2021: here Are Mortgage Rates Going?

This is the million-dollar question.

With so much unknown in our economy and real estate markets, there is one sure thing – interest rates are on the move upwards. BUT, this is only fixed rates.

Variable rates remain at all-time lows. Fixed rates have increased by approximately 30bps (.30%) over the last couple of weeks.

Why is it that only fixed rates are increasing? Fixed rates are based on the bond yield market. As bond yields increase, eventually, so do the fixed rates. There has been pressure building in the bond yield market for awhile now and it was only a matter of time. Whereas, variable rates are dictated by the Bank of Canada (BOC) and based on many things including the health of our economy and consumer debt load coupled with what upside/downside there would be if they change the prime lending rate – currently set at 2.45%.

Variable rates are holding firm and we’ve been told publicly from the BOC that they won’t look at the increase until 2023.

What does that mean for variable rates?

Variable-rate discounts remain low and so does the prime lending rate of 2.45%. When you factor in the low discounts with the low prime lending rate, variable rates are very, very attractive. If we believe the BOC, the prime lending rate of 2.45% will remain the same until 2023 but the discount from lenders may change. If you have a current variable rate mortgage you are good, your discount is locked in.

Currently, the BOC prime lending rate is 2.45%. If you have a variable rate mortgage, you either have a discount or premium added to this rate. Ie. Prime (2.45%) – 1% (discount rate) = 1.45%. If you have a premium added to that prime rate then we really need to talk because there is an opportunity to save some money.

As the BOC moves the prime lending rate of 2.45%, your discount stays locked in for the term (typically 5 years). So if the prime lending rate moves to 2.70% and your variable discount is 1%, your new interest rate is 1.70%.

If you want to secure a fixed rate before they increase even more, please reach out to lock in a rate hold.

If you want to see if we can save you money on your current variable rate mortgage, please let me know and I’ll run some numbers.

Either way, we as Canadians are in a great spot from a mortgage rate perspective. Money is still cheap and it will be for the foreseeable future.

Please let me know if I can help in any way.

Mortgage Mark Herman

403-681-4376

$37,000 Payout Penalty at CIBC

The latest in giant payout penalties, this one was $47,291.

Here is a person – one of my ACTUAL ALMOST-Customers who had to swallow a surprise at TD for $35,000. (We tried 3 times to get him to not take that mortgage.)

To make this even more mind blowing, at a 39% tax rate that is $65,700 the person has to pay … about the same as 1-year of income at a full time job, without tax taken off.

  • Would you work for 1 year to give it all to your bank if you had to sell or move or close down the mortgage for any reason?
  • Would you sign an agreement like that?
  • Have you already signed an agreement like this without knowing you have?

EASY to AVOID …

You don’t need to add in this risk to your home purchase. It is easy to get around by taking a mortgage from a major Broker Bank.

Broker banks calculate the payouts the “old way” which was way more fair to you, the buyer. Click here for the posts about payout penalties.

Broker banks also have better Terms & Conditions than the Big-6.

Link to the article: https://toronto.ctvnews.ca/american-who-sold-home-in-toronto-shocked-by-47-000-mortgage-penalty-1.5212884

“Broker Banks have better T&C than all of the Big-6. Call a mortgage broker first.”

Mortgage Mark Herman, Top Rated Calgary Mortgage Broker

 

Why CoronaVirus = Lower Mortgage Rates

This link does a great job explaining why rates are coming down right now for mortgages.

https://www.cbc.ca/news/business/coronavirus-mortgage-rates-canada-1.5443071

Summary:

  • Events that could cause a stock market crash tend to also cause a “flee to safety” and the 5-year Canadian Mortgage Bond is that safety net.
  • When investors buy these bonds the demand goes up so the bonds pay less as everyone wants them.
  • The lower cost of the bond means a lower interest rate on your mortgage

This should be a short term blip, so if you are buying a home take advantage of it quickly

Mark Herman, top Calgary mortgage broker

Why you don’t want your mortgage at your main bank

The Big-5 banks do not love you, they love your money, and now they can “trap” you in their mortgages if you fail the Stress Test.

Highlights of the last post are below. The post from January is here: https://markherman.ca/how-the-big-5-banks-trap-you-in-their-mortgages/

The new mortgage rules – called the B20 – allow the banks to renew you at almost any rate they want – or at least not a competitive one – if your credit, income, or debts should mean you can’t change banks.

