What Will Happen To Rates part 2.

What Will Happen To Rates part 2.

Bank of Canada Governor Mark Carney already has been predicting that rates will be going up, and for Canadians to brace for it. After months of speculation, a .25 bps hike was inevitable. Being the 1st nation to lead a fiscal policy change is never easy, as all other G20 nations are holding steady. However, as the summer continues, a .75 rate hike is priced in but not a “slam dunk” as David Rosenberg said in today’s morning economic summary. Breakfast with Dave - June 17th 2010

In another economic report by BMO Capital Markets, it was found that 84% of the time, rates move by .25 points, rate changes happen in clusters, pauses are expected, and a 200 basis point is not unexpected over 18 months as has happened in the past.

So what to do? when I was asked by the Globe in March, I made it clear: have a good plan. I still hold that sub 4% rates are worthy of locking in, otherwise variable is a best bet moving forward.


June Blog 1 - Welcome Back

June blog 1 – Welcome Back

So after an unfortunate biking accident, I had to take some time off to recover.  After 2 weeks of bed rest, I am back at work and it feels great. Lots has changed but first I would like to cover something else: me! A post in one of Canada’s leading mortgage blogs http://www.canadianmortgagetrends.com covered a top ten wishlist of their preferred broker.  Here is their list:

1.Be licensed in the industry over two years
Experience is so crucial in this business. It just avoids so many headaches. New brokers are very eager to please, but if a newbie is going to make a mistake, better that it be on someone else’s file.

2.Have closed at least $10 million of mortgages in the last 12 months
Tenure alone doesn’t afford experience. Deal volume does.

3.Have “status” at a minimum of three lenders
For better pricing and faster lender turnaround

4.Know the pros and cons of major mortgage products outside the broker channel (like those from RBC, BMO, and Manulife).
So they can advise us objectively.

5.Reply to emails in 8 business hours
Who’s got time to wait?

6.Return phone calls the same day

7.Have a decent professional web presence
Brokers who take pride in their marketing are usually fairly competent in other parts of their business

8.Diversify their deal submissions
And not send over 40-50% of their volume to any one lender. Otherwise, their objectivity could be impaired. (An exception is if they specialize in a mortgage that one particular lender offers.)

9.Recommend the ideal term and explain the reasoning in plain language.
And show us a…


The Recession.

The other day we were discussing mortgages and the impact of the soon-to-be-over recession. Housing prices fell for a very brief period of time (and it was a fantastic time to buy). Since then we are up above the pre-recession peak.

All is not well, however. When the New York Times makes mention of a potential housing bubble in a March article, we’re getting the negative attention we have thus far, avoided. It can only get worse from her when almost 80% of pre-tax income is used to support a 2 bedroom bungalow in the Vancouver area.

Someone in the industry said to me “the recession was short-lived, but the real impact will be felt for a long time in house prices”. We think we’re out of the woods, but with the rapidly increasing fixed rising rates, the sudden change in mortgage rule qualification, and the jump in prime rate, the taps have tightened and the flow of money will be restricted. If we felt that the recession had any impact on house prices and the market, these new rule changes will really show us what an impact will feel like – and it won’t be pretty.

So what can you do? If you’re in variable, and haven’t been doing so, pay down your mortgage as fast as possible by increasing your mortgage payment. If in fixed – ride it out because that 5% rate that looked pretty horrible earlier this year is suddenly “the norm” again. Most important, examine your renewal options by calling us anytime to discuss. Over 80% of clients renew with their current lender – potentially a very costly decision without shopping around.


What will happen to rates?

I stopped trying to predict rates recently and have accepted that the most important thing is to learn from the past, and from other economies. As such, when people ask me where are rates headed, I can only give a general guideline of what I see and hear – they are headed Upwards. By how much? When? What should I do? These questions are too personal to answer in a blog entry, but what I can say is that generally speaking a rising rate market will be healthy for Canadians. Too many buyers have over-leveredged themselves with mortgage debt, consumer debt, and have gotten too used to record-low rates.

One other important factor that I rarely, if ever hear being discussed is quality of life. When it comes to rising rates and making a decision whether buying a home is a good idea or not – too few people comment on the home for what it is: a base of family, of growth, and of bonding. It is a place we can relax in, a place we teach our children to read in, a place we host family dinners in. Rates – be they up or down – should not interfere with the bigger picture at hand. While they are crucial in planning a mortgage strategy – they are not and should not be the only deciding factor of when or if to buy, and too frequently I hear people making decisions based on rates and prices first, then the home itself. Just recently I heard someone say to me “I’ve been through so many bidding wars, I’m just going to get the next place no matter what”. It’s chilling to hear that.

My generation is used to the idea that real estate will always rise. Unfortunately it may not…

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