The iPhone’s sexy, but ‘iSave’ is far smarter
With all the hype on the new iPhone 5, this puts it a bit into perspective.
Interesting 3 minute read.
The Globe and Mail
Published Monday, Sep. 17 2012, 8:10 PM EDT
The new Apple iPhone 5 tells us a lot about why you can’t get your financial act together.
The iPhone is a brilliant device – a deluxe cellphone that has become a cultural icon. So important is the iPhone 5 that the announcement of its features and release date – it’s Sept. 21 – were treated globally as a major media event. Who doesn’t now know that the iPhone 5 is 18 per cent thinner and 20 per cent lighter than its predecessor?
A man talks on a mobile phone in front of an Apple logo outside an Apple store in downtown Shanghai in this September 3, 2012 file photo. Although Apple makes billions from new phones, a significant portion of its sales in recent years have come from dropping the price on older models once a new phone or tablet hits stores REUTERS
Apple could sell 33 million iPhone 5s globally this quarter, a tribute to the company’s gadget-building supremacy. But iPhones are also symbolic of a change in society’s attitude toward money. We now get our gratification through spending money rather than by saving it.
The savings rate in Canada has been falling for decades, more or less in line with the decline in interest rates. Today, savings accounts offer less than 1 per cent in many cases and barely 2 per cent at best. As a result, a lot of us have come to believe that saving is useless, even foolish. And so, we’ve moved on to spending.
The iPhone 5 will sell for a suggested retail price between $699 and $899 (depending on how much memory it offers), but in the past it has been possible to pay much less if you sign up for a multi-year wireless phone plan. If an iPhone sounds like an affordable luxury, ask yourself these questions:
However much the phone costs, have I contributed at least that much money, and preferably much more, to my retirement savings this year?
Have I contributed anything at all to my kids’ registered education savings plan?
Do I have any money saved that I can tap if the car’s “check engine” light comes on, if the basement floods, if the orthodontist says my kid really needs braces or if I lose my job?
If you’re covered on all of this, enjoy your new iPhone. Otherwise, you might want to reconsider that purchase because your spending and saving are out of balance.
The roughest rule of saving is that you should be putting away 10 per cent of your take-home pay for the future in a tax-free savings account or a registered retirement or education savings fund. If you’re getting a late start as a saver, your number is higher.
External factors like wage freezes and inflation can affect our ability to save, and today’s low interest rates offer no encouragement. But the biggest impediment is in our own heads. We see more value in spending than in saving.
In a way, spending by consumers is a good thing because it accounts for roughly two-thirds of our economy. But spending takes away from saving in today’s zero-sum economy, where wage growth isn’t strong enough to put us ahead of inflation. The only way to save more is to spend less.
The iPhone and similar devices make that a challenge because of the way they draw you into a web of higher spending. You could buy a cheap cellphone and your wireless phone company would probably give it to you for free if you signed up for a service plan. A basic cellphone would mean simple data needs, so you could probably get away with an inexpensive plan.
With an iPhone, you’ll pay extra to buy the phone and likely face higher monthly plan costs. And then there’s the temptation to upgrade. An iPhone 5 bought this fall could be superseded by something better within 12 months. By then, there will probably be a new iPad and, who knows, but maybe Research In Motion will have turned some heads with the new BlackBerry 10. Every new product is competition for money you could otherwise use to save or pay down debt.
You’re urged to buy things all the time via mass media, but there’s no lobby for saving. Apple had Steve Jobs on its side. Savers are stuck with Benjamin Franklin, who said that a penny saved is a penny earned.
How can we get people saving more, then? By making it automatic, not discretionary. Have money electronically diverted from your chequing account to your RRSP, TFSA, RESP or a savings account every time you get paid. Have some money left over after the bills are paid? Hello, iPhone.
