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October 2006

Market commentary & Interest rate trends

CIBC World Market economist Jeff Rubin is predicting a 1% drop in the Bank of Canada interest rates by the end of next year.  This means that if you are in the market for a mortgage, you must take a serious look at a variable rate mortgage.  Even if you are the type who prefers a fixed rate mortgage, you should not lock-in right now.  We recommend waiting until the end of next year to lock-in your mortgage.

Rates and Charts

Prime @ 6.0% (next review on Oct 17, 2006)

Term	Aug 18	Aug 28	Sep 1	Sep 8	Sep 15	Sep 22	Sep 29
3 year	5.44%	5.44%	5.40%	5.40%	5.30%	5.30%	5.30%
5 year	5.54%	5.49%	5.45%	5.39%	5.30%	5.30%	5.29%
10 year	5.79%	5.79%	5.79%	5.69%	5.69%	5.74%	5.69%

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 - 0.80%http://www.bcmortgage.ca/tax_deductible_mortgage_smith.htm

Interest - Only Mortgages

FirstNational Financial is the first lender to offer a true Interest-Only product.  This product has the ability to lower monthly payment significantly.  For example, the payments on a $300,000 mortgage is less than $1,300 per month.  This will allow many individuals to get into the market when they otherwise couldn't afford the monthly payments. 

The ideal target client for this product is someone with a potential to increase their income after a few years.  This could be a professional or an entrepreneur.

Many lenders offer interest-only.  However, the mortgage has to be structured as a line of credit.  The interest rate is a variable rate at the prime rate (6% currently).  Whereas FirstNational can offer this product at Prime less 0.85% (currently at 5.15%).  You can also choose their various fixed rate mortgages.

Some of the features and qualifications for this mortgage are as follows: (1) at least 10% downpayment or equity (gifts are not acceptable); (2) reasonable credit; (3) owner-occupied properties; (4) available for purchase and refinance; (5) borrower has the option to start paying principal after the 5th or 10 year subject to added premium.

Firstnational's products are only available through mortgage brokers.  Please do not hesitate to contact me shoul you have any questions.