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  #21  
Old 2008-09-29, 11:31 AM
MortgageGuy MortgageGuy is offline
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Default Great article to explain rising rates

See article below that is very informative from the Toronto Star...
Dan

BUSINESS REPORTER

Canadians received more proof yesterday of the global credit crunch hitting home after this country's biggest banks began hiking their residential mortgage rates in an effort to recoup higher funding costs from their customers.

The interest rate increases follow days of forewarning by financial experts, who predicted Canadians would feel the pinch of the financial crisis through higher borrowing costs on consumer loans.

TD Canada Trust was the first of the big domestic lenders to increase mortgage rates, moving by 0.35 of a percentage point on fixed-rate loans with terms of three, four and five years.

Effective today, TD's posted rate on its benchmark five-year closed mortgage is 7.2 per cent, while a three-year closed term rises by the same amount to 7.05 per cent.

The bank, however, also has a "special offer" for a five-year fixed rate of 6.14 per cent.

Meanwhile, its "closed variable interest rate mortgage" also increased by more than a third of a point, to 4.75 per cent.

"The reason it has gone up is because we've been holding on – all of the industry has been holding on – trying to not pass the cost to the customer, but we can't do it any more," said Joan Dal Bianco, vice-president of real estate secured lending for TD Canada Trust.

Dal Bianco said all mortgages – but variable rate loans in particular – have become money losers "because of the cost of funds due to all the challenges that are going on in the world right now."

Banks are grappling with higher funding costs in the wake of last year's subprime mortgage market meltdown in the United States. With the ensuing global credit crunch now in its second year, banks remain wary of lending to each other.

The bond market has also been in flux ever since the United States announced a $700 billion (U.S.) bailout plan for American banks. Experts say the plan, while necessary, would likely stoke inflation. That, in turn, has made it more expensive for banks to finance residential mortgages.

The interest rates on mortgages and other short-term borrowing are set based on the price of bonds. With lower demand for bonds and fears of inflation, rates have to rise to lure investors.

Later in the day, Bank of Montreal and Laurentian Bank raised their own five-year, fixed rate mortgages by 0.35 of a point to 7.2 per cent. Those five-year terms are traditionally the most popular mortgage choice amongst Canadians.

Also yesterday, Royal Bank of Canada set aside $35 million (Canadian) to protect clients who invested in a frozen U.S. money-market mutual fund. RBC's U.S. wealth-management unit last week began requesting redemptions for clients of its Ferris, Baker Watts Inc. unit who invested in the Reserve Primary Fund.

Reserve Primary on Sept. 16 became the first money-market mutual fund in 14 years to fall below $1 (U.S.) a share, an event known as "breaking the buck," because of losses on debt issued by bankrupt Lehman Brothers Holdings Inc.

RBC will cover losses of as much as three cents a share if clients receive less than $1 a share when the fund is liquidated, the bank said in a statement.

With files from the Star's wire services

Toronto Star



Quote:
Originally Posted by mato0107 View Post
Morgage guy

WOuld you still stay with the variable mortgage rate with all the stuff that is happening in US?
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  #22  
Old 2008-09-29, 05:37 PM
MortgageGuy MortgageGuy is offline
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Default Be cautious with variable rates

Just a reminder to all those who have a protected variable rate for a house purchase in the future. As you may have heard the cost of funds has increased significantly for the banks on short term money(your variable rate mortgage),
thus the discounts being given today off bank prime have dropped to anywhere from prime less .50% to none at all. Likewise long term rates (ie 5 yr fixed) have been increasing at most banks. BE SURE THAT IF YOU HAVE A VARIABLE RATE LOCKED IN THAT YOU CHECK WITH YOUR BANKER THAT YOU ALSO HAVE A FIXED RATE ALSO LOCKED IN. IT IS ANYONES GUESS WHERE RATES RATES WILL GO IN THE NEAR FUTURE. A Prime less .90% discount looks very attractive today, but watch that long term rates do not go up around you with no guarantee. The lesson this week is that just because bank prime is not increasing doesn't mean that fixed rate mortgage are not going up.
Dan
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
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  #23  
Old 2008-09-29, 05:44 PM
MortgageGuy MortgageGuy is offline
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Default Not forgotten your question re SMITH Maneuver

I will write a response to the Smith Maneuver question in the evening when I'm not at work. Have not done one in awhile and have to check the last one I did. I rarely use this mortgage product(it is hardly ever requested).
Dan

Quote:
Originally Posted by canabiz View Post
Hi Dan, your thoughts on the Smith Manoeuvre if you have had exposure to it ? and from a mortgage specialist perspective ?

I know it all depends on individual financial situation but generally speaking do the pros out-weight the cons ?
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Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
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  #24  
Old 2008-09-29, 06:46 PM
sarcol27 sarcol27 is offline
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Default

Hi,
Thank you for all the useful information you provide!!

I did want to clarify something with you. I have that 5.6 percent 5-year guarantee for a 24 month closing. You mentioned Design Dollars or Bank Dollars would lock me into that mortgage. I am not sure if you are talking about the Design Centre bonus that the builder is giving or are you referring to a bonus offered by the bank. I am getting a Design Centre Bonus with Tamarack, but as far as I know it doesn't have anything to do with the Bank. Is that what you were referring to?

Also, I have a variable mortgage rate with my current mortgage of prime minus a half. Should I be contacting my bank now and ask for a fixed rate guarantee. I didn't know that was something they did. Or, should I be switching to a fixed now although the rates are higher now than variable?

