On Wednesday May 30, 2018, the Bank of the Canada again maintained their overnight rate which means no change to your interest rate. Let’s not forget that interest rates are still low and this is a great time to take advantage.
As the spring market has been in full swing right now, here are a few things that might’ve been on your mind lately. News & media. There has been A LOT of buzz in the past few weeks about the housing market taking a major plummet. One of the key factors I have been discussing is how 2017 was an exceptional year. Meaning, these numbers were so far off trend they are skewing results and thereby allowing the media to develop a news frenzy on how the housing market is plummeting...
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TD Bank increased it’s posted rates and RBC will be doing so today.
This increase, from 5.14% to 5.59% at TD, is the “biggest move in years.” The first reason for a lender to increase their rates would be when the bond yields increase. We have seen a slight increase but not that much, and definitely not enough to increase the discounted rates too. Generally, when the bond market changes, the discounted rates will change. Discounted rates are the rates that clients actually see on their mortgage commitments. But actual discounted interest rates have not changed… so what exactly is happening? Banks benefit from higher Posted Rates, and here is why: #1. Posted rates are being used to calculate the bank’s mortgage penalty. Banks use the posted rate for their penalty calculations. The higher the posted rate, the higher someone’s potential penalty is when they break their mortgage prior to the end of the term. I’m referring to the Interest Rate Differential ( IRD) for the fixed rate mortgages. Needless to say, this is definitely not in the clients’ best interests. If you are in a variable rate mortgage or with a mainline lender, this does not concern you since the payout calculations are very different (and lower).
It doesn't make much sense, does it? Why would the buyer with the smaller down payment (and therefore the riskier borrower) would benefit from lower rates?
In the case of a separation, it is possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property’s value. Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program.
Here are some common questions about the spousal buyout program: Last Wednesday the Bank of Canada announced an increase in their overnight lending rate by .25% taking it from .50% to .75%. This is the first increase in the past 7 years. The rationale here was that economic growth projections are higher than previous ones and this was a way to temper inflation.
The banks were quick to jump on the bandwagon and have increased their prime lending rates by the same amount – to 2.95% from 2.70%. It is interesting to note that while increases seem to flow through to the banks instantly, the two last previous changes to the Bank of Canada rate (reductions of .25% each time) were met with not only a delay in the banks reacting, but also a smaller reduction in prime (they reduced prime by .15% each time). This phenomenon is good for shareholders and executive bonuses but not so good for borrowers. |
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