We have finally seen a bump up in interest rates. The 5 year government bond rate hit a low of about .60 in mid-September and is now pushing towards 1%. The lenders have reacted to this and we have seen the low rates of 2.59% on the 5 year fixed rate disappear. Some banks have raised their 5 year fixed rate to 2.99%, while there are a few lenders still offering 2.64% on high ratio mortgages. The banks have also been reducing their discount rate on their variable mortgages. Where there were some rates as low as prime -.80 they are now floating between -.30 to -.50. Since the Bank of Canada and the prime rate have not changed, why is the discount being reduced? Could it be that the lenders are concerned that the Bank of Canada could drop rates again in the near future?

With all the recent changes, what does the future hold? The European Central Bank (EBC) just cut its key interest rate to -0.3% and now we have the Bank of Canada talking about the possibility of the Bank rate dropping to 0% and the willingness to go negative to help spur on the Canadian economy. Negative interest rates are another whole topic.

So where are interest rates going? Reading the economic data is like looking down the road. The further down the road you look the less clear it becomes. Therefore, we must keep an eye on the road so to speak, to know what is best for our personal mortgage situation and if we should be making any changes to our current situation. This is one of many good reasons to have a mortgage adviser, as it is to have a financial adviser.

The current economic data tells us interest rates will remain low for some time to come. The 5-yr Canada Bond Rate has fluctuated in a range between 0.60% and 1.0% for the last year and currently is sitting at about 0.86%. I suspect we will be in this range for some time to come. Looking at the price of oil and commodities in general and the huge impact they have on the Canadian GDP does not bode well for the Canadian economy. That being the case, what is the best mortgage for you? Consult your Dominion Lending Centres mortgage professional on the options that best fit your situation.

If you come across clients that are looking for mortgage advice, I am happy to review anyone’s situation, even if they are just looking for information. I offer free mortgage reviews as many mortgage holders can better their situation by renewing early or positioning themselves to secure the best mortgage well before their mortgage comes due. I follow the economy and bond rates on a daily basis; therefore, have been able to proactively secure low rates in advance for clients who have done mortgage reviews with me well before their mortgage was due.

If there is ever anything I can do to help put you in a better financial situation please contact me at Dominion Lending Centres.

The Bank of Canada kept the key overnight interest rate unchanged at 0.5 percent as expected, as the Federal Reserve is poised to hike rates for the first time in nearly 10 years. The Bank’s decision did not, however, reflect complacency with the state of the Canadian economy, but rather a hand-off to the much ballyhooed fiscal stimulus in the coming year by the new Liberal government. With interest rates so close to the zero lower bound, it’s a good thing that firepower will be coming from another source. This is no time for misplaced fiscal austerity. If anything, the risk is that the government won’t do enough to reboot economic activity, paranoid about looming deficits and the erroneous assumption that tax hikes for the rich will somehow help the economy or address income inequality.

The Canadian economy, though improved from the first-half rout, is on very shaky ground. The third quarter GDP figures released this week showed a rebound to a 2.3 percent annual growth pace, largely the result of an improvement in exports–not surprising given the robust demand for autos in the U.S. and the weakness in the Canadian dollar. But the September data for GDP by industry was very troubling as real gross domestic product fell 0.5 percent following three consecutive monthly increases, primarily as a result of declines in mining, quarrying and oil and gas extraction and, to a lesser extent, manufacturing weakness.

Another pocket of vulnerability in the recent data was in the finance and insurance sector, which has declined for two consecutive months. This is particularly troubling as the major Canadian banks have announced expected layoffs in their Canadian operations for this year and next. With interest rate-spread compression and a weak economy, all the banks are in cost-cutting mode in this country. Mortgage rates have clearly bottomed despite the Bank of Canada’s inaction.

Oil and other commodity prices have continued to fall, to the surprise of the Bank of Canada. This marked further deterioration in Canada’s terms of trade is depressing net exports and the damage done to our labour markets and cancelled investment projects–not to mention the Canadian stock market–is far from over. The negative backdrop in Alberta, Saskatchewan and Atlantic Canada is now quite evident in the slowdown in housing activity in those regions. Not only have home sales and house prices edged downward, but a telling leading indicator–rental vacancy rates–have risen sharply in some key resource centres (see chart below).

Note that despite the strong pace of condo construction in both Toronto and Vancouver, rental vacancy rates remain extremely low in both cities.

The Bank of Canada expects GDP growth to moderate in the fourth quarter and to grow at a rate “above potential” in 2016. Given that the Bank’s estimate of potential GDP growth in Canada is just under 2 percent, this is hardly a positive outlook. I expect Q4 GDP growth of only about 1 percent, which will not be enough to prompt a rate cut, but will certainly weigh on the Canadian dollar as the U.S. moves to hike interest rates at the next Fed policy announcement on December 16. Canadian growth next year will likely be around 2 percent, compared to an estimated mere 1.1 percent this year.

Friday’s employment report for November in both the U.S. and Canada will be telling. Clearly, as the Bank said, “policy divergence is expected to remain a prominent theme.” Easing by the European Central Bank tomorrow; tightening by the Fed in two weeks; and, the Bank of Canada on hold for the foreseeable future.

THIS ONE TIME ADVANCE WILL ALLOW YOU TO MAKE THE CHANGES YOU NEED TO MAKE YOUR HOME PERFECT!

Have you been trying to find that almost perfect home? All homes have their flaws and imperfections. Some consumers can deal with these deficiencies in a home, but for others this can be a deal breaker.

Maybe the kitchen needs an update, the bathroom is in desperate need of a makeover or maybe the home just needs a fresh coat of paint with the enhancement of hardwood floors, the quickest, cost effective and most powerful impact on a home!

The purchase plus improvement product is for consumers looking to purchase a home that has great potential but needs a little TLC. With the purchase plus improvement program you can make those needed improvements on your home immediately after taking possession and you can have these improvement costs rolled into your home loan for one easy payment. All of these projects can increase functionality, beauty and potentially add value to your dream home.

As a rule with this home improvement financing option, your improvement maximum is 10% of the “as improved value” of the home to a maximum of $40,000 of improvements. With as little as 5% down payment, this product can work to get you into a home that is near perfect!

For example: if the purchase price of the home is $350,000 and the “as improved value” or post renovations of the home is valued at $390,000 you can qualify for 10% of the $390,000. Which means you can borrow $39,000 to cover your renovation expenses.

Once you have found a home, you will have to provide quotes from a licensed contractor including all costs associated with your renovations. Your mortgage planner will need to submit these quotes along with your purchase approval to the lender.

The lender may require an appraisal of the home with an as-is and as-complete value. However, if you are putting less than 20% down payment on the purchase, often only a final inspection is required to confirm the work on the quotes has, in fact, been done.

Once closing day has arrived, you will be required to pay your down payment, and at this point mortgage funds will be advanced. On the day you take possession of your home you can start working on the renovations. Make note that the renovations will have to be fully completed and inspected before the real estate lawyer can advance you the funds that the lender has been instructed to hold back. In other words, you will have to find some way to pay for the contractor to do the work, you will get reimbursed the funds once it has been inspected and confirmed that the work is completed. At no point will you be given the money prior to work being completed.

Depending on the lender, there are many variations to this mortgage product so it would be a good idea to speak with a mortgage professional at Dominion Lending Centres.

If you think that you can customize your home with this mortgage product, give me a call, I would love to help you through your home buying process and help you achieve your dream of homeownership.