Should I Renew Or Switch Lenders

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Should I Renew Or Switch?

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My mortgage is coming up for renewal. How do I know I’m being offered the best Its best rate?

Banks want to keep you as their customer. They may start sending you renewal documents month in advance of your renewal date. But how can you be sure that you are being offered the best product possible. Watch the Video Below. 

We think it is best to always let us review your mortgage during every renewal so that we can make sure your mortgage product lines up with you current goals and situation. Some mortgages will be more advantageous if you are looking to sell in the near future. 

More Articles About Interest Rates

Should I Renew Or Switch Lenders

Feb 7, 2023

Mortgage 101 Education Center Learn all You'll need to know to achieve your home buying dreams.   Should I Renew Or Switch?My mortgage is coming up for renewal. How do I know I'm being offered the best Its best rate? Banks want to keep you as their customer. They may start sending you renewal documents month in advance of your renewal date....

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Rate Teasers and why they are misleading

Feb 2, 2023

You've probably seen ads for mortgage rates significantly lower than what is currently offered on major banks page. These lenders are attempting to make money just like everyone else, so lets look at how they are banking on you taking the absolute lowest rate, and still planning on turning a profit.  

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Overnight, Prime, and Variable Rates

Feb 2, 2023

Overnight, Prime, and Variable Rates. Three terms that get kicked around when shopping for a mortgage. But how do they all connect. Learn more

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What is the Overnight Rate

Feb 2, 2023

What is the overnight rate?  

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Mortgage Minute 22: The bank’s final rate increase

Time To Evaluate

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Is the Bank of Canada finally ready to stop their rate hikes?

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Our Quick Take

After one more rate increase of .25% to start off 2023 we are hoping to see rates level off and remain constant until around this time next year. 

2023 Gets Started With A .25% Rate Increase

The Bank of Canada’s language is easing.

After the Bank of Canada’s half-percent rate increase in December, there was some hope that rates would stop rising. The Bank shifted from a stance of “yes we will increase rates further” to a “we will watch the data and decide if further increases are necessary.”

This shift in language was rather significant, but not enough to calm concerns about further increases.

Since March 2022 the bank has increased rates now 4.25%. And most of the increases have been a half percent or larger, compared to more normal quarter percent changes to the rate.

This brings the retail PRIME rate to 6.7%, with variable rate mortgages, depending on the discount from prime, somewhere around 5.8% for most variable rate mortgage holders.

Separate from this rate announcement, but related for anyone looking for a mortgage, new insured 5-year fixed rate mortgages today can be had for under 5% in most cases. This is because fixed rate mortgages change when the Bond rates change, which is different than the Bank of Canada’s rate.

 

So, with today’s announcement, there is a growing consensus that the Bank of Canada is done with the rate increases. This has been the most aggressive cycle of rate increases in decades with eight consecutive increases, and most jumbo increases verses the more traditional quarter percent adjustments. Housing markets across the country, in the markets that really needed it, have already softened significantly.

What the experts are saying

In advance of the increase today, BMO Capital Market’s director and senior economist Sal Guatieri said that he sees today’s move as insurance on the inflation outlook.

When asked what to expect this year, Guatieri told BNN Bloomberg that rates have risen enough and that the economy will enter a shallow recession in the first half of this year. He expects the Bank to sit on the sidelines for the balance of the year and then in 2024 start to reverse gears with rate drops.

Today’s announcement matches that pointing to “growing evidence that {rate increases] have slow[ed] activity, especially household spending. Consumption… has moderated from early 2022, and housing market activity has declined substantially.” The bank predicts that this “overall slowdown in activity will allow supply to catch up with demand.” This is economy speak for “inflation will return to the target range.”

And I am excited to tell you that the bank thinks this will be the last increase! They said that “If economic developments evolve broadly in line with [their] … outlook, [the Bank] expects to hold the … rate at its current level while it assesses the impact of the cumulative interest rate increases. “

Based on the major banks predictions I think we will see rates more or less where they are today until the end of 2023 and back to about 4% by the end of 2024.

 

Alberta’s real estate market remains strong. In the lower priced part of the market, Realtors are reporting multiple offers, and less flexible sellers. We didn’t have the price increases seen elsewhere in the country and are not expecting much more downward pressure on prices in our province. Both Calgary and Edmonton remain some of the most affordable major housing markets in the developed world.

