Five of My Most Read Posts In Case You Missed Them the First Time

Dave Larock in Interest Rate UpdateMortgages and Finances

Editor's Note: The Interest Rate Update appears weekly on this blog - check back every Monday morning for analysis that is always ahead of the pack.

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Last week was a quiet one for factors that affect Canadian mortgage rates.

We received the latest Canadian Consumer Price Index (CPI) data, for July, and it showed that overall inflation rose by 1.3% last month, down from 1.5% in June and still well below the Bank of Canada’s inflation target rate of 2%.

The U.S. Federal Reserve also released the minutes from its July policy meeting and while some of its members expressed a desire to raise rates sooner rather than later, most preferred to maintain the current wait-and-see approach. As of last Friday, the futures market was still betting that the Fed’s next raise won’t happen until mid-2017, so on balance, this latest release wasn’t a game changer.

With such a slow week on the news front I thought I would revisit five of my most read posts. These are worth a read if you missed them the first time around, and while some are a few years old, the topics are still relevant today:

  1. Why Today’s Fixed Versus Variable Debate Is All About the Spread – This post explains why even the most ardent variable-rate borrowers are now seriously considering fixed-rate alternatives. (When this post was written the gap between five-year fixed and variable rates was 0.50%, and today it has narrowed to about 0.15%, so the case for fixed has grown even more compelling since this post was first published.)

  1. Fixed-Rate Collateral Mortgages: Good for Banks, Not for Customers – When the major banks switched the way they registered their mortgages on title, they did so very quietly, as this CBC segment confirmed. I wrote this post to educate consumers about the unpleasant implications of this change, and have received many appreciative emails from readers for shining a light on this topic (except for the TD bank employee who posted in the comments section at the end of the piece).
  2. How the US Lent Its Way to a Housing Bubble and Why It Didn’t Happen Here – While several of our regional housing markets have heightened risks associated with them, I still do not believe that we are headed for a U.S. style housing crash. This post, written back in 2010, explains why.
  3. What Every Canadian Borrower Needs To Know About Fixed-Rate Mortgage Penalties – This post will make you an expert on the different ways that lenders calculate their fixed-rate mortgage penalties. Spoiler alert: Prepare to be shocked by the size of penalties charged by the Big Banks! (If you are interested in a more complete explanation of all of the important terms and conditions to watch for, check out my post called What’s in the Fine Print.)
  4. Spring Mortgage Market Update (2010) – I used to write Quarterly Mortgage Market Updates before I switched to weekly Monday Updates (now 265 and counting!). While it may be hard to remember now, I wrote this post in early 2010 when there was widespread consensus among our major bank economists that mortgage rates were about to head materially higher. In this post, I disagreed with that prevailing sentiment and offered a contrarian view that has held up well over time.

Five-year Government of Canada bond yields rose eight basis points last week, closing at 0.68% on Friday. Five-year fixed-rate mortgages are available in the 2.39% to 2.49% range, depending on the terms and conditions that are important to you, and five-year fixed-rate pre-approvals are offered at about 2.54%.

Five-year variable-rate mortgages are available in the prime minus 0.40% to prime minus 0.50% range, which translates into rates of 2.20% to 2.30% using today’s prime rate of 2.70%.

The Bottom Line: I continue to believe that both our fixed and variable mortgage rates are likely to remain at or near today’s levels for the foreseeable future, but I will keep putting that view to the test in future posts.

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: Email Dave

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