Interest rate predictions are tough

I found this in a retirment planning post ….

Every year since 2009, experts have predicted that “rates have nowhere to go but up,” only to be confronted with what seems to be perpetually low rates.

Most pundits predict rates will finally start to rise again in mid 2015, but the recent surprise rate cut by the Bank of Canada (from 1% to 0.75%) suggests how futile trying to predict the timing of such a change can be.

Central banks’ zero interest rate policies have resulted in “real” (net of inflation) returns of zero or even less-than-zero after income tax, except for outliers like Russia.

In December, Switzerland even began charging savers for the right to deposit funds!

This post from 2013

Now for the big picture…

Short version: rates are the lowest of all time … like a 496 year low. Is that low enough?

“in July 2012, 10-year yields in the US thus reached with 1.39% the lowest level since the beginning of records in the year 1790.

In the Netherlands – which provide the longest available time series for bond prices – interest rates fell to a 496 year low.

In the UK, ‘base rates’ are currently at the lowest level since the founding of the Bank of England in 1694.

In numerous countries (Germany, Switzerland), short term interest rates even fell into negative territory.”

Mark Herman, Mortgage Alliance, Top Calgary Alberta Mortgage Broker, and #1 mortgage brokerage in Canada for 2013 AND 2014!!!

Variable rate mortgage – how payments will change for the new rate

We are getting many calls on this so here is how it works for MOST of the banks.

The Bank of Canada (BofC) reduced their Prime rate by 1/4 % or .25% last week to 0.75% from 1% where it has been for about 3 years.

The banks took a while to decide ifthey were going to lower their rates as well. 3 times before the banks have either not passed on the entire rate reduction to customers or not moved at all and kep the savings to themselves.

Now that most banks have lowered their rate by .15% this is how payments are impacted:

a.    If they have an Adjustable Rate Mortgage – ARM mortgage – then the rate will be the new rate starting on the “effective date.”
b.    The payment after the next payment will change to reflect this new rate. (So if you pay monthly on the 1st, the Feb 1st payment will be your current payment, but the March 1st Payment will be the new payment, If you pay weekly every Friday, this Friday will be the same payment but the next Friday will be the new payment)
c.    Because the rate has gone down, your payment will decrease.
d.    Because the interest rate has gone down, the next payment that is still at your existing payment amount will apply a little more to your principal.
e.    Customer will receive a letter with their new payment amounts in the snail-mail.

Hope that clears things up a bit.

Call if you have questions.

Mark Herman, Top Calgary Alberta Mortgage Broker.

ATB = collateral mortgage registrations too

ATB – Alberta Treasury Branches – is registering their mortgages are collateral mortgages.

Are you sure you want one of these?

  1. Have a look at the previous articles showing why the banks want you to have this, and you do not want it:
  2. And – what if you move out or are transfered out of Alberta? ATB can only lend in Alberta so your mortgage is not PORTABLE to move to any other province – like with most lenders we work with. You will have to pay it out and pay the payout penalty. 🙁

Calgary, Alberta Mortgage Broker, Mark Herman

32 Mortgage Experts Give their Top Tips for Home Buying

Joe Samson & Associates of CIR Realty asked 32 top mortgage experts our tips for home buying. The results are interesting for sure. And I do agree with most all of what they say.

A great set of top mortgage tips for sure.

Here is a link to the post:

Joe Samson

I sent back 3 tips for each part of the question … they are below.

#1 tip in the buying process: use a top broker with at least 5 year experience because we have more pull, get more exceptions, and get better standard rates for your mortgage. Ensure you send in all the documents ahead of time BEFORE shopping so they can all be reviewed to ensure the purchase goes smoothly. People lose sleep due to the bank making them run around like crazy getting all the docs after they buy and the entire file may not work. Getting all the data in before shopping ensures a smooth purchase and ensure you are shopping in the right price range. There is nothing more disappointing than looking at 350k condos, putting in an offer and getting a decline and then having to buy for 200k. Of course all the 200k condos are nowhere as good as the 350k ones … that is why they cost almost 2 times as much!