If you are considering a purchase OR are looking for any advice regarding your existing mortgage, please reach out to me and my team! We are here ready to help you out!

Our Commitment is to open and honest advice. We strive to bring you the most up to date and relevant content when it comes making decisions about your mortgage.

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Book a Free Consultation

About

Josh Tagg

Owner of Mortgages For Less, writes about current market trends, and how they impact the mortgage market.

The post Mortgage Minute 22: The bank’s final rate increase first appeared on Mortgages for Less.
Mortgage Minute 22: The bank’s final rate increase posted first on https://mortgagesforless.blogspot.com

Mortgage Minute 21: Why Are Variable Rates Higher Than Fixed?

Fixed Rates Are Higher Than Variable!?

READ THE POST

Are they supposed to do that?

Fixed rates are higher than variable. What exactly does this mean?

 Interest Rates are Inverted!?!

 

It is a common understanding that taking a 5-year variable rate mortgage nearly always costs less when compared to a 5-year fixed rate mortgage. 

Usually, the variable rate at the start of a mortgage term is LOWER than the fixed rate at the same time. That helps make the choice easier. 

However, right now, I am recording this in December 2022, the variable rate mortgages are higher than available fixed interest rates.

Not all lenders have the same rates, but I will use examples from a few non-bank mortgage lenders that are commonly used, and happen to have lower published rates than the major banks do.

Here are a few examples of rates – both fixed and variable:

This first example makes a few assumptions:

 

1. It assumes the Bank of Canada is done with rate increases. While that may not be the case, it certainly could be. For the time being, it seems the bank is threatening increases if inflation doesn’t calm down, but I interpret that to primarily be posturing so that we continue to respond to the threat.
2. I am using an approximation of the average rate expectations of the major banks, but rounding those off (both up and down) to quarter percent changes since that is what the changes actually are.
3. This only takes their projections to the end of 2024 – and then assumes no further changes up or down after that. If rates continue to trend lower after 2024, then we would see greater savings than I will show, and if rates go up, then we would see lower savings than I will show.
4. I am assuming a $100,000 balance and a 25 year amortization starting in January 2023. This allows you to easily multiply to get to your own mortgage amount. If you are comparing to a mortgage with a shorter amortization, the end result is similar, but skews toward a slightly smaller savings. 

Here we see rates start to drop toward the end of 2023, and then a total of 1.25% of drop over about a 12-month period. This shows a savings over 5 years of nearly $2000 for every $100,000 owing on the mortgage. However, I suspect this might be a bit optimistic with the rate decreases.

Let’s try another example

with the same type of purchase mortgage, but with one more quarter percent increase in the spring, and then a 6 month delay on the start of drops and an additional quarter percent drop at the end of it to offset the increase in the spring of 2023.

Other than changing the interest rate changes, the other assumptions remain the same.

Here we see that by adding a quarter percent increase in the spring of 2023, and then delaying the rate drops by 6 months, our savings over the five years are reduced to just under $500 for every $100,000 owing on the mortgage.

These two examples are very similar to what we would see with 20% down, or on refinance application since the spread between fixed and variable in all cases is similar.

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Need Help Making This Hard Decision?

Right now, the decision is harder for sure! There is absolutely the risk of further rate increases. But on the flip side, there is the very real possibility of significant savings over the coming years by choosing a variable rate today.

Only time will tell what happens. Your risk tolerance and your ability to handle, or not handle, fluctuation in payments associated with a variable rate should be the primary factor in deciding if a variable or if a fixed rate is right for you.

As always my team and I are ready and willing to advise you on the best options going forward. Book a with us today and we will review your situation and give you the best advice possible.

Talk to An Agent

Our Commitment is to open and honest advice. We strive to bring you the most up to date and relevant content when it comes making decisions about your mortgage.

Ready to Talk?

Book a Free Consultation

About

Josh Tagg

Owner of Mortgages For Less, writes about current market trends, and how they impact the mortgage market.

The post Mortgage Minute 21: Why Are Variable Rates Higher Than Fixed? first appeared on Mortgages for Less.
Mortgage Minute 21: Why Are Variable Rates Higher Than Fixed? posted first on https://mortgagesforless.blogspot.com

Mortgage Minute 20: Bank of Canada Raises Rates for the Last Time in 2022

The Final  2022 Rate Adjustment

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It’s Finally Here. Can we expect to see a leveling out in 2023

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Whether getting a mortgage on your first home, or looking at options for your next one we are here to help. Our team prides itself on open and honest advice. Come see why we just received an award for top 100 mortgage brokers in the world.

