:


"The short answer is the big Institutional investors are dumping Bonds and their current low yields and keeping their cash with a plan to buy bonds later when yields are much higher...they were frightened by Bernake's comments that the US Fed would stop buying bonds and so it seems we are in a free fall of dumping Bonds, which in turn causes yields to go upwards, and at the same time the stock market and gold markets are being sold as well...this is pretty rare indeed."


This article might help explain why this is happening.



If you have questions about this please don't hesitate to get in touch with either myself or Karen.


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