#1 tip for the actual property: I would rather have the smallest/ least attractive home in a great community than the best home in a poor location/ area/ community. With the great community you get all the great amenities – family skating rinks, good friendly neighbors, etc.

#1 tip for the mortgage: Biweekly accelerated payments cuts the effective amortization down by few years. That is a huge difference by doing nothing other than paying every time you get a pay check. (It is not worth doing weekly payments as the cash budgeting will always leave you short at least 2 times a year and the $100 NSF fee will put you father behind than ahead.) And paying even a little bit more in the first 5 years of your mortgage will end up saving you 3 times that in the end. So that $5000 now will end up saving you $15,000 over the life of the mortgage in interest! And remember to take a holiday, not just pay that mortgage down!

Please feel free to call or reply with comments or questions.

Mark Herman, AMP, B. Comm., CAM, MBA-Finance

WINNER: #1 Franchise for Funded $ Mortgage Volume at Mortgage Alliance Canada, 2013 and 2014!

Direct: 403-681-4376

Accredited Mortgage Professional | Mortgage Alliance | Mortgages are Marvelous

Toll Free Secure E-Fax: 1-866-823-1279 | E-mail: |Web:

2014: #1 Mortgage Brokerage in ALL of Canada! AGAIN!


Mortgages are Marvellous just won the #1 mortgage brokerage for all of Canada, based on total value of funded mortgages at Mortgage Alliance, Canada’s largest SuperBrokerage with more than 100 offices and 1,800 agents from coast to coast.We also won this in 2013 so this is 2 years in a row.

Congratulations to all of our team.

We think it is becuase of our process – ensuring your deal will work BEFORE you buy and getting all the docs in and duscussing your deal with the bank BEFORE you buy!

It works!

Mark Herman, Top Calgary Alberta mortgage broker.

My bank REALLY REALLY REALLY wants my mortgage! Really?

Does your bank really, really, really want your mortgage that badly?

Do you know why?

NOT because they make lots of money on mortgages.

NOT because the bank rep needs to fill their mortgage quota this month (this happens too.)

BECAUSE the banks have studies that if they can get you to have 3 or more products with them, your odds of leaving to go to another bank fall by 75%.

This means 2 things:

  1. If they can get you to have the mortgage in addition to your existing checking and savings accounts and or credit card then you will probably not leave for another bank and their cost of customer acquisition is very high.
  1. Then they can cross-sell you the products they really, really make money on:
  • LOCs – line of credits – and more credit cards both with overdraft protection and insurance for the minimum payments if you are injured or laid-off.
  • mortgage insurance – a huge profit for them as they try very hard later not to pay claims in their post-claim underwriting process
  • mutual funds
  • long distance phone plans
  • travel insurance
  • all the rest.

And 1 more VERY important thing:

Banks know that 86% of people will stay with their existing bank at mortgage renewal time. AND if you have the magic 3 products will you move your mortgage somewhere else then?

Banks expect you to chisel them down now, and when you renew they renew you at rates that are typically .25% to .75% higher than they should be. And 86% of people just sign the renewal docs and send them back. (More data from studies.)

This does NOT happen with mortgages via mortgage brokers as the banks know they have to renew you at the best possible rates or the very same broker that took the customer to that bank will be the very same broker that moves the customer to a new bank if for a better rate on renewal.

Do you want to play this game with the banks or just skip it all together?

All this advice from the top mortgage broker in Calgary Alberta, Mark Herman.

Wisdom from Kevin O’Leary, interst rates increases and housing demand

Kevin O’Leary – AKA Mr. Wonderful and self-proclaimed star of Dragon’s Den and Shark Tank – was speaking at our real estate conference yesterday. Surprisingly, he also used to be a professor at Ryerson’s School of Business so he does know more about what he is talking about then you would expect he does.

The short version of his talk – which was way better than expected.