Any info. is much appreciated!
Thanks!
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  #25  
Old 2008-09-30, 03:52 PM
wOOge wOOge is offline
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Default

Great advice here —*thank you!

I have a question:

We're looking at a 6 month 4% fixed convertible mortgage that let's us choose any product after the 6 month term is up. I like this option because it let's us "wait out" some of the market turmoil before we decided to go fixed or variable.

Do you think this is a wise choice, or am I just procrastinating?
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  #26  
Old 2008-10-01, 12:32 AM
MortgageGuy MortgageGuy is offline
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Default

If the design center $'s are because you have taken the builders banks mortgage, then you will tie yourself to the mortgage.
I will assume your existing mortgage, and the rate guarantee for the new mortgage are from different banks. It is likely that only your builders bank is holding rates for that length of time. 5.60% is a great rate for 24 month rate guarantee. Be very happy. I can only remind you to check with me 4 to 6 months prior to a closing date to be sure you are being offered a competitive rate from your builders bank.

Quote:
Originally Posted by sarcol27 View Post
Hi,
Thank you for all the useful information you provide!!

I did want to clarify something with you. I have that 5.6 percent 5-year guarantee for a 24 month closing. You mentioned Design Dollars or Bank Dollars would lock me into that mortgage. I am not sure if you are talking about the Design Centre bonus that the builder is giving or are you referring to a bonus offered by the bank. I am getting a Design Centre Bonus with Tamarack, but as far as I know it doesn't have anything to do with the Bank. Is that what you were referring to?
Dan

Also, I have a variable mortgage rate with my current mortgage of prime minus a half. Should I be contacting my bank now and ask for a fixed rate guarantee. I didn't know that was something they did. Or, should I be switching to a fixed now although the rates are higher now than variable?

Any info. is much appreciated!
Thanks!
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
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  #27  
Old 2008-10-01, 12:44 AM
MortgageGuy MortgageGuy is offline
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Default

If you are taking a 6 month term, meaning you can actually leave that lender after the 6 months is up, or stay with them, that may be an attractive alternative. But with the same risks as going variable, mortgage rates can go up around you if you are not careful. Fixed rates have gone up effective today. My best 5 yr that was 5.09% yesterday, is now 5.40% today. An example of how quickly rates can change.
Dan

Quote:
Originally Posted by wOOge View Post
Great advice here —*thank you!

I have a question:

We're looking at a 6 month 4% fixed convertible mortgage that let's us choose any product after the 6 month term is up. I like this option because it let's us "wait out" some of the market turmoil before we decided to go fixed or variable.

Do you think this is a wise choice, or am I just procrastinating?
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
Reply With Quote
  #28  
Old 2008-10-01, 11:34 AM
wOOge wOOge is offline
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Default

Quote:
Originally Posted by MortgageGuy View Post
If you are taking a 6 month term, meaning you can actually leave that lender after the 6 months is up, or stay with them, that may be an attractive alternative. But with the same risks as going variable, mortgage rates can go up around you if you are not careful. Fixed rates have gone up effective today. My best 5 yr that was 5.09% yesterday, is now 5.40% today. An example of how quickly rates can change.
Dan

Sound advice —*thanks!
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Adrian
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  #29  
Old 2008-10-01, 06:18 PM
sarcol27 sarcol27 is offline
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Default

Again, thank you!

The Design $ is for anything buying a home from them, so not tied to a bank from what I understand.
I feel it is a good rate to, but glad I have that confirmed from a person with knowledge of the industry.

Now I have a new question....I am REALLY nervous about the housing market in light of this week's worsening economy in US and here. My fear is that we have bought at a high price and will be selling in 18 months when prices might potentially go down. Do you have any guesses at to how much of a price drop we might be looking at in Spring 2010? We actually have a couple more days before the deal is finalized and I am wondering if we should consider not going through with the purchase. We're in Ottawa. Am I just overreacting??

I do appreciate any insight on this.
Thanks!
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  #30  
Old 2008-10-01, 11:43 PM
MortgageGuy MortgageGuy is offline
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Default house prices

I'm afraid that I am not a realtor, thus can not give professional comments regarding house prices. Maybe ask the realtor on this site.
Having said hat I have just closed on a purchase of a home in the island park area this last feb/2008. I see see the market in my area and there is already a significant lenght of time houses sit on the market today, than when I purchased in Sept of 2007. I certainly feel that house prices are settling and may drop somewhat in the short term. Over the long term, I'm not concerned. Ask an agent that knows the area in which you are purchasing, keeping in mind that you will lose 4 to 51/2% commission on the sale when you sell.
Dan
Quote:
Originally Posted by sarcol27 View Post
Again, thank you!

The Design $ is for anything buying a home from them, so not tied to a bank from what I understand.
I feel it is a good rate to, but glad I have that confirmed from a person with knowledge of the industry.

Now I have a new question....I am REALLY nervous about the housing market in light of this week's worsening economy in US and here. My fear is that we have bought at a high price and will be selling in 18 months when prices might potentially go down. Do you have any guesses at to how much of a price drop we might be looking at in Spring 2010? We actually have a couple more days before the deal is finalized and I am wondering if we should consider not going through with the purchase. We're in Ottawa. Am I just overreacting??

I do appreciate any insight on this.
Thanks!
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
Reply With Quote
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