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March 2005

• Interest rate trends
• Mortgage Life Insurance - Should you take your bank's offer?
• In the news

Interest Rate Trends

February 2005 was a quiet month for fixed interest rates with hardly any movement. 

The prime rate stayed the same in February 2005.  Bank of Canada reviewed the overnight rate on Mar 1, 2005 and decided to keep the rate unchanged.  The BOC stated that growth in the 4th quarter of 2004 was slightly lower than anticipated.   The Consumer Price Index (CPI) for January 2005 was released on Feb 22/05.  CPI for Jan 05 was at 2.0%, slightly lower than Dec 04 CPI of 2.1%.  The Bank's next review is scheduled for Apr 12, 2005.    

Prime @ 4.25%

Term	Jan 14	Jan 21	Jan 28	Feb 4	Feb 11	Feb 18	Feb 25
3 year	4.39%	4.39%	4.39%	4.39%	4.39%	4.39%	4.39%
5 year	4.75%	4.75%	4.75%	4.75%	4.75%	4.75%	4.75%
10 year	5.45%	5.45%	5.45%	5.45%	5.45%	5.45%	5.45%

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)

Click to view other relevant graphs

 

1) Graph of 5 year residential mortgage rate and prime rate since 1951

2) Graph of 5 year posted rate since January 2000

3) Graph comparing the 5 year mortgage rate versus variable at prime - 0.75%

Mortgage Life Insurance - Should you take your bank's offer?

Most mortgage lenders offer mortgage life insurance and often, many home owner's are pressured by the lender to take the lender's in-house product.

Before you sign on the dotted line, you should know that the insurance offered by most lenders are not portable.  After the term of your mortgage, you may wish to switch to another lender (say, your current lender's rate is not competitive).  If you switch, you will not be able to take the same mortgage life insurance with you.  You will have to re-qualify with the new lender for a new policy.  Given the passage of time, it may happen that you no longer qualify for insurance or the premiums are higher (since you would be older).  Thus, you may be forced to stay with your current lender.

The second disadvantage of lender's insurance is that their rates are higher.   Lenders will have only one rate for both non-smokers and smokers.  Since smokers have a higher risk, non-smokers are effectively subsidizing smokers.

As the country's largest independent mortgage brokerage house, we have developed our own mortgage life insurance product that better suits the needs of home owners.  The insurance is portable and the premiums are lower.  Secondly, smokers and non-smokers do not pay the same premium.  Non-smokers will definitely benefit from Invis' offering (although I've seen cases where smokers too obtain a better deal).