————
How the savings rate has tracked in the past 50 years
(data taken from first quarter from each year)
| 1962 | 6.50% |
| 1972 | 9.80% |
| 1982 | 21.20% |
| 1992 | 12.40% |
| 2002 | 4.80% |
| 2012 | 2.90% |
Source: Statistics Canada
The upside of higher rates
We all know interest rates are going to go up. Even after reading this the big hit we all know is coming is that variable rate mortgage payments go up right away. The rest mentioned below may come later.
Jason Heath Mar 31, 2012 – 7:00 AM ET | Last Updated: Mar 30, 2012 9:09 AM ET
For three years, the word on the street has been that interest rates have nowhere to go but up. But few Canadian commentators – other than David Rosenberg – got the call on rates right. Although the prime rate has risen since dropping to an all-time low of 2.25% in April 2009, the increase to the current 3% rate that has remained stable since September 2010 has been modest to say the least. Long-term rates, like fixed mortgage rates, have gone up and come back down during that time, such that one can currently lock in fixed rates under 3%.
York University’s Moshe Milevsky did a study in 2001, which he revised in 2007, and determined that borrowers are better off going with a variable rate mortgage instead of a fixed rate mortgage approximately 9 times out of 10. That said, we have to be close to if not already in that 10% sweet spot where fixed beats variable.
Despite the opportunity to lock in low rates today, it could actually be beneficial for the average Canadian for rates to rise. Conditions need to warrant rate increases and the Bank of Canada (which directly governs the prime rate) and the bond market (which indirectly governs fixed mortgage rates) won’t raise rates until the time is right. How soon that time comes depends partially on domestic influences, but also on our neighbours to the south and the current eurozone debt debacle.
Greece is a perfect example of why rates should rise. Greek participation in the European Union gave them access to cheap credit and helped facilitate some of the excess spending that has them where they are today. Despite bond markets demanding higher interest rates on Greek and some other European government bonds, market intervention by the EU has helped keep rates artificially low.
The U.S. Federal Reserve has been doing the same thing, buying up U.S. government treasury bills to keep U.S. rates artificially low as well.
It’s hard to justify how artificially low interest rates for an extended period are good for anything other than delaying the inevitable for some market participants.
Higher rates would have a negative impact on those of us with outstanding debt, as higher interest charges would follow. But Canadian debt levels have moved ever higher in recent years, likely a response to the low rates that have been in place in part to stimulate spending. Higher mortgage rates could protect us from ourselves by making higher debt levels more punitive and less tempting.
Furthermore, fixed income investors could benefit. The emphasis on “could” is key. Rising rates typically hurt those holding bonds because today’s bonds are that much more appealing than yesterday’s as rates go up. How much the hurt hurts is a matter of fact. But those renewing GICs or sitting on cash these days are desperately awaiting higher interest rates to help their savings grow. So higher rates could at least lead to higher returns for fixed income investors in some cases.
Higher rates could benefit stock investors. Once again, the emphasis on “could” is key. Higher rates usually mean the economy is improving and inflation is rising. This could be a good sign that corporate profits and corresponding stock prices are moving higher. That said, one has to wonder if low bond and GIC interest rates and cheap credit have pushed more money into the stock market than should otherwise be there. Rising rates could bring income investors back to the more traditional income investments like bonds and GICs from the blue chip stocks they’ve potentially flocked to in order to obtain yield.
Despite the purported uncertainty above on stocks and bonds, higher rates should at least contribute somewhat to restoring equilibrium to credit, debt and equity markets. Something seems wrong with near zero or negative real interest rates. That is, something seems wrong with a GIC investor earning 2%, paying 1% of that away in tax and 2% inflation resulting in an effective return of -1%. On that basis, something seems right about higher interest rates, whether we like it or not. What happens to mortgage debt, stocks and bonds remains to be seen.
Jason Heath is a fee-only Certified Financial Planner (CFP) and income tax professional for Objective Financial Partners Inc. in Toronto.
