May 2006 Mortgage Newsletter
Greetings to all and a warm Welcome to New Subscribers.
I have been getting a ton of phone calls asking what is going on with interest rates creeping up? Also when should I lock in my interest rate? All of my mortgages are in the Best Discounted Variables I could get. Over the long term it will pay off. I still maintain that Interest rates are unbelievably low and that if the recent creeping up of rates has you loosing sleep then I would suggest a fixed rate would be better for you at this time.
Don’t rush into fixed-rate mortgage, experts suggest as rates rise
Tuesday’s rise in variable mortgage rates will have some homeowners looking to lock in their rates, but experts say not to be hasty. It could be just a blip.
The cost of a variable mortgage has risen for the sixth time since the summer, after the Bank of Canada announced Tuesday it is hiking its benchmark interest rates by a quarter-point. About 22 per cent of Canadian mortgages are now variable, moving in step with the bank’s prime lending rate, says CIBC World Markets (TSX:CM) senior economist Benjamin Tal.
Andrew Moor, CEO of mortgage brokerage firm Invis, says more customers have been opting for fixed-rate mortgages over the last few months as interest rates have risen.
But, he adds, the carrying costs on a variable mortgage are still less than those on a fixed-rate mortgage.
After Tuesday’s rate hikes, a competitive variable mortgage rate will be about 4.85 per cent, up from 3.45 per cent at the beginning of September, according to Invis.
As a result, the payments on a $150,000 mortgage will have risen from about $745 a month to about $860.
A five-year fixed mortgage could be obtained at 4.5 per cent in September. That would cost about $830 a month on a $150,000, 25-year mortgage.
Today the rate is more like 5.25 per cent, costing $894, Invis said.
Within hours of the Bank of Canada’s announcement Tuesday, mortgage lenders were already posting new variable mortgage rates that were up by a quarter of a percentage point.
“Every time something happens with the rates, there are people who decide, instead of going variable, to go fixed,” said Jim Rawson, a regional sales manager for Invis working in downtown Toronto.
But he said economists don’t expect the Bank of Canada to continue its credit-tightening policy for much longer.
“It may be a blip in the market and, therefore, you may not need to worry about going into a fixed term if you’re used to playing the variable game,” he said.
“There’s really no need to panic. For those who are finding that it may be a bit of a pinch, there are things like longer amortizations.”
He said stretching mortgage payments over a 30-or 35-year window may be a good temporary solution for young homeowners who need to reduce their monthly payments in the short term but know they can increase them in a few years when their salaries are higher.
“It comes down to your risk tolerance,” Rawson said of the final decision on fixed-versus-variable mortgages.
“If you’re the type of person who is going to lose sleep worrying about rates… take a fixed-rate mortgage. It’s not worth it if you’re going to be worrying about it every day. But there are savings to be had with a variable-rate product.”
Moor added that steep competition in the Canadian mortgage market has been good news for consumers.
“The pricing of variable-rate mortgages in Canada is becoming very competitive, and in fact Invis has witnessed mortgage lenders battling for market share by offering variable-rate mortgage rates well below prime — discounts not previously seen in the Canadian market,” Moor said.
© The Canadian Press, 2006
(May 8, 2006)
Today’s ProLink Interest Rates on First Mortgages are as follows:
Rates are subject to change without notice.
| Description | ProLink Rate |
|---|---|
| Prime | 5.50% |
| 6 Month Closed | 5.35% |
| 1 Year Closed | 5.15% |
| 2 Year Closed | 5.20% |
| 3 Year Closed | 5.30% |
| 4 Year Closed | 5.35% |
| 5 Year Closed | 5.40% |
| 7 Year Closed | 5.75% |
| 10 Year Closed | 6.00% |
| 15 Year Closed | 6.25% |
| 25 Year Closed | 6.75% |
I trust this information will come in handy and help you to stay informed.
I will continue to update you on the Market and where things are going.
One Small Saving on your Interest Rate will be worth Thousands! in the Long Term.
Feel Free to call anytime…
Regards,
Dan Heon
ProLink Mortgage Inc.
Phone: Calgary 403-257-1801
Phone: Edmonton 780-701-7100
Fax: 403-206-7622
Toll Free: 1-888-281-0111
Email: ProLink@telus.net
The best way to thank your Mortgage Broker is tell others about your Savings and Service.
