Time to lock in your variable rate mortgage

As a mortgage broker, I am constantly getting negative comments from clients when I tell them the fixed rate for a 5 year term is say 5.75%...... why so high ! they say.

My, we all have a short memory. It's amazing how selective our memory is.

Looking back over the years, it's not too difficult to see that this exceptionally low interest period was a "blip" and could not go on forever.

No one can see into the future, and maybe interest rates will drop later in the year.... but read the article below to get a very well respected economist's view on where rates are going to go

Please feel free to call me if you want to discuss what this might mean to you individually

Low-rate ride is finished, so lock in your mortgage

ROB CARRICK825 words05/06/2007
The Globe and MailB12English2007
CTVglobemedia Publishing Inc. All Rights Reserved.

The golden age of variable-rate mortgages is over. They're still a defensible choice if you're buying a home or renewing your mortgage, but the variable-rate option isn't the no-brainer choice it was a few years ago. In fact, fixed-rate, five-year mortgages look like the better choice right now.
Blasphemy, you say? Fair enough, given that the benefits of variable-rate mortgages have been talked up a lot in this column over the years. Priced off the prime rate used by banks for their best customers, variable-rate mortgages allow you to ride interest rates ups and downs over the years. In doing so, history has shown that you would have almost certainly paid less than if you locked into a five-year mortgage (that's the term chosen by almost everyone who goes with a fixed rate).
Benjamin Tal, a senior economist at CIBC World Markets and consumer credit expert, believes you'll continue to save on interest costs if you go with a variable-rate mortgage today instead of a fixed-rate loan. But the amount of the savings will be negligible, so much so that the worry-free comfort of the fixed-rate mortgage becomes a good value.
“Locking in now would not be a mistake,” Mr. Tal said. “In fact, it could be a good thing.” It's not just home buyers and people renewing mortgages who face the question of whether to go with a variable rate or a fixed rate. Large numbers of people are now working their way through variable-rate mortgages they set up a few years ago, and they're wondering about whether to use an escape clause that lets them jump into a fixed-rate mortgage.
To understand the appeal of the fixed-rate option, you have to look at how rates vary for short through long terms. Rates traditionally move higher and higher for longer terms, but today short rates are the loftiest. The net result for borrowers is near parity for short-term rates and longer-term rates.
Variable-rate mortgages soared in popularity earlier this decade because short-term rates were much cheaper than long-term rates, and they were falling. Choosing a five-year mortgage back then was almost like buying a useless insurance policy against interest rate shocks where the premiums were in the form of much higher interest costs. Today, you can get that insurance at a much lower cost.
The posted five-year mortgage rate at the big banks hit 7.14 per cent last week, the highest since the summer of 2001. That's far from the last word on five-year rates, however. A couple of major banks offered discounted five-year mortgages at 6.08 per cent yesterday, and some credit unions and alternative banks were as low as 5.3 to 5.5 per cent.
Now, compare these rates to a variable-rate mortgage, which is currently priced off a 6-per-cent prime rate at all lenders. Discounts on this type of mortgage range from 0.75 to 0.9 of a percentage point, so your true rate would be as low as 5.1 per cent. Advantage, variable-rate mortgage.
For now, that is. Economists at RBC Dominion Securities said they expect rate increases this year and next that would push up the prime to 7 per cent. At TD Economics, they see increases that would increase the prime to 6.5 per cent. Not everyone agrees rates will rise, but if they do, it could drive up the discounted cost of a variable-rate mortgage above 6 per cent.
The benefit of going with a variable-rate mortgage is that you're poised to benefit should rates decline after whatever increases lie ahead. The question is, what are the prospects for rates to decline any time soon?
Many economists would say they're minimal because of the need to keep inflation under control. Mr. Tal believes there's a case to be made for the rate that influences the prime to be half a percentage point higher than it is now for the next few years. After that, he said, it's possible that inflation could become a greater challenge than it is now and thus trigger more interest rate increases.
Then again, there could be a major terrorist attack, or the Chinese economy could stumble and send a shockwave around the world.
Global interest rates would fall and people with variable-rate mortgages would benefit. Today, inflation is a serious issue for the first time in years and interest rate increases are widely expected. Sounds like a good time to pay what could very well be a nominal extra amount for the protection of a five-year, fixed-rate mortgage.

