Editor's Note: Dave's Monday Morning Interest Rate Update appears on Move Smartly weekly. Check back weekly for analysis that is always ahead of the pack.
Last week was a relatively slow one on the mortgage-rate news front so I thought I would use today’s update to highlight several of the posts I have written since the inception of this blog - which now includes 230 posts and counting.
Some of my most popular posts focus on mortgage contract terms and conditions that are often buried deep within your mortgage documents . If life were fair, many of these clauses would be printed in boldface font and come with flashing lights next to them:
This post explains how lenders calculate fixed-rate mortgage penalties. Many readers are surprised to learn that the Big Six banks charge penalties that are often four or five times higher than those assessed by many other lenders.
When I wrote “Why I Won’t Sell Mortgage Insurance”, I got a call from a mortgage life insurance company telling me that I had to take the post down because I wasn’t a licensed insurance advisor and therefore wasn’t entitled to offer an opinion on the product. (I didn’t.)
This one explains how one large Canadian lender imported an aggressive U.S. lending tactic - and this lender is also the only one in Canada that uses collateral mortgage charges on standalone fixed-rate mortgages, a technicality which I explain is good for banks but bad for customers.
My variable-rate simulations tend to draw a significant amount of interest as I try to look into my murky crystal ball to divine whether a fixed or variable rate might save some money over the next five years. (I’m due to post an updated version soon.)
If you’re going to write about where interest rates may be headed, I think you earn your credibility when you go against the grain and offer a view that challenges conventional wisdom (provided your theories are well researched and supported). Here are some examples of where I took that risk:
Back in 2010, many bank economists were predicting a sharp rise in interest rates but I didn’t agree (Note: This post includes my first attempt to Photoshop – leading to a rather flattering picture of Mark Carney, our former Bank of Canada (BoC) Governor.) Along those same lines, here is the first of many posts I wrote explaining why I thought BoC Governor Carney’s warning about higher rates would not materialize.
When the federal government decided to tighten the rules for mortgage lending, most of my industry peers cried foul and argued that the government would trigger a house price correction that would destroy our economy and basically bring about the end of the world as we knew it. I argued that these changes were needed, and that they would prove to be short-term pain for long-term gain in the fullness of time.
That said, I didn’t agree with every suggestion on how we should regulate the housing market. In this post, former TD Chairman Ed Clark incurred my Photoshop wrath when he asked the federal government for tighter mortgage regulations on the same day that his bank announced that it would begin registering mortgages for up to 125% of a property’s value to make it easier for its customers to borrow more money in the future.
In this cheeky post, I ask whether the BoC had discovered Life on Mars, and here I offer a rebuttal to a forecast by BMO economists who made the case for why fixed rates would outperform variable rates going forward.
Nuts and Bolts
While I enjoy writing about where interest rates may be headed in future I make my living by educating clients about the nuts and bolts of mortgage borrowing and making sure they end up with the lowest cost option that is right for their specific circumstances. This includes detailed explanations on topics like how high-ratio mortgage insurance works, how bridge financing can help when buy/sell dates don’t overlap, and on how to secure mortgage financing for vacation properties.
I get a lot of good questions from first-time home buyers and have written many a post in answer to the best of these, including “The Power of Prepayment”, “Closing Costs – The Stomach Punch of the Home Buying Process”, “Pre-approvals: Why They Aren’t Worth the Paper They’re Written On and Why You Should Still Get One” and “Puff the Magic Payment Frequency”.
I received a gracious note from Fraser Smith when I wrote this summary of the Smith Manoeuvre, called “How to Make Your Mortgage Interest Tax Deductible”. (He called my two-part post the best summary of his book that he had ever read and asked if he could include it in his next client mailing - which I happily agreed to.)
If you found these posts interesting and want to be sure that you don’t miss the latest news on what is happening in the Canadian mortgage market, you can sign up for my RSS feed on the right hand side of my blog page to have my posts automatically delivered to your inbox.
Five-year Government of Canada (GoC) bond yields fell by one basis point last week, closing at 1.48% on Friday. Five-year fixed-rate mortgages are available in the 2.79% to 2.94% range and five-year fixed-rate pre-approvals are offered at rates as low as 2.99%.
Five-year variable-rate mortgages are available in the prime minus 0.75% to prime minus 0.60% range, depending on the terms and conditions that are important to you.
The Bottom Line: As a committed blogger, I am always looking for new topics that will be of interest to my readers. If you have questions about a mortgage-related topic, click on the “email Dave” link at the bottom - I might end up writing a post in answer to your question!
David Larock is an independent mortgage planner and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David's posts appear weekly on this blog, Move Smartly, and on his own blog integratedmortgageplanners.com/blog. Email Dave