14 May

Why Are Bond Yields Rising? Will Mortgage Rates Follow?

General

Posted by: Angela Calla

Why Are Bond Yields Rising? Will Mortgage Rates Follow?

Bond markets have tanked in the past several weeks, driving yields upward. Hundreds of billions of dollars have been wiped out in global bond markets. Ten-year government bond yields in Canada have risen 50 basis points (bps) in the past month as Treasury yields have jumped 32 bps. The rate increases in sovereign European bonds have been even greater, up roughly 60 bps for core Europe, albeit from extremely low levels. At today’s postings, 10-year Government of Canada bonds (GOCs) yields are at about 1.80% while 10-year Treasuries are at 2.24%.

In contrast, shorter-term yields are little changed. Yields on bonds worldwide coming due in one to three years -- those most tied to interest-rate expectations -- have remained little changed. Basically, fixed-income investors are signaling that they don’t expect central banks to begin hiking rates anytime soon. Indeed, JPMorgan Chase & Co. added to economic pessimism yesterday by revising down its estimate of U.S. Q2 growth to 2% from an earlier 2.5% on the heels of weaker-than-expected retail sales data.

This comes a month before the Fed’s next meeting where policy makers will resume their debate over whether the economy is robust enough to warrant the first interest-rate hike since 2008. I don’t expect the Fed to raise rates in June and even a September rate hike is in question. So why are longer-term bond yields rising?

Bond markets were overbought earlier this year with widespread economic pessimism, especially in Europe, and ongoing deflation fears. In recent weeks, however, oil prices have rebounded with West Texas Intermediate (WTI) crude, the U.S. benchmark, climbing more than $17 a barrel from a six-year low of $43.46 on March 17. WTI is currently hovering around $60.00 a barrel. This rise in oil prices has dissipated fears of widespread deflation.

Euro pessimism has also diminished. After spending the end of last year slashing 2015 growth forecasts for the euro zone, economists are raising estimates again. As recently as February economists were calling for the euro zone to grow 1.1% this year. Now they've raised their median forecast to 1.4%, according to a Bloomberg survey.

Overbought positions have corrected. Data from the Commodity Futures Trading Commission show investors started 2015 with the biggest bet on U.S. government bonds in seven years. By the end of the first quarter, more than half that position was gone.

Will Higher Bond Yields Lead to Higher Mortgage Rates in Canada?

Probably not, at least for variable mortgage rates, even though interest rate spreads at financial institutions have been further squeezed. This has been one of the most competitive spring mortgage markets in years. Fixed mortgage rates could rise roughly 30 basis points if bond yields rise further. But today’s release of negative producer prices in the U.S. and disappointing retail sales suggest that further rate hikes will be muted.

The best mortgage plan is one that is developed by assessing your goals and life stage. The Angela Calla Mortgage Team will help you personally call us at 604-802-3983 or email callateam@dominionlending.ca
14 May

Bargain-basement mortgage rate may not be what you want

General

Posted by: Angela Calla

As a mortgage professional, I know that there is more to the perfect mortgage than a low rate. It seems the Toronto Star has also figured it out in their article “Bargain-basement mortgage rate may not be what you want” and they correctly point out, brokers can help consumers make an informed choice.

“Brokers say the push for low rates is not a bad thing, but it has led to some confusion. While mortgage contracts used to be fairly standardized, many of them now contain various conditions and clauses, and in some cases it’s hard for consumers to decipher the difference between various products.”

Questions on determining the best mortgage for you and your future? The Angela Calla Mortgage Team is here to help call us at 604-802-3983 or callateam@dominionlending.ca We look forward to helping you.

13 May

Learn about the only 2 tax free investments in Canada

General

Posted by: Angela Calla

Principal Residence home equity & sale proceeds along with TFSA’s are the only tax free investments.

Higher TFSA limits might mean some people will stop overreaching on home purchases as a way to stash cash, knowing they’ve got another tax-free haven for their money.

Click HERE to view the full Financial Post article

Here’s a question for all those people against increasing contribution levels to tax-free savings accounts: What about all the people who never plan to own a home?

 

The best mortgage plan is one that is developed by assessing your goals and life stage. The Angela Calla Mortgage Team will help you personally call us at 604-802-3983 or email callateam@dominionlending.ca

11 May

Ten rules for switching banks because you’re mad about service fee hikes.

General

Posted by: Angela Calla

Ten rules for switching banks because you’re mad about service fee hikes. 

Click HERE to view the full Globe and Mail article

You may be angry about rising service fees, but banks are pros at riding out storms. Ready to toughen up as a customer? Then check out the Personal Finance column’s 10-point Mad as Hell at My Bank Guide

The Angela Calla Mortgage Team gives you clarity on the best mortgage by being transparent, unbiased free mortgage advise with choice. We are here to help you personally with your mortgage at 604-802-3983 or callateam@dominionlending.ca

8 May

3 Steps To Home Ownership

General

Posted by: Angela Calla

Here are 3 easy steps to help you gain clarity and why a subject period with ample time is essential for your new home purchase:

 

  1. Pre –Approval– This is where a credit application, a few income confirmation documents and a discussion about down payment will be required.   This will allow us to see what options you have and to learn about what can be done to position you with the best budget and affordability.  The rate that will be held, provided you get a pre-approval through an AMP, will be one that will be reviewed prior to closing to ensure it is still the best rate offered.   Lenders will often have quick close specials or other offers in place that can only be obtained when you have an accepted purchase offer.  Lenders and Insurers do not verify these special offers in the pre-approval process.
  2. Submission for Conditional Approval–  Once you get an offer accepted, you may be required to provide updated documentation for your income, down payment and credit.   The property you are purchasing will also need to be approved.  This is when the lenders begin their due diligence on all of the items.   They also have the right to request any additional documentation that they deem necessary, depending on the buyer’s qualifications and property details.
  3. File Complete – This is when all the lender’s conditions have been satisfied and no further documentation or information is required.   It is then up to the lawyer/notary and the client to remove their subject to financing.  Remember, if the lender decides to do a final audit of your application prior to completion and if anything has changed with the property, credit, income or down payment, the lender always reserves the right to retract their approval or ask for something further.

