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First Rate A newsletter specifically designed to keep you updated on interest rate trends |
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Sept 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
- Mortgage strategies to control your consumer debt
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 Oct 17, 2006)
Term
July 14
Jul 21
Jul 28
Aug 4
Aug 11
Aug 18
Aug 25
3 year
5.45%
5.45%
5.45%
5.44%
5.44%
5.44%
5.44%
5 year
5.50%
5.50%
5.50%
5.54%
5.54%
5.54%
5.49%
10 year
5.75%
5.85%
5.79%
5.79%
5.79%
5.79%
5.79%
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
Mortgage Strategies to Control Your Consumer Debt
Consumer debt can come from many sources, such as credit cards, department store cards, car loans or other personal loans – with many Canadians paying much more in interest costs than they need to be.
Increasing equity in homes can offer a possible solution for homeowners burdened by high-interest consumer debt. While personal debt levels continue to rise, so too does the equity that many have in their homes, which opens a range of options to dramatically reduce one’s interest cost burden. Here are two common strategies for homeowners:
Home Equity Line of Credit
Another mortgage option for homeowners which offers greater flexibility is a Home Equity Line of Credit – or HELOC – which allows you withdraw funds as needed.
The advantage here is that you can put a HELOC in place and charge up when needed, then pay down the line of credit, never needing to re-qualify, provided payments are kept up-to-date.
Your payments fluctuate depending on current interest rates and the outstanding balance over the month, with interest-only payment options available. A HELOC can be convenient for paying off higher interest debts, as you withdraw and pay (relatively lower) interest on only what you need.
Mortgage Refinancing
Refinancing a mortgage can give you the opportunity to consolidate higher-cost borrowing with lower-cost mortgage financing – potentially allowing you to save significantly on overall borrowing costs.
With a lower interest rate on a refinanced mortgage, some borrowers decide on a lower monthly payment to improve their cash flow, while others choose to pay off the loan sooner, saving them money over the long term. What’s more, mortgage refinancing offers a plan to reduce your debt – after the elapsed amortization period, your balance is zero.
With Canadians now carrying increasing amounts of high-interest debt such as credit card balances and personal loans, how best to manage one’s borrowing costs is a concern for many. Talk to your Invis Mortgage Consultant – you may be surprised to learn how much you can save with the right debt management strategy.
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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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