Don’t delay, call today before its gone.  No rate holds or pre-approvals.  Purchases and refinances only.

Current 5 year fixed rate offered under this program is 4.49%

Don’t wait, lock in today.  With mortgage rates slowly going up, wouldn’t it be nice to have peace of mind in knowing that you can take your time to sell your home and not worry that you may end up with a high interest rate?

Call me TODAY (03) 991-2198

TD, ING, Laurentian, CIBC and soon the rest of the Big Banks will follow suit.  Scotiabank is usually good for lagging behind for a few days or even a week just to scoop a huge rush of business from the other players.  Scotiabank’s ADVERTISED 5 year fixed rate is 5.89% – but for their fabulous Broker Partners (some of us), we can offer the UN-published rate of 3.69%.  This will all change in a few days, to a week, however.

Keep in mind that when you lock into a rate hold through me, the rate hold is good for up to 120 days.  This means you have 4 months to buy a house or to decide what you want to do.  Just keep in mind that the rate expires exactly 120 days from the date of the commitment.  There is no looking back after that.

In an interview with 660 AM Radio yesterday morning, I reiterated that I am advising my clients to “LOCK IN” now.  Analysts are predicting rates to increase over the next 18 months, resulting in PRIME being as high as 6%.  That can mean doubling some mortgagee’s monthly payments.  It can be huge, but if you lock into 3.69% this week before its gone, you are going to save yourself a lot of financial grief.

Call me today for your own personal evaluation and application.

It’s probably time to start the countdown on interest rates going up.

The Bank of Canada only pledged — conditionally — to keep its record-low lending rate until the end of the second quarter, so that leaves us with slightly more than four months before the housing market falls apart. At least that’s what some national magazines and economists predict will happen when rates start to rise.

“Some people say they could go up in April, but I don’t buy that,” says Benjamin Tal, senior economist with CIBC World Markets and one of the more sane voices out there. He predicts a pullback in housing, but not the collapse we’ve seen in the United States.

So, what do you do in the face of this inevitable march of interest-rate hikes coming our way, likely at the Bank of Canada’s first meeting in July?

“I think people will start locking in their rates very soon and that’s already happening,” says Mr. Tal, referring to the variable-rate crowd that has mortgages tied to prime. “The five-year [fixed] rate [mortgage] will be moving [up] well ahead of the bank rate in anticipation of an increase.”

While locking in is extremely tempting in this market — given a five-year mortgage is as low as 3.8% — a floating-rate mortgage can be had for almost half that. Vince Gaetano, a vice-president of Monster Mortgage, says he’s seeing variable rates for as low 30 points off prime, or 1.95%.

The problem for many Canadians who negotiated variable-rate mortgages in the past year, and still don’t want to lock in, is they are stuck in contracts that have them paying a rate as much as 100 basis points (one percentage point) above prime. They call it a five-year term is because that’s the length of the contract.

But Mr. Gaetano says just break that mortgage. If you are in a variable-rate contract, the penalty is three payments. To go from a contract that is 100 basis points above prime to one that is 30 points below could have you recoup your money in less than a year.

“There is a large amount of people refinancing to take advantage of these variable rates. We’ve seen a full-point comeback in the borrower’s favour. We’ll never see 1.95% ever again,” Mr. Gaetano says.

One option for consumers who can’t make up their minds is to apply for a new mortgage and have the lender hold the rate for as much 120 days.

“There will be a credit bureau check on your name and it could lower your credit score if you don’t use money,” says Mr. Gaetano, referring to the potential pitfalls of looking elsewhere for a new rate.

The reality is most consumers, once they have their mortgage, stay put and wait for renewal. The banks have a loyalty record that would make any industry drool. The Canadian Association of Accredited Mortgage Professionals says 93% of borrowers who renew on schedule stay with the same lender. Even among those who renew early, 81% stay with same financial institution.

As you consider where to go next with your mortgage, remain open to switching financial institutions if it saves you money. Sometimes there are costs, but the potential savings can offset those costs.

Martin Beaudry, vice-president of ING Direct Canada, says his company will now hold your rate for 120 days by just applying online. You don’t even need to fill out a full mortgage application. ING holds the rate on any term, or even the spread between a variable-rate and prime, which is now 20 basis points.

“There is no downside, but less than half of people take advantage of rate guarantees. People deal with renewals less than 30 days before the maturity date,” says Mr. Beaudry.

Most banks will guarantee you a rate 90 days in advance of your mortgage coming due. Why wait until the last minute and why stay with same institution if you are not getting best rate going?

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Dusty wallet Having trouble making ends meets because of property taxes? If you are a senior citizen, some jurisdictions will allow you to forgo the payments with the amount owing attached as a lien on the house. Make sure to check the interest rate they charge on that money owed or your heirs could be left with a lot less house–if you care about that.

gmarr@nationalpost.com

The 2001 study that Milevsky did, examined the previous 50 years to determine whether consumers benefited from locking into a fixed-rate mortgage or going with a variable-rate product linked to prime.

Consumers did better 88% of the tie by going with the variable-rate option.  The study has been used by banks to lure consumers into variable rate products.  Currently, about 25% of mortgage holders have gone with floating rates.

