Fixed or Variable Rate Mortgage? Now is the Time for Which? Have Your Advisor Prepare the Right Documents.

In a recent study conducted by the Bank of Montreal, "variable-rate mortgages have worked out to be better than fixed-rate mortgages 83 per cent of the time since 1975." That is an impressive statistic in favour of variable rates. In today's current environment, however, there are a number of key reasons to think fixed rates might be the better option for most borrowers.

Firstly, it is extremely rare to get a fixed rate mortgage historically below 5 percent. With some clients being able to get fixed rates under 3%, clear advantages are available for some individuals that historically simply have not usually been available. If you can lock-in around 3%, or even under in some cases, it is often more advisable to do so depending on your situation. To be sure, for those who want added security, 10 year fixed rates are even available in the 4% range.

Generally, the spread between fixed and variable rates is much higher. Just last month I was able to get a client a variable rate of Prime minus 0.8%, or 2.2%... this month, however, variable rates have largely risen to Prime minus 0.5%, or 2.5%. If one can obtain a fixed rate for only around 3%, the advantage of the variable rate is only half a point. Too many, half a point is simply nor worth the worry of rate fluctuations and at the end of the day, peace of mind is worth much more to people than they realise.

Most of my investment and mortgage clients are much more risk averse than they initially realize and protecting your clients from both fear and greed should be the hallmark of most advisors. So you should think of how much you can afford your mortgage payments to fluctuate should rates change, and ask your advisor to prepare you a document outlining how much your payments will be at each rate. If you feel comfortable with a fairly reasonable level of increases, then perhaps variable is for you, otherwise be content with today's low fixed rate environment.

Cheers, and be sure to comment or e-mail any of your questions.
matthew.j.w.clarke@gmail.com

Mortgage Rates to go up at Royal Bank and CIBC after Thankgiving. Other Banks to Follow. Vote with your Wallet and get your Mortgage Elsewhere.

According to the Canadian Press, mortgage rates at Canada's largest banks will be on the rise after the Thanksgiving weekend. Strong U.S. jobs numbers have caused the cost of borrowing to rise for banks in the bond market, and as usual these costs will be passed on by our banks to the Canadian consumer.

The Royal Bank is raising rates on both variable and fixed rate mortgages. At Canada's biggest bank, a five year closed rate will be 5.29%, well above rates available at mortgage brokerages and other lenders. CIBC also increased its five year rate to 5.29% for most customers. Canadians should vote with their money and choose to do business somewhere else.

Post or E-Mail Your Comments and Questions.

Dundee International

Dundee International:

Dundee International has been holding up very well during recent market turbulence. With equity markets posting their worst weekly return since 2008, a stock that provides a stable and reliable stream of income is a breath of fresh air.

Dundee International is paying investors 8% per annum, well above current T-Bill and Bond rates, and far higher than any other current savings vehicles offered at your local bank branch. As mentioned on this site before, Dundee International holds a disparate array of commercial properties that it leases out primarily to Germany`s pre-eminent postal service. With a reliable tenant, the default risk for Dundee International is currently low.

Personally, I own Dundee International for the cash it generates and the diversity it provides my equity portfolio.

Highlighted on the company website are three key reasons to own this stock:

It

• Unique opportunity to diversify outside of Canada
• Strategically located, geographically diversified portfolio
• Attractive yield and cash flow stability

Home Prices up Over $25,000 From Last Year. Low Mortgage Rates Contribute to Growth.

Home Prices Show August Increase:

According to the CBC, Canadian's paid 7.7 percent more for homes than they did last year. The Canadian Real Estate Association said the average sale price for an existing home is now $349,916, up about $25,000 from a year ago. The market clearly remains strong. In addition, economic troubles outside of Canada are keeping interest rates low and mortgages attractive for Canadians.

The Bank of Canada has a number of reasons to keep rates low and encourage the continued rebound in the Canadian housing market. Nationally, Toronto and Vancouver showed some signs of slowing down, with many other parts of Canada picking up steam.

E-Mail or comment with any questions.

Variable Discounts Quickly Evaporating. Fixed Rates Becoming More Attractive.

Variable Discounts Quickly Evaporating. Fixed Rates Becoming More Attractive.

Variable rate discounts are quickly evaporating at Canada's major banks. Effective tomorrow, TD, Scotia, CIBC, and Royal are reducing the discount under Prime at which they are willing to lend new mortgage money. Soon, the second-tier lenders will follow.

The banks are encouraging borrowers to choose higher margin fixed rate loans, which generate a steady income and stream of profits for the banks. Generally, new rates on variable loans will be in the 2.5% range for A rated borrowers, and in the neighbourhood of 3.29% for fixed rate borrowers.

Average Housing Prices Rise Again Across Most of Canada's Major Urban Centres.

July's resale housing price numbers have been released, indicating another year over year increase in most of Canada's major urban centres. Real estate continues a strong upward trend. 

Average MLS® Resale Price for Local Markets

City	July 2011	July 2010
Halifax	$ 262,723	$ 245,944
Saint John	$ 158,448	$ 176,061
Quebec	$ 240,225	$ 237,605
Montreal	$ 317,519	$ 303,317
Ottawa	$ 342,925	$ 322,342
Toronto	$ 459,122	$ 420,455
Hamilton/Burlington	$ 349,235	$ 309,293
Winnipeg	$ 238,258	$ 225,191
Saskatoon	$ 303,439	$ 289,715
Regina	$ 272,548	$ 281,836
Calgary	$ 397,613	$ 402,809
Edmonton	$ 334,444	$ 329,731
Vancouver	$ 761,673	$ 657,815
Victoria	$ 467,052	$ 496,943

E-Mail or comment with any questions or concerns:

matthew.j.w.clarke@gmail.com

www.kingstonhomeloans.ca

Lending Rates Hold at Historically Low Levels. Mortgage and Consumer Lending Stays Cheap Money, Could go Even Lower.

Mortgage and lending rates should remain relatively steady over the short-term as Bank of Canada governor Mark Carney decided to hold the benchmark lending rate at 1 percent today. Borrowing costs should remain low, hopefully spurring the purchase of more housing and other big ticket items like cars by Canadians. This is good news for anyone shopping for a home or investment property soon, and anyone who has existing variable rate debt. 


In the Globe and Mail today, Mark Carney is cited as saying:

“In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished.”

“The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2-per-cent inflation target over the medium term.’’


In layman's terms, the global economy is doing worse than expected, and trouble in Europe and the United States is forcing Canada to keep stoking its economy to encourage domestic spending and consumption.


Most importantly, the door has now been left open for the Bank of Canada to actually cut interest rates going forward instead of raise them... money is cheap and in Canada it might just get even cheaper : )


Please post or e-mail me your comments and questions.
Matthew J.W. Clarke.