 If your mortgage is at your main bank they can see:

  • your pay and income going into your accounts
  • debt balances on your credit report
  • what your credit score is
  • your debt payments
  • your home/ rental addresses so they can accurately guess at your home value.

ALL THIS MEANS they can calculate if you can pass the new “Stress Test.”

If you can’t pass it then they know you can’t change banks, are you are now totally locked into them for your renewal. They can renew you at POSTED RATES … 5.34%, not actual discounted rates they offer everyone, today (June 2019) about 2.99%.

The GOOD NEWS is broker banks do not do any of this … so having your mortgage at your main bank only helps them “grind you” later on. …. so how convenient is having your mortgage at your bank now?

Highlights of the article link below are:

Canada’s biggest banks are tightening their grip … as new rules designed to cut out risky lending make it harder for borrowers to switch lenders …  the country’s biggest five banks … are reporting higher rates of renewals by existing customers concerned they will not qualify for a mortgage with another bank.

“B-20 has created higher renewal rates for the big banks, driving volumes and goosing their growth rates,” said an analyst. “It’s had the unintended consequence of reducing competition.”

Royal Bank of Canada (RBC), said last month that mortgage renewal rates [are up …] due in part to the B-20 regulations.

Ron Butler said, “Even if they are up-to-date with their repayments, borrowers may find they don’t qualify with other lenders so they’re stuck with their bank at whatever rate it offers,” he said.

Senior Canadian bankers such as RBC … and TD … voiced their support for the new rules prior to their introduction, saying rising prices were a threat to Canada’s economy.

While analysts say RBC and TD are expected to benefit from higher-than-normal retention rates in 2019, not everyone is sure borrowers will benefit.

“The banks are becoming more sophisticated in targeting borrowers who would fail the stress test and they can charge them higher rates at renewal knowing they can’t move elsewhere,” Butler said.

A lesson from RBC’s mortgage rate increase

I love this article from the Globe as it explains why rates are going up a bit and what expectaions are for the near term.

Call for a rate hold if you are thinking of buying in the next 4 months!

“Borrowers who use a mortgage broker pay less …,” Bank of Canada.

See our reviews here: https://www.markherman.ca/CustomerREVIEWS.ubr

Mark Herman, Top best Calgary mortgage broker

The lesson home buyers should take from RBC’s mortgage rate hike

Alberta sky is not falling

The graph below shows the expected Alberta GDP growth rate for the end of 2015 and 2016. The numbers are still positive – just not as high as they were before.

If the Calgary to Edmonton corridor was a country it would have the 2nd highest growth rate in the world after China.

Now these numbers are back to earth, things will continue as normal as oil slowly works it’s way back to about $70 a barrel.

Mark Herman, Top Calgary, Alberta mortgage broker

Click on the chart to see it larger.

image

Slight mortgage rate increase on the way?

We watch lots of technial things to see where rates are going. One of those is the CMB – Canadain Mortgage Bond.

Today, the benchmark government of Canada five year bond yield ended the week at 0.79%, up from 0.73% the previous week.

that means that fixed rates may move up from their 2.74 – 2.79% soon.

Get your rate hold / applicastion in!

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: mark.herman@shaw.ca |Web: https://www.markherman.ca/

1 Graph Shows Why Mortgage Rates Are Lower in Jan 2015

The graph below shows why rates have found what we think is a short term low. This will not last forever so be sdure to get a rate hold now!

30 day Canadian Mortgage Bond (CMB) trend – below

trend

Graph Summary

The banks get their money for mortgages from the CMB … this is a short term oddity right now. This trend will change soon and is from:

  1. the quick drop in oil prices
  2. the surprise rate cut from the Bank of Canada on Prime
  3. and other world economic activity.

Market Summary

The Bank of Canada has certainly shaken things up with its surprise 0.25 bps rate cut. Even more so because Governor Stephen Poloz has left the door open for a further cut.

Poloz explained that the BoC trimmed its rate as “insurance” for the broader economy in light of the fallout from falling oil prices. He went on to say the Bank was prepared to take out more insurance.

Concerns about unemployment, slowing economic growth and deflation have obviously trumped past worries about record high household debt-to-income ratios.

However, it is not a sure bet that the lower central bank rate will inflate the Canadian real estate bubble. Canadians have established a history of using lower rates to pay down debt, rather than adding to it.

All this from Calgary’s top mortgage broker, Mark Herman

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.