Home Trust releases short-term variable products

[Source - mortgagebrokernews.ca]
Following last week's news that Street Capital introduced two new short-term variable mortgages, Home Trust announced the launch of one-year and three-year term variable-rate products.

"We've noticed there has been an increased demand for shorter-term mortgages because some people think that rates have not bottomed out," said Armando Diseri, vice-president of mortgage lending for Home Trust's Accelerator program. "In order to satisfy this demand and give our brokers and consumer more options, we felt introducing the one-year and three-year variable-rate mortgage was the sensible thing to do."

The products are offered through Home Trust's prime-focused Accelerator program. The features and guidelines are the same as its five-year variable-rate Accelerator product, including a prepayment penalty.Home Trust will announce its 2009 fourth-quarter financial results on Monday.

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To get the latest best mortgage rates, visit my website: www.gregbarrow.ca

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Variables Falling to Prime + .60%

[Source - Canadian Mortgage Trends.com]

Prime + .60% is becoming the new norm for closed variable-rate mortgages. Prior to last week, prime + 1.00% was the average.

RBC was the first to cut last week to prime + .60%, and now other lenders are following suit. Non-bank lenders are also moving to prime + .60%, which is nice to see. (Given the recent credit crisis, smaller non-bank lenders have had the hardest time finding low-cost sources of lending capital.)

A decent variable-rate mortgage can therefore be found for about 4.60% today OAC. This rate will likely drop further following the Bank of Canada's December 9 interest rate announcement.
Keep in mind, however, that all-in-one-style HELOCs can be had for just 4.00% (with a lot more perks). The qualification criteria are more stringent though, you need 20% down, and the rate is not technically locked to prime like a regular variable-rate mortgage. [Other differences apply as well so talk to a mortgage professional for a complete comparison]

Variable rates have been easing down primarily because funding costs are improving. 30-day bankers' acceptance yields (which are usually correlated with variable-rate funding costs) have fallen from roughly 2.60% at the end of October to 2.15% yesterday.

Big 6 Banks drop prime rate following Bank of Canada

Variable rate mortgage holders will be happy as the major banks reduced prime rate to 4.00% after the Bank of Canada reduced the key lending rate by another 1/4 point yesteraday.

Other lender's who have reduced their prime rates to 4.00% include: Laurentian Bank, Street Capital, Caisse Centrale Desjardins, Dominion Lending White Label, ATB Financial, Merix Financial, and Scotia Express.

If you are interested in purchasing a home soon, or your current mortgage is coming up for renewal and you would like to speak to a professional regarding fixed vs. variable rates, please contact Greg Barrow at gbarrow@dominionlending.ca. You can also try calling 416 807 7123. I would be happy to answer any of your questions.

Mortgage borrowers pushed to lock in

[Source - Garry Marr, Financial Post Published: Wednesday, October 15, 2008]

Canadian banks are trying to convince consumers to lock in their mortgage rates because more than 20% of the home loans they have negotiated have become unprofitable, according to industry sources.

[Source-Andrew Barr, National Post]

The push has come after the banks cut the discount they offered to consumers with variable-rate products tied to the prime lending rate. Two weeks ago a consumer could get a variable rate product at 0.60 percentage points below prime; today it is one percentage point above prime.

"Banks are scaring people and those people are calling us asking whether they should lock in," said Vince Gaetano, a vice-president with Monster Mortgage, a mortgage brokerage firm.

His advice is pretty emphatic. Anybody with a mortgage negotiated in the past two years would be out of their mind to lock in to, say, a five-year term, he said. They would be going from a rate as low as 3.35% to 5.79%. Lines of credit previously negotiated at a rate below prime are also still valid.

Read More: http://www.financialpost.com/story.html?id=880446

TD to raise rates on mortgages, home equity loans

The latest victims of the growing financial crisis could be the standard discount available to consumers on variable mortgages, and home equity loans at prime.

In a move expected to be followed by other banks, all of which have been stung by higher funding costs, TD Canada Trust is raising rates on both types of loans, effective Oct. 7.

Rates on these products will rise to 5.75 per cent, a percentage point above the prime rate. Only last week, TD eliminated the discount on its variable rate mortgages, offering them at the prime rate of 4.75 per cent. During the housing boom of the past several years, consumers could often get their bank to drop the rate by half or even up to a full percentage point.

“While TD Canada Trust has endeavoured to not pass on the increases in rates to its consumers, this change reflects steadily increasing costs of funds in the current economic environment,” the bank said in a statement.

The percentage point increase raises the term interest cost on a $250,000 variable rate mortgage by $12,247.22 over five years, according to Royal Bank of Canada's online mortgage calculator. The difference is based on a 25-year amortization, a variable rate mortgage with a five-year term and bi-weekly payments. On that basis, the bi-weekly payment amount rises to $725.90 from $657.83.

The credit crisis and economic uncertainty have caused banks to stockpile their cash. That's driving up their short-term cost of borrowing from one another, and means margins on variable rate mortgage products are shrinking.

Rates on fixed-term mortgages went up last week too, as banks have passed on fewer of their savings from falling bond yields to consumers to consumers.

“The deterioration of global credit markets is beginning to squeeze the ability of even the strongest of financial institutions to raise longer-term funds, which could limit the provision of longer-term credit in Canada to businesses and households,” federal Finance Minister Jim Flaherty said in a statement Monday.

“Hopefully this isn't a permanent shift, but a short-term reaction to conditions the likes of which we really haven't seen before,” said Gary Siegle, regional manager at mortgage broker Invis.
With a discount, some customers can still get five-year, fixed-rate mortgages at 5.55 per cent, meaning a bi-weekly payment of $707.66 on a $250,000 mortgage amortized over 25 years. This means those looking for peace of mind in the current market turmoil aren't paying a premium to lock in, Mr. Siegle said.

[Source - LORI MCLEOD // Globe and Mail Update // October 6, 2008 at 8:46 PM EDT]