Maybe you shouldn’t lock in your mortgage rate just yet
January 25, 2012
It’s never looked more attractive to lock in your mortgage rate for five years but news the U.S. Federal Reserve won’t be hiking rates until the end of 2014 should make you think twice.
Bank of Montreal stunned the Canadian mortgage world with its 2.99% rate on a five-year fixed rate mortgage, the lowest in Canadian history for that term.
The deal, which ends on Jan. 25, had a number of catches — among them a 25-year amortization and prepayment terms of only 10% of the mortgage per year. Nevertheless, the move pushed a number of banks to lower their rates.
With long-term rates this low, it has almost made no sense to go variable and float with prime. The prime rate at most financial institutions is 3% with the discount for variable only 20 basis points — a thin savings for not locking in.
But Rob McLister, editor of Canadian Mortgage Trends, wonders whether yesterday’s announcement by The Fed is a strong signal that short-term rates are not going anywhere which makes locking in less attractive.
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Financial PostMore mortgage rules planned if housing market gets too hot
January 23, 2012
A new round of mortgage rules from Ottawa could include tough new measures for calculating how the self-employed qualify for loans and tighten regulations for condominium buyers, according to two separate sources.
Ottawa remains concerned about the possibility of an inflated housing market and wants to crack down on the practice where consumers self-disclose what they make when applying for a loan. In the case of the condominium buyer, the government continues to consider a proposal that would have 100% of condo fees count when assessing how much debt a consumer could afford.
“None of this is happening just yet. The housing market has slowed down and the government wants to see what will happen next,” said one source. “If the spring market picks up, then we will see more changes to the rules.”
Bank of Canada Governor Mark Carney said Sunday that some parts of the Canadian real estate market are “probably overvalued” and policymakers are monitoring to see if further steps are needed to cool it.
“We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there. We’re watching it closely. We’re working with our partners, the federal government, the superintendent of financial institutions,” he said in an interview broadcast on Sunday on CTV.
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Financial PostFlaherty keeping wary eye on housing market
January 17, 2012
Finance Minister Jim Flaherty says he stands ready to intervene in the housing market again, just as a mortgage price war breaks out among Canada’s major banks.
Mr. Flaherty said Tuesday that he’s watching the market closely, although he has no plans to tighten the market again at this point.
His comments came on the same day that the Bank of Canada projected that the debt burden on households will continue to rise, a troubling sign that means stretched consumers are vulnerable to shocks in this climate of heightened economic uncertainty.
Mr. Flaherty said he is in close contact with the big banks, most of whom are now offering 2.99-per-cent fixed-rate mortgages, the lowest ever.
Both the Finance Minister and Bank of Canada Governor Mark Carney have been urging consumers to get a handle on their debts, the bulk of them in mortgages, and not allow low interest rates to entice them into taking on more credit than they can handle.
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Globe & Mail
