Christine Buemann Mortgage Broker

Banks need to control their own lending and not rely on the government to do it for them. That’s essentially what Finance Minister Jim Flaherty told Bloomberg News last week. “The primary responsibility for prudence in lending practices rests with the financial institutions,” he said. Just as importantly, individuals “need to take responsibility for what they do and exercise common sense in terms of taking on debt.” It’s refreshing that sensibility is making headlines in Canada’s often emotional debt debate. Banks are completely capable of underwriting prudently on their own. Moreover, banks by nature fear defaults. Mortgage defaults occur in plain view. They can’t be hidden and they are not tolerated in Canada’s highly scrutinized and regulated mortgage market Flaherty won’t say whether any rule changes will be made in 2011, but he said he’ll carefully evaluate the economic implications. The most serious of these implications would be harmful effects on employment and job creation. So...

Everyone’s seen the housing bubble headlines this year. But some say there is a real bubble that’s been overlooked, and it’s been losing air fast. The reference is to the bond market. Bonds have collapsed and yields (which lead fixed mortgage rates) have catapulted .70% higher since October 19. On Friday, 5-year government yields made a 22-week high, closing at 2.56%. The Wall Street Journal proclaimed, in reference to US yields, this could be “the end of the bond mania.” (US and Canadian yields are tightly correlated.) If yields move much higher, lenders will certainly lift longer-term fixed rates. A few already have. Keep that in mind if you’re planning to get a fixed rate hold soon. Fortunately, there are still excellent fixed rates to be had. Whether yields continue higher from here is anyone’s guess. Traders say there is a bias in the market to keep selling bonds near-term, but there is also a high probability of up-and-down volatility until economic growth is more consistent. Som...

Many people are looking to purchase rental properties in this market and take advantage of the low real estate costs. The only stipulation is that most banks require a 20% down payment for any non-owner occupied rentals. I currently have access to a 10% down payment program for rentals. The interest rates are higher so it is not for everyone, but it is worth looking over. If you were to purchase a $200,000 rental property with 10% down ($20,000) your bi-weekly payments would be approximately $595. At the end of your 5 year term, you would have just over 22% equity in the house and you could switch to a lower interest rate lender for free upon renewal. Keep in mind; that is if real estate prices did not increase at all, so you could potentially have much more equity then that. For this example, your outstanding balance would be approximately $155,400 at the end of the term. In order to save up the additional $24,598 of equity that you would then have in the property, you would have had ...

Deeply-discounted variable rates have historically beat out 5-year fixed rates roughly 77% of the time.But CIBC economist Benjamin Tal suggests the coming five years may “slightly” favour fixed rates. He displayed this chart at the CAAMP Forum on Monday that projects that the typical variable-rate mortgage (VRM) will be more expensive over five years than the typical 5-year fixed. That’s based on forward swap rates and a closing date in January 2011, says Tal.Tal was careful to point out that this isn’t a blanket recommendation of fixed rates; it’s more of a commentary on how narrow the gap has become between fixed and variable mortgages, based on market rate expectations.Some people will undoubtedly look at this and see no point in assuming the risk of a VRM given the minimal projected cost difference.Others will remain skeptical, with the belief that North America’s economy isn’t strong enough to spark sustained 3%+ inflation (and the rapid rate increases that would come with it). Th...

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The posted 5-year rate reduction two weeks ago had all the trappings of a head fake. With bond yields* making 40-day highs, RBC deemed it appropriate to lower its 5-year fixed rates by .10%. Other banks followed suit as usual, and posted dropped to 5.19%. That’s Canada’s lowest posted long-term mortgage rate since the 1950s. 5-year yields closed up huge last Monday and discounted fixed rates followed. Most lenders have already announced fixed-rate increases. Regardless of your position on the fixed vs. variable debate, it can’t be overstressed how low fixed rates are right now. 5-year fixed mortgages are a whopping 1.66% below the 10-year average of the deep-discounted rates. Locking in at these all time low rates is like winning a small lottery, historically speaking. So if you need a fixed rate for a new mortgage closing in the next 180 days, be prepared to act—especially if yields continue higher. * 5-year bond yields typically lead 5-year fixed mortgage rates. Disclaimer: As always...

Just nine days after RBC cut posted rates to new lows, they’re headed back up. TD is raising fixed rates 15-25 basis points, effective tomorrow. The posted 5-year fixed is going from 5.19% to 5.44%. This is the first such increase in almost six months. Other banks typically follow competitors’ posted rate moves within 1-2 days