Category Archives: rates

Playing it safe with a locked in decade

Interest rates are at historical lows and it doesn’t look like that’s due to change anytime soon.

Of course if you could predict future changes with accuracy you could become incredibly wealthy.

It’s the unknown that’s the challenge and that’s why some people chose to pay a premium to lock in todays low rates for many years.

Unfortunately you can’t get the incredibly low rates that US buyers enjoy on a 25 year term, but 10 year rates have fallen along with 5 year and variable rates.

Ten year products are growing in popularity recently with terms available as low as 3.6% according to this article in the Financial Post.

only about 1% of the market locks in for longer than 10 years, Bank of Montreal recently did away with an 18 year locked in mortgage:

“We had to shelve that. It wasn’t a very accepted product by customers,” said John Turner, director of mortgages at Bank of Montreal. “People have a problem getting their head around that long of a commitment.”

Manulife scolded by Flaherty, rescinds 5 year rate.

What is going on in the mortgage world?

Now Flaherty is personally calling up banks and asking them to raise their mortgage rates.

On Tuesday, Manulife Bank dropped its posted interest rate for a five-year fixed-rate mortgage to 2.89 per cent. That’s the lowest posted rate for that time frame the company has ever offered. But in an about-face later in the day, the company pulled the offering and reverted to its former rate above three per cent.

“After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate,” the company said in a statement.

Read the full article over at the CBC.

Are a few pips in mortgage rate really driving people to run out and overpay?

What first-time buyers really need

Mortgage Brokers have come to the defense of first-time buyers and are asking Ottawa to bring back the good ol’ days of 30 year mortgages and extra ‘help’.

The Globe and Mail asked first time buyers what would help them, and oddly enough the overwhelming response wasn’t ’30 year mortgages!’.

It was:

Affordable houses.

It appears that the price of a home has an impact on first time buyers:

“The biggest challenge I face is affordability,” said Dustin Strong, a 34-year-old Vancouver renter looking for a home in the $500,000 range. “I have spent several years saving up enough for a reasonable down payment, but have now determined that in the current market, it just makes more sense to rent.”

Ok, so the price of the home and the fear of losing your down payment and more as prices decline:

Market uncertainty and bubble-talk are also holding buyers back, said James Ellis, a 26-year-old looking for a house in Kingston, Ont., with a $250,000 budget. His biggest challenge, he said, is “determining if the value of a house now is inflated or not, and whether resale value in a few years will reflect the current value once the housing market equalizes.”

“Our main challenge is beating the fear of home prices falling on us,” added Joseph, a 28-year-old looking for a detached house in Calgary. “That is what has kept us renting.”

Read the full article here.

Reckless Canadian Banks not so Reckless

There’s an interesting opinion piece over at the Tyee:

Canada’s Reckless Banks Inflate House Price Bubble

The story suggesting house prices were overvalue by just 20 per cent was based on a report from Fitch ratings — a company which rates mortgage backed securities. A less sanguine and more objective estimate of the overvaluation comes from a report by The Economist, which says the figure is 78 per cent as against rents (the highest in the OECD) and 34 per cent (second only to France) as against income. The U.S. is undervalued by seven per cent and 20 per cent respectively, which gives you an idea of how bad things can get when a bubble bursts, or even if a balloon deflates — the favourite analogy of the wishful thinkers.

Writer Murray Dobbin calls the banks ‘reckless’ for pulling in buyers with rock bottom interest rates, but they aren’t being reckless at all. It would be reckless to leave taxpayers money on the table when the government is so eager to give it to them via the CMHC.

He does wrap up the piece with a very clear statement of who is to blame for the mess we now find ourselves in:

Responsibility for the intractable mortgage dilemma can be laid decisively at the feet of Flaherty and his own recklessness back in 2007. That’s when he opened up the CMHC’s mortgage business to U.S. competition. We soon had the same lunacy here as they did south of the border: no down payment, 40-year sub-prime loans. That year-and-a-half experiment (Flaherty finally got scared smart and started to rein it in) is what spurred the irrational drive by so many Canadians to own a home.

Read the full article over at the Tyee.

Flaherty thanks banks for not competing.

It’s not April 1st yet is it?

Because this article in the Globe and Mail reads like some sort of weird parody.

Canada’s Finance Minister has taken his battle against a housing bubble an extraordinary step further, issuing rare praise for the country’s banks for not matching Bank of Montreal’s cut-rate mortgages


Ottawa is growing concerned the banks could end up causing the housing market to overheat, especially after Mr. Flaherty has gone to great lengths to cool the market over the past year.

Could overheat? What brand of rear-view mirror are they using? Maybe if you didn’t use taxpayer money to ensure that they make money from mortgage business but take not risk of loss thanks to the CMHC that would help cool the market a smidge?

Mr. Flaherty and Bank of Canada Governor Mark Carney have waged an all-out war against the massive build-up in consumer debt to record levels. Along with Mr. Flaherty’s restrictions – which reduced the maximum amortization on mortgages last year to 25 years, down from 30 – the central bank went so far as to warn it could raise interest rates to tame the borrowing binge.

All out war?!? This gets better and better! They reduced amorts to 25 years but who jacked them up to 30 in the first place? And warning that rates could go up? Boy, that’s tough!

Battling a housing bubble by undoing the things you did to fuel it is a bit like thinking that getting rid of your slingshot should be enough to un-break all those windows you shot out.

“I encourage responsible lending,” Mr. Flaherty said Friday. “I think that the financial institutions of course are major players in the residential mortgage market and it forms a major part of their asset portfolios and the Government of Canada has a lot to say about it, not only because we’re concerned about the economic fiscal health of the country, but also we have CMHC [the federal mortgage insurer] and many of those mortgages held by the private sector financial institutions are insured with Canada Mortgage and Housing Corp.”

Maybe via the CMHC you’re encouraging too much lending, responsible and not.

And here’s the punchline:

Mr. Flaherty’s praise of BMO’s rivals may be somewhat off target, though, since most of the lending sector is quietly offering the same rates as BMO, mortgage professionals say

Phew. Is that enough stupid for your monday morning?