why they are at current levels and what the future holds.
Enjoy,
Mark
Good afternoon,
As expected, the Bank of Canada kept their overnight rate unchanged at 0.25%
(meaning the prime lending rate remains unchanged at 2.25%). With the
economy starting to show some signs of recovery and with the real estate
market as strong as it is, the Bank of Canada would have likely raised the
rate this morning if it were not for our strong Canadian dollar.
Raising mortgage interest rates would send our dollar higher, therefore
doing damage to our economy. As long as the Canadian dollar remains high,
we can expect the prime rate to stay fairly low and there is some
speculation now that the prime rate may be left unchanged beyond the BOC's
commitment to hold it to mid 2010.
With most major lenders pumping their 5 year fixed mortgage rates up by as
much as 35 basis points last week, there are still many rate deals available
for your clients. It still amazes me just how many homebuyers go to their
bank and accept whatever rate they are quoted without actually taking a look
at other options that could save them thousands of dollars. For example,
most banks are offering a 'discounted' 5 year fixed rate of around 4.35%.
With a mortgage amount of $300,000 and an amortization of 35 years, the
monthly payment would be $1,384.88 at 4.35% Let's now compare this with
the lowest available market rate for a five year fixed, which is 3.68%.
For the exact same mortgage amount, your monthly payments would only be
$1,266.45 saving the client $118.43 per month or a whopping $7,105.80 over
the 5 year term! Now, this 3.68% rate is for closings within 30 days
only, and comes with limited prepayment privileges of 5% per year, so it may
not be for everyone, however over 90% of homeowners never take advantage of
their prepayment options anyway. With a 5% prepayment privilege, they can
still pay up to $15,000 toward their mortgage without penalty using the
above example, so does it really make sense for you to PAY just to have the
OPTION to pay up to $60,000 more per year towards their mortgage? While
some people may have that kind of disposable income to throw around, I would
say that most don't.
Today's lowest mortgage rates:
1 year 3.68
2 year 3.20
3 year 3.50
4 year 3.85
5 year 3.68 (quick close, no frills)
5 year 3.84 (full prepayment options, 90 day close)
5 year ARM 2.15 (prime -0.10)
I hope this finds you Happy and Healthy!
All the Best!
Mark
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Thank you for reading my blog and if there is anything else I can help you
with please don't hesitate to contact me,
Mark
A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate
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