Money Matters Toronto

Canadian 5 yr bond yields +0.03bps to 2.68- Four weeks ago it was 2.45%. The spread, based on 5 yr fixed rate mortgage of 4.39%,  is at 1.71%.

Pressure on fixed 5 year: Up.
Financial Post – Markets

Lenders typically like to keep a spread of 1.80% to 2.00% between their fixed five year rates and the current 5 year bond yield. If the bond yield increases then the spread will shrink putting upward pressure on mortgage interest rates. The reverse is also true. If bond yields decrease then the spread widens and there is downwards pressure on fixed rate mortgages.

Canadian 5 yr bond yields -0.03bps to 2.65- Four weeks ago it was 2.45%. The spread, based on 5 yr rate of 4.39%,  is at 1.74%.

Pressure on fixed 5 year: Down.
Financial Post – Markets

Lenders typically like to keep a spread of 1.80% to 2.00% between their fixed five year rates and the current 5 year bond yield. If the bond yield increases then the spread will shrink putting upward pressure on mortgage interest rates. The reverse is also true. If bond yields decrease then the spread widens and there is downwards pressure on fixed rate mortgages.

In my post yesterday, I mentioned in point #4 that mortgage interest rates are overpriced. To flesh out that statement I found this great interview.

The following is a link to a great video blog on the Globe & Mail website by Financial editor Rob Carrick. In it he interviews author of the Canadian Mortgage Trends blog and fellow mortgage planner, Rob McLister.

Rob’s comments & position in the interview are very insightful.

In this episode I talk about the fourth C of credit. Collateral. Collateral refers to the real estate that is used to secure the mortgage. Different considerations are given to different properties depending what they are being used for. Learn more by watching this episode.

As a mortgage broker in Toronto I receive calls from my clients and shoppers asking what to do in today’s market. After all, over the past 3 months alone mortgage rates have gone on a bit of a roller coaster ride.

I think variable is still the way to go. Here is why (DISCLAIMER: This is my opinion only. I am not offering financial advice. Everybody has different circumstances and mortgages are not one size fits all):

1. You will keep your mortgage payments low. The difference between the average variable rate in today market P+.50 (2.75%) and today’s average fixed rate mortgage (4.49%) is 1.74%. That translates into a difference of $231/month on a $250,000 mortgage amortized over 25 years.

2. If you are willing to pay the monthly payment of a fixed rate mortgage you can opt for the variable and take advantage of your ability to increase your monthly payment by 20%. All the extra money will go toward reducing the principal which will take months if not years off your mortgage and save you interest.
Continue reading Fixed Or Variable Rate Mortgage: What Should I Do?

Canadian 5 yr bond yields +.04bps to 2.41- Four weeks ago it was 2.74. The spread, based on 5 yr rate of 4.49%,  is at 2.08%.

Pressure on fixed 5 year: Down.

Financial Post – Markets. Lenders typically like to keep a spread of 1.70% to 1.80% between their fixed five year rates and the current 5 year bond yield. If the bond yield increases then the spread will shrink putting upward pressure on mortgage interest rates. The reverse is also true. If bond yields decrease then the spread widens and there is downwards pressure on fixed rate mortgages.

As a mortgage broker in Toronto, it’s important for me to keep on top of significant economic data. This data is useful to me as it helps me to advise my clients on decisions about interest rates and predicting opportunities and pitfalls in regards to their mortgage financing and real estate options.

The Globe & Mail reports an increase in the unemployment rate in their article “Jobless Rate Inches Up To 8.6%”. The article suggests that while the unemployment rate increase to 8.6% from 8.4% in May, the numbers are better than expected.

The Globe site hosts two interactive maps which break up the unemployment numbers by region, province, and city.
Map 1
Map 2
Continue reading Unemployment Numbers: Effect On Mortgage Interest Rates

Canadian 5 yr bond yields -.04bps to 2.37- Four weeks ago it was 2.82. The spread, based on 5 yr rate of 4.49%,  is at 2.12%.

Pressure on fixed 5 year: Down.

Financial Post – Markets. Lenders typically like to keep a spread of 1.70% to 1.80% between their fixed five year rates and the current 5 year bond yield. If the bond yield increases then the spread will shrink putting upward pressure on mortgage interest rates. The reverse is also true. If bond yields decrease then the spread widens and there is downwards pressure on fixed rate mortgages.

 A such there is pressure for fixed 5 year rates to be around 2.37 + 1.80= 4.17%

in this episode i talk about capacity