Bank of Canada Cuts Key Interest Rate by 50bps

The Bank of Canada announced this morning that it would cut its key policy rate by half a percentage point to its lowest level ever.

Variable mortgages offer savings Whether the lower policy rate from the Bank of Canada will translate to lower interest rates for some borrowers remains to be seen, but variable-rate mortgages are still a cheaper option than they were a year ago.

As of January 19, 2009, a competitive variable rate mortgage could be obtained at the chartered bank prime rate of 3.50 per cent plus 0.6 per cent (a rate of 4.10 per cent). In January 2008 before the credit crisis got traction, the competitive rate for a new variable rate mortgage was prime (6.00 per cent) minus 0.6 per cent (5.40 per cent). On a $200,000 mortgage with a traditional 25-year amortization, that rate differential means an advantage of $146.26 for each monthly payment, adding up to $1,755.12 in annual savings.

Fixed-rate pricing on downward trend Pricing for fixed rate mortgages is higher than it normally would be, as lenders are accounting for higher perceived risk in the financial services industry. The spread between a five-year Government of Canada Bond (1.58 per cent) and a competitive fixed rate mortgage rate (4.79 per cent) is now 3.21 per cent – which is much higher than what we have seen over the last few years.

However, the pricing trend for fixed rate mortgages has been downward lately, which is good news for consumers.

Getting the best of both worlds The good news is that many of these variable-rate mortgages have liberal conversion privileges that allow borrowers to switch to another mortgage type, and lock-in to a fixed rate mortgage when they’re ready, depending on what works best for them.

Working with an Invis mortgage professional can help you make sense of the options available and find the best mortgage for you.

“On the heels of 2008’s credit market crunch, the headlines have seemed grim, but in turbulent financial times it is important for people with mortgages, or applying for a mortgage, to understand that good options are still out there,” says Rob Hafer, regional manager with Invis. “Based on today’s rate environment and your own financial situation that may mean considering a variety of mortgage strategies before you decide.”

Getting a Mortgage After Divorce

If you find yourself having to make a fresh start in the wake of a separation or divorce, it helps to be aware of the unique challenges you may face in acquiring a mortgage. Most importantly, after any property settlement, you will have to qualify for a mortgage with your own income, salary plus any alimony or child support you may receive. If you pay alimony or child support, this obligation is factored into your ability to make mortgage payments.

An Mortgage Direct2u Invis mortgage professional can guide you on a range of home financing issues facing those going through a separation or divorce, including:
• maintaining your credit rating
• paying out an existing mortgage
• buying out your spouse's equity
• consolidating debts
• obtaining funds for divorce expenses
• purchasing a new home

With access to over 60 lenders, an Mortgage Direct2u Invis mortgage professional can shop the market to pinpoint the mortgage product that best suits your individual needs in changed circumstances. He or she will take the time to get to know your new financial situation and will offer confidential, unbiased advice.

Debt Consolidation

Strategies to Pay Off Holiday Purchases

With holiday purchases – a lot of them put on plastic – soon coming due, many Canadians are sorting through bills and realizing that they have too much high-interest credit card debt. This new year, consider taking charge of borrowing costs by paying off higher-interest consumer debt with funds secured through mortgage financing.

A common mortgage option for consumers which offers flexibility is a Home Equity Line of Credit – or HELOC – which allows you withdraw funds as needed for a set period. The real benefit is that you can put a HELOC in place for a one-time cost and charge up then pay down the line of credit many times over, never needing to re-qualify. Your payments fluctuate depending on current interest rates and the outstanding balance over the month. A HELOC can be convenient for paying off higher interest debts, as you withdraw and pay (relatively lower) interest on only what you need.

Mortgage refinancing also offers a plan to reduce your debt – after the agreed upon amortization period, your balance is zero. With HELOCs, after the set draw period, there may be an amortization period during which any outstanding amount is repaid. In contrast, with revolving credit – such as credit cards – you may be paying a lot in interest without ever reducing the principal.

You may be surprised to learn how much you can save with a debt consolidation strategy. An Mortgage Direct2u Invis mortgage professional can offer expert advice on smart ways to manage your debt. Access your options today!