New Canadian Mortgage Rules are Possible
Below is a commentary on the possible new rules for Canadian mortgages. Anyone looking at buying with 5% down (which is about 80% of our clients) or using a 30 year amortization (75% of our clients) should look at buying sooner than later.
Comparing New Amortization & Down Payment Rules
Government mortgage restrictions instituted from 2008-2011 have not achieved their goal, suggests Desjardins’ Senior Economist Benoit Durocher.
He wrote this on Thursday: “…The third series of [government mortgage rules] was announced nearly a year ago now, and we must conclude that the tightening introduced to date has not
slowed the market enough.
Under these conditions, it is likely, and perhaps even desirable, that the federal government will shortly announce a fourth series of measures to further limit mortgage credit.”
It almost sounds like Durocher has some inside info.
He adds: “Among other things, the government could be tempted to once again raise the minimum down payment on new loans (it went from 0% to 5% in October 2008).”
Many believe a down payment increase would have a more chilling effect on home prices than the other option being talked about: a reduction in the maximum amortization from 30 to 25 years.
The difference in impact would depend, however, on the degree of rule changes.
For example, raising the minimum down payment from 5.0% to 7.5% (a possibility that’s been discussed) would require that entry-level homebuyers come up with $8,700 more on a typical Canadian home purchase. For most, that’s not totally out of reach.
A five percentage point increase to the minimum down payment is a somewhat different story. Requiring 10% down equates to $34,780 on an average home. That’s beyond the means of a sizable minority of first-time buyers.
First-time buyers are essential to home price stability. They account for 1/2 of unit demand according to Altus Group research. While the latest data suggests that average down payments are somewhere around 30% (an estimated $104,000), first-time buyers put down far less.
That means stricter down payment rules could potentially hurt home values at the margin, if other things are held equal.
In terms of amortization, a government-imposed reduction—from 30 to 25 years—would lower a typical family’s maximum purchase price by roughly 9%. (That’s based on today’s 5-year fixed rates, normal qualification guidelines, median incomes, and average consumer debt.)
To put this in perspective, a reduction in amortization from 30 to 25 years would cut a typical buyer’s maximum possible purchase price by ~$31,000 (again, based on an average income, average debt, a 5% down payment, etc.).
Fortunately, most people don’t need a 30-year amortization to buy a home. Despite 41% of homebuyers choosing extended amortizations, the majority could have qualified with a standard 25-year mortgage. (That said, this doesn’t mean that cutting amortizations across the board is justified. Well-qualified borrowers deserve a carve-out in the rules because they utilize extended amortizations for legitimate cash-flow management purposes. But that’s a topic for another day.)
CIBC Being Sued: Unfair payout penatly calculations continue
This is interesting.
We have always thought that the way they do their math was odd or different or something.
Another reason to use a good Calgary broker that has other options than the Big 6 banks that continue to take advantage of their own customers. Why do they do this?
CIBC class action attracts hundreds of inquiries
Lawyers spearheading twin class-action suits against CIBC over “vague prepayment terms” have fielded interest from hundreds of the bank’s mortgage clients — that as a case management judge in B.C. gets assigned to the legal action.
“There have been hundreds of inquiries about these cases to our office and that of our co-counsel in Ontario,” Kieran Bridge, a Vancouver lawyer with the Construction Law Group, told MortgageBrokerNews.ca, pointing to borrowers who paid out CIBC mortgage from April 2005 onward.
Firstline clients areamong those concerned that they may have been adversely affected by the lender’s prepayment policy.
A Case Management Judge has also been assigned, what Bridge calls a key, mandatory step in moving class actions forward in British Columbia.
“We applied in November for a judge to be appointed, in order to move the case ahead, and are pleased this has happened,” he said.
The twin lawsuits were filed in B.C. and Ontario last October, alleging some CIBC mortgage borrowers have been unfairly penalized by unclear prepayment terms giving rise to two substantive complaints.