 Angela Calla, Mortgage Expert, AMP of the Year in 2009 has been helping British Columbian families save money with the best mortgage strategy for over a decade from her Port Coquitlam office location. She is a regular contributor to national and regional media outlets, and sits on many advisory boards for mortgage lenders & insures. She can be reached directly to help you at 604-802-3983 orcallateam@dominionlending.ca www.angelacalla.ca

6 May

Will a ‘Credit Inquiry’ Lower My Score?

General

Posted by: Angela Calla

Your ‘beacon score’ is an indicator for a lender as to whether a client is likely to make payments on time and in full. Beacon (credit) scores are sometimes referred to as FICO scores, and both names are derived from the credit bureaus that developed the scoring system. Keeping track of this important number is vital. Inquiries to your score are recorded and tracked on the credit report as well. However not all inquiries are created equal.

Credit Inquiries

Each time a creditor (potential lender) checks your credit report, a record is created of this event. There are two types of inquiries, soft and hard. A soft inquiry occurs when you pull your own credit report. (Worth doing on an annual basis and FREE via mail at either Equifax or TransUnion.)

A hard inquiry occurs when submitting loan or credit applications with your written authorisation to inquire. A lender cannot process a hard inquiry without your written permission. There is a process to have non-authorized credit inquiries removed from your report.

Effects on Your Score

Soft inquires do not affect the credit score. Consumers can pull their own credit score as many times as they wish without repercussions. Hard inquires affect the score to varying degrees. Multiple inquires that occur in a 14-day span are (typically) counted as just one inquiry. This helps those who are credit shopping (mortgages, personal loans, etc.) and need to have their credit pulled several times. Multiple inquiries are rarely the reason that people are denied credit, unless the score was borderline to start with.

This said, inquiries for‘good debt’ such as a mortgage have far less impact on one’s credit score than multiple inquires for ‘bad debt’ such as a car loan/lease or debt consolidation.

Who has access?

Only individuals with a specific business purpose can check your score. Creditors, lenders, employers and landlords are some examples of approved business people. The inquiry only appears on the credit report that was checked. For example, if a landlord uses Experian to check the creditworthiness of an applicant, the credit check will only appear on Experian’s report, not TransUnion or Equifax. To limit the number of soft inquires made on your credit report, contact the credit reporting agencies and request that they remove your name from marketing distribution lists.

Conclusion

Having a few inquiries in a period of a couple of weeks while determining whether to work with a specific Mortgage Broker will (in most cases) not have a notable negative impact on one’s credit score. If your score is at or near 600 or 680 then one must be more cautious with inquires as this affects certain mortgage product availability.

Working with an independent Mortgage Broker typically results in one inquiry on your bureau for the use of multiple lender partners of that Broker. Thus more than one rate-hold can be placed with more than one lender without negative credit consequences via a Broker. Yet another great reason to work with a Dominion Lending mortgage professional!

6 May

Thinking of giving your landlord a notice?

General

Posted by: Angela Calla

Thinking of giving your landlord  a notice? Test drive a mortgage payment #callateam read & share

In both rising markets and softer markets there will be many people contemplating making a move to a larger home and with that larger home often comes a larger mortgage. Last month’s newsletter offered technical tips to help prepare for the process of porting your mortgage to a new property, this month we will talk about preparing for a payment increase in advance.

We test drive cars before we buy, we try on clothes before we buy, we even sample wines or beers before we commit. Yet when it comes to taking on a mortgage payment, or increasing our mortgage size, and thus payment, few of us take the new monthly payment around the block. Instead, we are often so caught up on other aspects of the process that 30 days after moving in when that first payment is withdrawn, there can be a degree of post-closing payment shock.

Knowing your numbers in advance is one thing – living with the numbers in advance is another.

Here is a table for quick calculations of the possible increase in mortgage amount you may be considering:

Mortgage Amount

Monthly Payment

$10,000

$45.75

$25,000

$114.37

$50,000

$228.74

$100,000

$457.48

*Based on a 2.69% 5yr fixed rate amortised over 25yrs.

The key to this is not simply doing the math and knowing what you future payments will be for the next 25 years. The key is to actually increase your current mortgage (via your prepayment privleges) by the corresponding amount so that you are making that new payment for a few months prior to taking action. Alternatively, you might choose to withdraw an amount equal to the proposed increase from your account and stash it in a ‘safe‘ place like a savings account, an actual safe, or a parents care. The key is to start replicating that new payment and confirm you can live with it prior to actually taking it on.

The best mortgage plan is one that is developed by assessing your goals and life stage. The Angela Calla Mortgage Team will help you personally call us at 604-802-3983 or email callateam@dominionlending.ca