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First Rate A newsletter specifically designed to keep you updated on interest rate trends |
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Note: if this page does not display correctly, click on First Rate - July 2006 edition(this page is optimized for MS Outlook, Yahoo mail and Hotmail)
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July 2006
Dear Homeowner,
As a homeowner (or prospective homeowner), investor or real estate professional, you rely on your mortgage professional to keep you informed about interest rate movements and trends. This newsletter is designed to do just that.
In this issue:
- Market commentary and Interest rate trends
- CMHC's latest innovation - Interest Only Mortgage
- In the news
Market commentary & Interest rate trends
The Bank of Canada (BOC) today announced that it will leave its key interest rate unchanged. As a result, lending institutions in Canada are expected to keep their prime lending rate steady. Today’s decision comes after a string of seven consecutive quarter-point rate hikes going back to September of last year
There is still some savings with a variable rate mortgage. The best variable rate is at Prime less 0.90% or 5.1%. Compare this rate against the best 5 yr fixed rates which are at 5.5%. Although the gap is not large, there is a potential to increase if rates drop next year as some economists are predicting.
If you're currently have a good variable rate mortgage, it is probably a good idea to hold on to it. If you switch now, you could be locking in at the peak of the interest rate cycle.
Rates and Charts
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Prime @ 6.0% (next review on Sep 6, 2006)
Term
May 19
May 26
Jun 2
Jun 9
Jun 16
Jun 23
Jun 30
3 year
5.30%
5.30%
5.30%
5.30%
5.30%
5.25%
5.45%
5 year
5.30%
5.30%
5.34%
5.25%
5.30%
5.34%
5.50%
10 year
5.55%
5.55%
5.55%
5.55%
5.55%
5.55%
5.75%
Table shows the discounted residential mortgage rates for 3, 5 and 10 yr closed fixed rate mortgages
For a longer term view, click here to see the 3, 5 & 10 year best residential rate since September 2003 (updated monthly)
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Click to view other relevant graphs
CMHC's latest innovation - Interest Only Mortgage
On June 28, 2006, CMHC announced that they will now insure Interest Only Mortgages. This mortgage is available for new purchases and refinances. But don't rush out to your lender to apply for one. Lenders still have to set up their systems to handle this innovation. Give it another 6-10 months before major lenders tool up for this service.
Interest-only mortgages are really not new. The same effect could be achieved by setting up your mortgage as a line of credit (LOC). With a line of credit, you pay just the interest on your mortgage. The disadvantage of an LOC is that the rate of interest is variable (at Prime rate). With this CMHC product, it will be possible to get a fixed interest rate on an interest-only basis.
Ideal candidates are young professionals or entreprenuers who have a high earning potential. Eventually, borrowers will need to pay down the principal. Borrowers have the option of chosing to start principal payments on the 5th or 10th of the mortgage.
In the News (excerpts from recent press releases)
1) Extra costs face people buying their first home (Canada.com, Jun 30, 2006) - First time home buyers should give themselves a plush financial cushion to avoid being sideswiiped by hidden costs like taxes, title searches, and legal bills that add tens of thousands in charges. Click here to read more.
2) May home sales in BC hit $4 billion (Vancouver Sun, Jun 26, 2006) - May home sales in BC set a record volume in a single month topping the $4Billion mark for the first time. Click here to read more.
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Please consider the information provided in this newsletter as general information. Before you do anything consult a professional.
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