Aside from what Bridge terms “uncertain and unenforceable language” in contracts dating as far back as 2005, he also points to the mathematical formula CIBC used to determine those prepayment charges, calling them “invalid,” or in legal speak a “miscalculation.”
The suits rely on individual representative plaintiffs in B.C. and Ontario. Each of those two notices of claim alleges CIBC applied terms and conditions to certain mortgage contracts that allowed it “unfettered discretion” in calculating mortgage prepayment penalties.
The suits also allege that the actual amounts of those penalties were themselves in breach of the mortgage contracts.
CIBC will haven’t yet filed a statement of defence against the allegations.
“Because these cases are intended class actions, the normal time limit for filing a Statement of Defence is rarely applied,” said Bridge.”There has been no Statement of Defence filed, and no substantive response from CIBC.”
The assignment of a management judge notwithstanding, the suit still must be certified in order to proceed to trial. That could take a year or more.
The collective legal action effectively echoes some of the more-perennial and broader concerns of brokers, who grapple with the widely varying interest rate differential and prepayment penalties many lenders demand of borrowers. The former, sometimes stretching into the tens of thousands of dollars, has presented a major impediment to helping clients take advantage of historically low rates by switching or refinancing clients before maturity, argue many mortgage professionals.
Those challenges have led to broker calls for industry-wide standardization of penalties.
Undoubtedly, broker-arranged mortgages through Firstline are among the thousands of transactions the dual suit is meant to address, said Bridge, at the same time expressing his support for mortgage professionals.
The B.C. lawyer led a similar case against RBC about ten years ago. It ultimately ended in a settlement, said Bridge.
Teetering on the edge of a rate hike – not all bad news
This article below is good news for everyone with a variable rate – as it looks like they will not go up that fast.
The data below is the most accurate with out any hype that I have seen is a while.
Teetering on the edge of a rate hike
Well we have a better idea of where Bank of Canada Governor Mark Carney stands, and it appears that we’re teetering on the edge of a rate hike.
This comes as no surprise, with many analysts crying for a rate increase for some time now. The question is whether it will be at the next meeting, or the meeting after that, or even before year end.
The key takeaway is that Carney signaled that ‘some’ government stimulus ‘will’ be withdrawn, rather than ‘all’ and ‘eventually’ withdrawn. That means he’s close to pulling the plug. We are looking at growth and employment numbers for the second half of the year and if it remains strong, we may see rates move before year end.
With this week’s announcement put on the backburner, analysts are focused on where we’re going over the next several months, and they certainly have a lot to consider in their projections.
The Bank has a goal of a neutral rate, which bolsters the economy yet controls inflationary pressures. There’s no magical ‘neutral rate’, but economists figure it’s in the 3%-4% range. However, Carney seems reluctant to pull the trigger on rates, considering the likes of the U.S. economy along with the issues we see in several European countries. If we widen the rate gap with the U.S. it will only drive the loonie up further, creating more resistance for economic growth.
Another external factor is the European sovereign debt crisis, in which Carney senses more concern over their troubles that the U.S. will default on its debt. The chances of the U.S. defaulting on its debt is slim and more of a scare tactic than anything. Don’t get me wrong, it’s a huge problem and the Obama Administration doesn’t know whether to turn left or right, but at the same time, if the US defaulted we’d be talking about a whole new worldwide fiasco.
Since the Bank of Canada doesn’t declare what a neutral rate is, it’s hard to determine when and how much rates will move when they do. By the way that Carney is talking it appears as though when rates do start to rise that they will in a controlled manner and they won’t be too aggressive. Analysts and economists shouldn’t assume that rate increases are going to be quick and steep.
Here at home our economy seems to be moving along as projected, and any sudden, high rate increases will be sure to stifle our growth. It looks like if everything goes to plan we may see a modest hike in October, but if some of the assumptions are off a bit it may be later before we see any movement.
