Tag Archive for: mortgage rates

Mortgage Renewal and Educating Yourself

We believe Informed Consumers Make Better decisions

 

Educate Yourself

 

Mortgage renewal and educating yourself, there are so many questions. There is information overload and it can be daunting. Where is the economy at and where is it going? We don’t have a crystal ball, but here are some tips if you have a mortgage renewal coming up.

 

Why education matters; we believe that informed consumers make better decisions.

  • Do I have to requalify?
  • Variable rate or fixed rate?
  • What term should I take?
  • How much are my payments going to increase?

Five things to consider when renewing your mortgage:

What the economists are saying:

 

Benjamin Tal, CIBC Economist:

“Things are moving in the right direction, but not good enough – therefore, we keep the option to raise again open”, “They’re not going to commit to not raising interest rates anymore. [That’s] no big surprise – they don’t want to be seen as relaxed about inflation.” “The short answer is, we don’t know. It’s really 50/50.”

Stephen Brown, Capital Economics:

“The Bank of Canada accompanied its decision to leave interest rates unchanged with a pledge to hike again if needed, but we doubt it will need to follow through. With recession risks rising and labour market conditions loosening, we continue to think that the bank’s next move will be a rate cut, in early 2024”

Earl Davis, head of fixed income and money markets at BMO Global Asset Management:

“We didn’t anticipate a hike today [Sept 6th] there’s two more meetings before the end of the year, we anticipate they’re going to hike it once minimum.”

Changes to Consider

Lender

Switch/Transfer your mortgage to a new lender (at their cost).  Most lenders will help pay the costs associated with moving your mortgage at renewal. To be eligible for a transfer program, you cannot increase your mortgage amount at this time. Everything is the same except the lender.

Refinance your mortgage

Now is the time to consider any of those upcoming changes that may require money in the coming years. Does it make sense to take equity out of your home?

Extend you amortization

Increasing your amortization period helps provide payment relief by spreading payments out over a longer timeframe.

Type of mortgage

Should you consider a fixed or variable mortgage? Would you want to look at removing co-signers who may not be needed any longer?

Look at the big picture

What is coming up in the next five years?

  • downsizing
  • expanding your family
  • moving closer to family
  • major renovation
  • kids education
  • help adult kids with housing
  • buy rental property/vacation property
  • dream vacation

Avoid Payment Shock

Get an idea of what your payments will be at renewal. You could start practicing making higher payments now, to relieve some pain at renewal!  Why not get the budget book out.  If you have the funds to make a lump sum payment, this will help reduce interest paid, and monthly payments. You could also consider paying off some debt to free up monthly cashflow. Whatever you do don’t take on any new payments.

Interest Rates

Bank of Canada (BOC) sets its policy interest rate (overnight rate) to control inflation. They raised rates 10x since March 2022 (+4.75%) this impacts variable interest rate products. The last meeting on September 6, 2023 the rate was held at 5%. The BOC’s next meeting is October 25, 2023.

Fixed mortgage interest rates are not directly linked to Bank of Canada Rates. The fixed rates follow bond yield. Fixed rates increased roughly 2.25% since March 2022.

 

Requalifying 101

You can refinance up to 80% of the value of your home.

Income qualification – documents and questions will be required (no blood sample required).  Stress Test – you will qualify at 2% above your mortgage interest rate. A Lawyer/Notary could be needed and an appraisal is likely.

Renewing with you lender

  • If you’ve made all your payments on time, your existing lender will generally give you the option to renew your mortgage.
  • Avoid requalifying – if you are not increasing your mortgage amount, amortization, or making a change to who’s on the mortgage.
  • No cost – there shouldn’t be any legal fees, appraisals, or income documents to provide.
  • Can be as easy as signing the dotted line. There is a bit more involved, but the most straight forward option.

Options

Terms – Lenders usually automatically offer a 5 year fixed term. Consider a shorter term or a variable rate.

Early Renewal – Most lenders offer early renewal options – up to six months early

Rate Holds – Inquire with your lender about how long they will honour a rate hold.

We believe that informed consumers make better decisions. To discuss your upcoming renewal,  or any mortgage situation call Kevin, Jason or Blaire today!

 

 

 

The Million Dollar Question…

Moneydoesgrowontrees

The bank of Canada has just raised their rate to a 22 year high at 5.0%. This move has us all pondering : What are interest rates going to do?  Whether you’re a Mortgage Broker, a Realtor, a homeowner, a consumer, or an investor – everyone wants to know what interest rates are going to do. This proves to be a challenging question.  Below are some of the latest opinions of reputable economists.

What the economists think

The economists are divided on predictions for not only the next BOC meeting, but also the strategy that will unfold in the coming months.

RBC Economics – Claire Fan:

“We continue to expect the full impact of rate hikes to date to come through gradually, slow spending over the second half of this year and for that to push the central bank back on the sidelines with no additional interest rate hikes this year.” 

Desjardins’ Senior Director of Economics Randall Bartlett:

“Given that the Bank even considered pausing at this month’s meeting, the better-than-expected inflation outcome reinforces our forecast for the overnight rate to be maintained at 5% for the remainder of the year,” he noted.

CIBC Economist Benjamin Tal:

“This is opening the door for another move in September,” Tal said. “Our official call is now that the Bank of Canada is going to move again, unfortunately, in September by 25 basis points, and that maybe will be the end of it.”

“We have to realize that we are already in a process of, in my opinion, overshooting – maybe by design by the Bank of Canada,” he said. “But it also means that if you overshoot, you accelerate the process of cutting.”

“We have to realize that this is an asymmetrical game, namely a situation in which the Bank of Canada is getting mixed signals from the economy,” he explained. “Some signals suggest that the economy is strong, some suggest that the economy is reacting to higher interest rates and slowing down, especially the housing market.”  

So, now what?

While interest rates play a major part in our clients decisions, the basic need of housing is universal and is not going away.  Fixed interest rates may be around 5-6% range, making home ownership more costly than Rent is astronomical and not doing anything to build clients networth.  

At the end of the day, you have to live somewhere! Real Estate is always a good long-term investment.

If you have questions, we are here to help. 250-753-2242

Contact Us

Interested in more?

https://www.mpamag.com/ca/mortgage-industry/market-updates/another-bank-of-canada-rate-hike-likely-in-september-cibcs-tal/452614