“I’ve written seven books and 100 research articles and that’s the one I’m known for,” says Mr. Milevsky, with a laugh.  “I just wish some of these banks would mention the author.”

He says the study results still hold true.  If you factor in the past nine years, the variable rate probably does better about 96% of the time.  But that doesn’t mean if you are looking for a mortgage today you should float, he says.  “There is another element of risk to analyze,” says Mr. Milevsky.  He’s referring to the volatility in the mortgage market for variable-rate products.  The variable rate is still tied to prime, but the discounts and premiums being offered are moving up and down wildly.

A year ago, consumers were being offered discounts as much as 90 basis points below prime, meaning those people who took it are now borrowing at 1.35% based on the current prime rate of 2.25%.  When credit markets tanked a year ago, variable products were being sold at 100 basis points above prime.  Credit markets have calmed since.  Bank of Montreal announced a week ago that its variable rate was down to 2.25%, with no discount or premium.

The Bank of Canada may have pledged (conditionally) to not touch the rate until next June, but consumers getting into variable rate products are facing teh risk that the discounts they get today will look pretty ugly in a few months.  Worse yet, the variable products being sold by the banks are generally closed mortgages, so they cannot be paid off immediately without a penalty.  An open mortgage can be paid off at any time but you have to pay a higher rate for the privilege.

With such confusion in the marketplace, these days even Prof. Milevsky is leaning somewhat in favour of the fie-year closed fixed-rate mortgage.  On a discounted basis, some lenders are offering rates as low as 3.69%.

“At some point, people have to ask themselves if they can afford the fact that eventually these things are goin to go up, whether its in one year, two years or five years,” he says.

Mortgage DEFAULT Insurance

Mortgage Default Insurance is mandatory for any mortgage over 80% loan to value in Canada.

There are currently three Mortgage Insurers in the Canadian Market allowing Canadians the dream of Home Ownership with as little as zero down.

• CMHC – Government owned and run
• Genworth – American owned and run
• AIG – American owned and run

Mortgage insurance is NOT the same as Mortgage LIFE Insurance.

There are many different products that are common among these insurers, as well as some that are unique to each.  Although the general rule of thumb with insured mortgages is when your mortgage is high ratio – 20% or less down, some insurers will still insure the mortgage if you need or want to participate in a specific insurer program.  Typically the premium for these situation are 1%.

Some commonly used programs offered by the insurer are:

• 5% Free Down Payment Program
• Flex Down
• Purchase and Refinance high ratio mortgages

Mortgage Default Insurance Premiums are as follows:

Should I even start?  This is a huge topic of controversy among Canadians right now between those of us with industry knowledge and experience and even those who don’t.

Here’s my TAKE on it, I do not present this with any predictions or claim for it to be fact.

This is how I advise my clients when they ask me – “Should I go variable or fixed?”

First, yes, the Bank of Canada conditionally agreed to keep the key over night rate at the current rate until spring 2010.  I say conditional, because they have reserved the right to change it at any time..

Second, Helmut Pastrick, chief economist with Central 1, has indicated to CBC in October that the Bank of Canada is anxious to move away from low rates.  He predicts that the bank will likely raise rates by half a percentage point at a time perhaps three times through the fall to spring from 2010 – 2011.  “That would allow them some room to cut rates should the economic recovery falter.”  With this information, it makes me uncomfortable to advise a variable rate, especially when the 5 and 7 year fixed rates are so low.  Why not lock into a nice low rate that won’t be subject to uncertainty during these times?  No one can accurately predict the future and with this type of economic uncertainty, wouldn’t it be nice to know that your mortgage payment is not going to be affected by it?

I recently had a discussion with a young man in Fort McMurray who was buying his first home.  He was pre-approved for many months prior to finally finding a condo and making an offer.  When it came time to do the financing, he got a rate of 4.34% for a five year fixed.  He sent me an email a few days later, saying he was talking to his friend and asked me why I didn’t get him the 2.2% 5 year variable that was available at the time.  I explained to him that he indicated initially he was only interested in a five year fixed, which is what his pre-approval was based on.  I then proceeded to explain how a variable works, the risks involved and what I would suggest given the current economic environment.  He responded later in another email indicating he went to another mortgage broker in Fort Mac that said the opposite.  This mortgage broker said that the variable was the way to go and that he would save $52,000 the first year alone in interest.  He also said that he questioned whose interests I was really looking our for, his or mine.

Well.  If I was not looking out for his interests, I would not have explained the risks associated with the product, I would simply have switched him over to that product.  The finders fees we receive for either product are identical, so there was no further benefit for me to place him in one verses the other.  As far as saving $52,000 in interest the first year… well, that is not even remotely possible.  I feel we, as professional’s have the responsibility to advise our clients on the risks associated with a variable rate right now.  Yes, 2% is a lovely rate.  The problem is, however, if prime goes up to say, 5% and you have a P.-10% rate, your rate is now 4.90%.  That is more than you would have been paying if you locked into a five year rate initially.  Additionally, yes, you can lock in at any time.  Typically when the variable rates are going up, so are the bond yields, making the fixed rates go up too.  So even though “YAY” you can lock in, you are still not locking into the fixed rate you COULD have, initially.

Again, this is simply my take on the Great Rate Debate….