Consumer Prime stays the same at 3% – but for how long?
Prime stayed at 3% today and as below rate hikes are coming as soon as we are past the recession for good. These super low rates are the tail end of the recession so take advantage of them while you can. Call to discuss what that means for you. 403-381-4376
Bank of Canada sees hikes on the horizon
Bank of Canada governor Mark Carney.
Photograph by: Reuters
OTTAWA — The Bank of Canada held its benchmark interest rate steady on Tuesday, as widely expected, as the global economy remained fragile amid debt problems in Europe and the United States.
But the central bank hinted higher borrowing costs could be coming sooner than later if the domestic economy maintains steady growth.
The bank’s lending rate has been at a near-historic low of one% since last September in an effort to spur economic growth following the downturn.
“To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn,” the Bank of Canada said in its interest rate statement. “Such reduction would need to be carefully considered.”
Avery Shenfeld, chief economist at CIBC World Markets, “may be nudging the market into pricing greater odds of at least a modest dose of interest rate hikes before year end.”
“It dropped the word ‘eventually’ in reference to the need for rate hikes ahead, and while saying some of the pressure on core inflation is ‘temporary,’ it also attributed some to ‘more persistent strength in the prices of some services’.”
The Bank of Canada on Tuesday also revised its economic growth outlook for 2011 to 2.8%, down from the previous estimate of 2.9%. Left unchanged were growth forecasts for 2012, at 2.6%, and 2013, at 2.1%.
“Of course, the troubles abroad and challenges to net exports kept the bank from hiking as early as today, and it is still assuming a resolution of the eurozone debt issues,” Shenfeld said. “But signs of better growth in the U.S. and Canada in the second half would clearly be enough to tip the bank into hiking, and we should have enough of that evidence on hand by October.”
Still, some economists have pushed back the possibility of a rate hike until early next year due to continuing uncertainty outside Canada’s borders.
“Weighing-in on the stand-pat side, the U.S. economic soft patch is dragging on, as we count down to potential ‘credit events’ on both sides of the Atlantic,”said BMO Capital Markets economist Michael Gregory.
“Pulling on the tighten-soon side, Canadian domestic demand performance in Q2 might not be as bad as initially posited, owing to a surprising surge in home construction, while the output gap could be smaller . . . and closing quicker . . . if the latest Business Outlook Survey is any guide.”
The Bank of Canada is expected to provide more details on its economic outlook on Wednesday when its releases its Monetary Policy Report.
Lower Canadian Mortgage Rates – should have happened a month ago
Here is some bank-spin b.s. in full display. Bank mortgage rates should have come down 3 weeks or a month ago like the broker rates did. Banks intentionally left their rates higher to keep their profits up. So it is supposed to be a big deal now that the Big 5 banks have a 5 year at 4.09% when we have been at 3.89% for the last month?
Always use a mortgage broker to take care of your interests! And the banks pay us so there are normally no fees to you for our services!
Global instability leads to lower mortgage rates in Canada
Global instability, highlighted by turmoil in Libya and Japan, has caused Canadian banks to drop their mortgage rates.
Just as changes to mortgage rules coming into effect Friday were likely to make borrowing for a new home more difficult, the latest drop in interest rates has helped potential new borrowers in the short term find a more affordable price.
The Royal Bank of Canada (RBC), along with the Bank of Montreal, slashed its rates on various fixed rate mortgages. Other lenders are also expected to follow suit.
After heightened confidence led to mortgage rate increases last month, banks are now following the cue of declining bond rates, according to the Globe and Mail.
For the RBC, the country’s largest bank, its residential mortgage special fixed rate was unchanged at 3.2% for one-year closed mortgages, but its four-year special fixed rate for closed mortgages was reduced 0.15% to a rate of 4.19%.
The same rate, 4.19%, now applies to five-year special fixed rate closed mortgages, which are down 0.1%, while 5.1% applies to a seven-year closed special fixed rate, which is down 0.2%.
