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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 - May 2006 edition(this page is optimized for MS Outlook, Yahoo mail and Hotmail)
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May 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
- Get credit when you don't need it
- In the news
Market commentary & Interest rate trends
The Bank of Canada (BOC) increased the overnight rate by 1/4% to 4.0% on Apr 25. Major mortgage lenders and banks moved to increase the prime rate to 5.75%. Many economists are predicting one last rate increase to 4.25% on May 24.
Adjusting to the rate increases, the 5 yr fixed rate moved up to 5.4%. I currently have one lender offering a special 10 yr rate at 5.35%.
With the prime rate getting close to its peak, it's probably a safe bet to take a variable rate mortgage. On a variable, you could be paying 4.85%. However, the savings will not be as great as they were last year. If you are deciding whether to fix or float, I suggest you read the article by Benjamin Tal of CIBC World Markets. Click here to read the article.
Rates and Charts
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Prime @ 5.75% (next review on May 24, 2006)
Term
Mar 17
Mar 24
Mar 31
Apr 7
Apr 14
Apr 21
Apr 28
3 year
5.00%
5.00%
5.00%
5.00%
5.15%
5.15%
5.20%
5 year
5.08%
5.08%
5.08%
5.10%
5.25%
5.25%
5.25%
10 year
5.50%
5.50%
5.50%
5.25%
5.35%
5.35%
5.35%
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
Don't apply for credit when you need it
During the past week, I've encountered mortgage applicants telling me that they never applied for credit since they never needed it. They've always had enough cash to meet their day-to-day requirements. Unfortunately, now that they are applying for a mortgage, they have no credit. With no credit, it becomes very difficult for lenders to judge whether an applicant is responsible in handling credit. While it is still possible to obtain a mortgage without a credit history, it will be more expensive for the borrower since lenders will charge a higher interest rate to cover for the risk.
We never know when we will need credit. Things happen that we don't anticipate such as a family emergency or medical bills. Don't wait until you need credit to apply for it. You may not get it. We should always have credit available to us and our spouses/partners.
Once in a while, get a copy of your credit bureau. Check it's accuracy. If your score is low, improve it. I can suggest ways for you to improve your credit score. You can obtain a copy of your credit score online at www.equifax.ca and www.tuc.ca .
In the News (excerpts from recent press releases)
1) Where to invest in real estate now (Canadian Business, Mar 27 - Apr 9, 2006) - The question every potential real estate investor wants to know the answer to hangs in the air: Can I still make money, or have I missed the boat?. Click here to read more.
2) Bank of Canada sees inflation rising, US$ Falling (Reuters, Apr 27, 2006) - Canada's benchmark interest rate of 4% is "appropriate" but further reate increases may be necessary as the economy expands, the Bank of Canada Governor David Dodge said on Thursday 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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