The good news is hiding

  • Corporate earnings for the last ¼ of 2014 are being reported this week and they are all good or great, coming off of one of their best years ever! Companies have increased sales and have lots of cash; unless you are an oil company.
  • Overall the S&P should be up 7% for 2015 – with lots of volatility – so hold on tight.


  • Even if demand reduces due to less people buying because of the drop in oil prices OR from an increase in interest rates, pricing should stay stable. Alberta will still have in-bound migration and those people still need places to live.
  • Demand should stay stable as long as any interest rate increases are less than 1.2% from today’s rates. That is not expected to happen for another 2 – 3 years.
  • Big banks are buying solid real estate and less bonds now. An example is a billion dollar building in New York selling at a cap rate of about 1%. That means that the return on the investment is expected to about 1% on a billion dollars. This is much lower than almost any bond and shows the reasoning that real estate is a great investment in today’s changing markets.

 Interest Rates

  • Today the US 30-year bond fell to a record low, surpassing the previous record low of set in July, 2012.
  • The US 10-year bond is almost at record lows as well.
  • The problems in the market are not real estate but for long term bonds – like the 30-year bond above – lost about 30% of its expected return.
  • 6 of the big banks expectations are for interest rates to begin to rise in October by about 1/4% – the same as what the Bank of Canada said 2 months ago. See previous Blog post from October 22 here:
    • The interest rate increase prediction was before oil fell so interest rates may not increase and stay the same for longer than expected above.

BONUS – 3 Keys to Business Success on the Dragon’s Den

He also shared a few studies on the companies in the Dragon’s Den. They all showed all the companies that boomed all had this in common:

  1. Their business model could be fully explained in 90 seconds or less
  2. The owners were able to explain why they were the ones to be able to execute the business model better than anyone else and
  3. They knew the numbers to their business cold – pricing, costs, revenue, economics, IRR, etc.

All this from the top Calgary, Alberta mortgage broker, Mark Herman at Mortgage Alliance.

Alternative Canadian Mortgage Lenders


According to data compiled by CIBC World Markets (based on Statistics Canada figures), the value of loans from alternative lenders has increased by 25% this past year. In comparison, the overall growth in the mortgage market for 2014 was 4%.

As the number of alternative borrowers grows, it’s important to find a top Calgary Alberta mortgage broker that can provide customized solutions and deals with common sense lenders. We specialize in alternative lenders that have financial solutions to meet:

  • Clients who don’t fit the traditional ‘A’ lending / or bank guidelines.
  • Self-employed or commissioned clients with stated income.
  • Salaried clients with a GDS/TDS that doesn’t meet traditional bank requirements.
  • Clients with bruised credit due to extenuating circumstances.
  • Clients with outstanding Canada Revenue Agency debts.
  • New immigrants to Canada.
  • Sophisticated residential real estate investors.
  • Clients who can demonstrate a reasonable ability to make future mortgage payments.

All of our solutions are customized to fit the specific needs of the borrower—bringing them closer to their financial goals.

Call me, Mark Herman, Top Calgary Alberta mortgage broker, to talk about any of these products for your specific situation.


Oil Price & Mortgage Interest Rates

This is an easy way to see the relationship between oil prices and mortgage interest rates.

Mark Herman, Top Calgary Alberta mortgage broker.

The path between the price of oil and the cost of your mortgage may seem long and winding and hard to follow, but it does exist.

Oil is a major component of Canada’s economy. Energy accounts for about 25% of Canadian exports and oil is a significant part of that. Oil is now selling for about half what it was just a few months ago.

Lower oil prices mean less royalty money for governments. Low oil also means the main driver of employment in Canada – the Alberta oil patch – is likely to slow as well as energy firms cut back operations. Employment is one of the key indicators the Bank of Canada watches when determining interest rate policy.

Falling oil prices are likely to have an, overall, negative effect on Canada?s economy, exerting downward pressure on the Bank of Canada rate, and therefore variable mortgage rates. The impact on GDP and employment will likely hold down government bond yields and, in turn, fixed mortgage costs.