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Our Quick Take

2022 Saw some of the largest swings in interest rates we’ve seen in decades. But as 2023 approaches we can expect a more “wait and see” approach by the Bank of Canada.

The Final Rate Adjustment of 2022 just dropped. Read below for my full take.

Fixed rates have dropped!

Leading up to the Bank of Canada’s October rate announcement, pricing on the bonds which are the basis for fixed-rate mortgages was increasing. But after that rate announcement was smaller than anticipated by the market, we have seen downward pressure on the Government of Canada’s 5-year Bond Yield.

After peaking on October 20th at the highest rate seen since June 2008, it has dropped more than ¾ of a percentage point, and fixed mortgage rates are trending in the same direction. 5-year fixed mortgages for 5% down purchases were around 5.5%, and they can now be had below 5%! This is positive news, and I will be watching to see if the trend continues and will share more about this in the new year.

Bank of Canada Increased Rates Again!

Meanwhile, today, December 7, 2022, the Bank of Canada made its final rate announcement of the year. In the last week, economists have been pretty split not on whether or not the rate would increase, but on whether it would be a quarter or a half-per cent increase.

The Bank chose a half-percent increase, boldly placing us in a spot where there may be no more need to increase the rate further. 

For those of you with Variable Rate Mortgages, this equates to about a $29 per month payment increase for every $100,000 that you owe.

While the Bank won’t tell us that directly, it did point out that they see that the higher rates have slowed consumer spending and housing activity and that price pressures of most everything may be losing momentum. The bank sees the economy stalling as we enter 2023.

This leaves us in a rather unusual position where Fixed Interest Rates are LOWER than the Variable rates on new mortgages! It is usually a safe bet that variable mortgage rates cost less than fixed rate mortgages over the 5-year term of the mortgage. And that may still be true, but the future hasn’t happened yet! I will put together another video next week discussing this odd situation specifically.

Where does this leave us?

Different banks have different predictions of what we will see, but here are a few ideas to consider.

Last week CIBC Senior Economist Andrew Grantham predicted a 0.5% increase today “before the Bank moves to the sidelines in 2023 to observe how the economy is coping with these higher interest rates.”

In a Reuter’s poll of 29 economists last week, all but 3 of them predicted that the rate would peak at 4.25% – leaving the Retail Prime rate at 6.45%. While I don’t have a crystal ball to predict the future, and the data continues to inform policy decisions, it does seem that we are at the end of this historic cycle of rate increases.

I shared last month that the rate might start to decrease as early as a year from now. Let’s hope that proves true!

What does this mean for the housing market?

 

With rates leveling out now, we can reasonably expect that home prices in Calgary and Edmonton have likely bottomed out – or are very close to that. The most recent data for Calgary shows average prices increasing since August, and leveling out in Edmonton. Over the coming year, if rates remain stable, we should see a corresponding stability return to home prices in Alberta, until it starts to look like rates will head back down which may put upward pressure on home prices. Some economists think that the Bank of Canada may start lowering rates as early as the last part of 2023.

What if I am suffering?

 

While the banks have been releasing data that suggests that the majority of variable rate holders are in a good position to weather higher rates, that certainly isn’t the case for everyone! If you are struggling, there are options available to your lender to help you out as long as you reach out to them while your mortgage is still in good standing! They can look at skipping payments or stretching your amortization to as many as 40 years if you are at risk of missing payments. But again, you need to start the process before you miss a payment. Each mortgage is different, but reaching out to customer service at your lender can help you understand which options are available to you. If you want or need help knowing where to call, please reach out to me or my office for guidance.

Our Commitment is to open and honest advice. We strive to bring you the most up to date and relevant content when it comes making decisions about your mortgage.

About

Josh Tagg

Owner of Mortgages For Less, writes about current market trends, and how they impact the mortgage market.

Ready to Talk?

Get a Free Consultation

The post Mortgage Minute 20: Bank of Canada Raises Rates for the Last Time in 2022 first appeared on Mortgages for Less.
Mortgage Minute 20: Bank of Canada Raises Rates for the Last Time in 2022 posted first on https://mortgagesforless.blogspot.com