Prime to be at 4% by 2012
BoC rate to reach two per cent by year end: RBC
By | 11/03/2011 2:00:00 PM | 0 comments
As part of its economic outlook for 2011, RBC projects that the Bank of Canada overnight rate will rise from one per cent to two per cent by year-end.
The gradual pace of rate increases combined with anchored inflation expectations will result in less upward pressure on long-term interest rates, added the Economic Outlook released by RBC Economics.
On the back of solid net exports in the final quarter of 2010, Canada’s economy finished the year on a high note recording stronger than expected gains. The biggest support for the economy came from net exports, which added a full 4.5 percentage points to the quarterly growth rate. Continued consumer spending also played a vital role in driving overall GDP, marking the fastest increase in spending since late 2007.
RBC expects real GDP to increase at 3.2 per cent in 2011, as U.S. demand for Canadian exports increases. Growth in 2012 is forecast to rise by 3.1 per cent.
The report also stated labour market conditions will remain firm in 2011and disposable income is expected to post a 4.1 per cent gain that will provide continued support to consumer spending.
“Consumers’ earlier confidence in taking on increasing amounts of debt was based on a combination of lower interest rates, a strengthening labour market and a 4.6 per cent rise in disposable income,” explained Craig Wright, senior vice-president and chief economist, RBC Wright. “An expected slowing in the housing market, rising interest rates and tightening mortgage lending standards all add up to a levelling out in consumer debt relative to income.”
At the provincial level, RBC forecasts Saskatchewan will lead the country in growth this year. Alberta is expected to return to a top three placing, closely trailing growth in Newfoundland and Labrador. Ontario and Manitoba will hover close to the national average while both Quebec and British Columbia will fall slightly below. Nova Scotia, New Brunswick and Prince Edward Island are still projected to lag behind at the lower end of the scale for 2011.
‘Window closing’ on ultra-low mortgage rates
Essentially we are in artificially low interest rates and the government is expecting rates to come up to normal levels in the near future. Bond yields are continuing to put pressure on long term mortgage rates and we will continue to see the rates moving upward this year. The government is also trying to make it more difficult for individuals to qualify for insured mortgages. This article, from the Financial Post, speculates rates will increase rates by May.
Enjoy the Read!
Amid the noise of volatile-but-improving economic indicators, mortgage rate hikes are likely to repeat like a chorus in the coming months.
Canadian banks are raising interest rates on mortgages, marking the beginning of a trend as they correlate with rising bond yields and expected monetary tightening.
That’s making a strong case for borrowers to lock into fixed rates before it’s too late, said Benjamin Tal, deputy chief economist with CIBC World Markets. “The window is closing.”
TD Canada Trust and CIBC both announced Monday hikes to their residential mortgage rates, the first increases since changes to the rules of borrowing were announced by the federal government last month. The other big banks where expected to follow the moves shortly.
Effective Feb. 8, the interest rate on the banks’ benchmark five-year closed fixed rate mortgage will increase 25 basis points to 5.44%. The country’s other major lenders are expected to soon follow suit.
Toronto mortgage broker Paula Roberts said rising borrowing costs will compel more of her clients to abandon ultra-low variable rates in favour of higher, fixed-rate mortgages.
That can be a tough decision for borrowers to accept higher payments, but not one that should strain a mortgagee’s finances, she said.
“If you can’t afford [your payments] … that’s a problem,” Ms. Roberts said. “That’s why the government has changed the rules.”
In two stages over the past year the federal government announced changes to the conditions of mortgage lending — shortening the maximum amortization from 35 years to 30 years and requiring borrowers to qualify for a fixed-rate plan, even if they are opting for a variable rate.
Many who only qualify under the old rules, however, will try to secure mortgages before the shorter maximum amortization periods come into effect next month, Ms. Roberts said.
“There are going to be a lot of people that will enter into their agreements by March 18.”