Bad street name can drive down real estate

Bad street name can drive down real estate
The Leader-Post (Regina)
Fri 11 May 2007
Page: F5
Section: News
Byline: Misty Harris
Column: Market Value
Source: CanWest News Service

Apologies to sticks-and-stones philosophers, but it seems names really can hurt -- at least
when it comes to real estate.
Industry experts report a small but noteworthy negative effect between a badly named
street and the perceived market value of the homes or businesses on it: When identical
properties were simultaneously listed in the same neighbourhood, the dwelling whose
address evoked prestige was likely to fetch a higher price than the one that sounded like a
punchline.
Good news for residents of Country Club Drive in Kingston, Ont. Not so much for those
in nearby Bastard Ward.
"People attach values (to addresses) and pay a premium," explains Murtaza Haider, a
business professor and director of Ryerson University's Institute of Housing and
Mobility.
Haider recently analysed the property values of 300 homes either directly on or within
100 metres of Toronto's posh Bloor Street. Controlling for size, he found that having
Bloor in the physical address added a statistically significant premium to a property's
market worth.
"A street name, I think, carries a certain snob value," says Haider. "When Ryerson
markets its business program, it says 'MBA on Bay.' The reason is that they want to
capture the prestige associated with finance on Bay Street in Canada. But there isn't even
an entrance to the building on Bay Street. You enter from Dundas."
Research by Texas realtors Sylvia and Steve Crossland in 2006 similarly found that
properties in the same subdivision whose addresses had overtly violent names -- among
them Gun Fight, Ammunition and Six Gun -- sold for less than those on neutrally named
streets.
"Developers do spend some money coming up with appealing names, both for their
projects and for the streets within them," says William Strange, a professor of real estate
and urban economics at the University of Toronto.
"The branding probably brings them revenues, and the only way that can happen is for
there to be an impact of street name on property value."
Some of Canada's most bizarrely named streets include Dingle Bingle Hill Terrace in
Nanaimo, B.C., rue Schmuck in Shefford, Que., and Ragged Ass Road in Yellowknife,
N.W.T.
In Ontario's Bastard Ward, situated in the Township of Rideau Lakes, Mayor Ron
Holman recalls a movement to have the area's provocative name changed. The rebranding
effort resulted in an uprising among the locals, hundreds of whom took to wearing
buttons that read, "I'm a proud Bastard."
"When the final tally came in, it indicated that 90 per cent of residents were in favour of
the title Bastard remaining," says Holman, laughing. "I think the name is more of an
attraction than anything."
Americans seem to have the same idea, happily setting up house on Bucket of Blood
Street in Holbrook, Ariz., Black Weiner Drive in Savannah, Ga., Skunk's Misery Road in
Long Island, N.Y., Schmuck Road in Evansville, Ind., Poverty Plains Road in Warner,
N.H., Divorce Court in Pittston, Pa., and Shades of Death Road in Warren County, N.J.
Edition: Final
Story Type: Business; Column
Length: 494 words

Banks Boost Mortgage Rates

TORONTO - Canada's major banks are raising their posted mortgage rates by up to one third of a point in anticipation of a rate hike by the country's central bank.

After the Bank of Canada hinted an increase in its 4.25 per cent overnight rate could be in the pipeline as soon as July, RBC Royal Bank (TSX:RY), CIBC, (TSX:CM), Bank of Montreal (TSX: BMO) and TD Canada Trust (TSX:TD) all raised their rates effective Wednesday. The rate hikes also reflect the rising cost of borrowing in the bond market, where banks finance their mortgage lending.

Source: Edmonton Journal

Toronto Housing Market Reaches New Heights!

June 5, 2007 -- With an astonishing 11,146 sales in May, the Toronto Real Estate market put in its best performance since records have been kept, President Dorothy Mason announced today. "The Toronto Real Estate Board has been tracking the local housing market for over forty years, and there has never been a month that even approaches this level of activity," Ms. Mason stated. "May was up 18 per cent over April, our previous record month (9,452 sales), and also up 18 per cent over May of 2006 (9,434 sales), which now ranks as the third highest sales total recorded."

Ms. Mason further noted that, according to statistics compiled by the Canadian Real Estate Association, every home sale generates about $27,000 in economic activity (for renovations, furniture purchases, and so forth) over and above direct expenditures involved in the transaction. "This means that Realtors® and their clients have contributed over $300 million to the local economy in ancillary costs last month alone."

However, while sales sky-rocketed, price increases were restrained, with the average rising a mere five per cent to $382,787 from the $365,537 recorded during May of 2006.

Breaking down the total, 4,175 sales were reported in TREB’s 28 West districts and averaged $356,836; 2,038 sales were reported in the 14 Central districts and averaged $506,172; 2,323 sales were reported in the 23 North districts and averaged $408,391; and 2,610 sales were reported in TREB’s 21 East districts and averaged $305,168.

Source: Toronto Real Estate Board