Variable rate war…*YAWN*

Mortgage Tips Robert Ganzhorn 17 May

If you’ve been watching the news you’ll notice the big lenders are pulling out all the stops with a variable mortgage rate war to try to offset the lack of mortgages being funded this spring.

A few thoughts on this….

My brokerage has had these rates for weeks now. We can offer the big lender mortgages to you as well but those are likely more restrictive (fine print) than what we already have in our toolbox

For those of you that took a variable rate mortgage before this announcement and are stuck at a higher rate I feel badly for you. But you’re not really stuck – YOU SHOULD LOOK INTO BREAKING THAT MORTGAGE REGARDLESS OF HOW LONG YOU’VE HAD IT. Standard breakage for a variable mortgage is three months interest which may not be a huge penalty depending on the facts surrounding the mortgage. To top it all off there are lenders that offer no charge transfers and allow you to capitalize up to 1% of the mortgage balance to a maximum of $3,000 to cover those breakage fees. It’s almost found money in some situations.

Finally if you have a mortgage renewing within a 90/120 days hurry up and get a pre-approval or just break it now and execute on these offers.

A couple of notes on interest rates…

Interest rates Robert Ganzhorn 8 May

BNS increased its 5 year posted rate today, the last of the Big 6 banks to do so. I’d expect an increase to the qualifying rate as early as tomorrow to 5.34%, the statistical mode of the big 6 posted rates. Tomorrow you may actually qualify for less mortgage financing…..

To follow the Bank of Canada qualifying rate look here under series V80691335:

https://www.bankofcanada.ca/…/int…/canadian-interest-rates/…

Apparently almost half of all Canadian mortgages are renewing this year…in a rising rate environment at that. So the question for half of you is what term and what interest rate type will you decide on? The spread between fixed and variable rates right now is quite large making the variable attractive but also subject to Bank of Canada economic policy decisions (overnight rate can and go up or down affecting you directly). If you don’t mind the risk its certainly a cheaper option that the current fixed rates of equal terms. However there are some great fixed 7 and 10 year rates out there that would give you the predictability for an extended term on your largest expense and any fixed term over 5 years can be paid out on three months interest after the fifth year…the spread between these offerings and a 5 year fixed are not that large and eating a little more interest expense now may pay off over the term. The point here is to get your head out of the 5 year fixed mindset and think about other terms

If your mortgage is renewing in the next few months it may well be worth your while to consider breaking it to take advantage of what’s out there now.

Finally we’ve been in a cycle of unprecedented low rates for about 10 years now and we appear to be heading back to “normalcy”. To give you an idea of what that is exactly I’ve added a document to the files section that shows the conventional posted 5 year rate and the average lending rate for 5 year fixed mortgage (Thanks StasCan) since 1993.  Click on the link below to download it

25yrconvandavgratesV2