Much of the momentum in mortgage rates can be attributed to a bond selloff and rising yields across the board. That effect is partly a reflection of building global inflationary pressures as well as a global economy that is proving more robust than expected.
“In my opinion, the bond market will not be the place to be over the next six months, and if that’s the case, you will see mortgage rates continue to rise,” Mr. Tal said.
In addition, anticipation of increases to the Bank of Canada’s benchmark lending rates is building, also contributing to rising yields, which puts pressure on fixed-income mortgages.
If there was any lingering doubt that the Bank will soon raise rates, last week’s jobs report erased them. The report showed Canada added four times more jobs than expected in January.
“[It] creates a fairly powerful story for the Bank of Canada, which is clearly concerned on the domestic front,” said Camilla Sutton, chief currency strategist at the Bank of Nova Scotia. “I think there’s a material change.”
So do investors. The probability that the central bank will boost its key policy rate by May, as measured by overnight index swaps, jumped to almost 75% after the jobs data.
Source: Financial Post
‘Window closing’ on ultra-low mortgage rates
Tim Shufelt, Financial Post · Monday, Feb. 7, 2011
Amid the noise of volatile-but-improving economic indicators, mortgage rate hikes are likely to repeat like a chorus in the coming months.
Canadian banks are raising interest rates on mortgages, marking the beginning of a trend as they correlate with rising bond yields and expected monetary tightening.
That’s making a strong case for borrowers to lock into fixed rates before it’s too late, said Benjamin Tal, deputy chief economist with CIBC World Markets. “The window is closing.”
TD Canada Trust and CIBC both announced Monday hikes to their residential mortgage rates, the first increases since changes to the rules of borrowing were announced by the federal government last month. The other big banks where expected to follow the moves shortly.
Effective Feb. 8, the interest rate on the banks’ benchmark five-year closed fixed rate mortgage will increase 25 basis points to 5.44%. The country’s other major lenders are expected to soon follow suit.
Toronto mortgage broker Paula Roberts said rising borrowing costs will compel more of her clients to abandon ultra-low variable rates in favour of higher, fixed-rate mortgages.
That can be a tough decision for borrowers to accept higher payments, but not one that should strain a mortgagee’s finances, she said.
“If you can’t afford [your payments] … that’s a problem,” Ms. Roberts said. “That’s why the government has changed the rules.”
In two stages over the past year the federal government announced changes to the conditions of mortgage lending — shortening the maximum amortization from 35 years to 30 years and requiring borrowers to qualify for a fixed-rate plan, even if they are opting for a variable rate.
Many who only qualify under the old rules, however, will try to secure mortgages before the shorter maximum amortization periods come into effect next month, Ms. Roberts said.
“There are going to be a lot of people that will enter into their agreements by March 18.”
Much of the momentum in mortgage rates can be attributed to a bond selloff and rising yields across the board. That effect is partly a reflection of building global inflationary pressures as well as a global economy that is proving more robust than expected.
“In my opinion, the bond market will not be the place to be over the next six months, and if that’s the case, you will see mortgage rates continue to rise,” Mr. Tal said.
In addition, anticipation of increases to the Bank of Canada’s benchmark lending rates is building, also contributing to rising yields, which puts pressure on fixed-income mortgages.
If there was any lingering doubt that the Bank will soon raise rates, last week’s jobs report erased them. The report showed Canada added four times more jobs than expected in January.
“[It] creates a fairly powerful story for the Bank of Canada, which is clearly concerned on the domestic front,” said Camilla Sutton, chief currency strategist at the Bank of Nova Scotia. “I think there’s a material change.”
So do investors. The probability that the central bank will boost its key policy rate by May, as measured by overnight index swaps, jumped to almost 75% after the jobs data. http://www.financialpost.com/news/Window+closing+ultra+mortgage+rates/4239243/story.html#ixzz1DMwQzyWP