Time to Lock in your Mortgage?

General Angela Calla 30 Aug

Have you been asking yourself, should I change my mortgage from the variable rate that I have?  Should I change my mortgage at all?  There is a simple answer to all this hysteria about mortgage rates going up. Don’t lock in your rate.

I know it’s almost heresy to have a floating rate in a mortgage world dictated by Finance Minister Jim Flaherty, who thinks nothing about calling up the banks and telling them their rates are too low.

But the reality is that a variable rate mortgage tied to prime can still be had for as little as 2.60% from some major institutions while the comparable five-year fixed closed rate is approximately 3.59%.

The Risk. The Bank of Canada’s key lending rate, which prime is tied to, hasn’t moved in three years and some economists maintain it won’t be moving until 2015.

“It’s a big, big change going from 2.89% to 3.79%,” says Benjamin Tal, deputy chief economist with CIBC World Markets, who expects there to be some rush from consumers to get into the market in the short-term. “There will be more and more people locking in.”

There has been a big jump in mortgage rates to match what has happened with long-term bond yield but it comes down to about 50 basis points. If half a percentage point is going to drive you out of the market, it is time you saved more money to buy a house. The sentiment that ‘the sky is falling (with interest rates) at 4% is not based on any historical reality’

But if you want a low rate and are willing to roll the dice, the variable product is out there.  I would expect it to become that much more enticing over the coming months as the interest rate gap widens.

As the yield curve flattened, it didn’t require much thought to lock in. If a financial institution will give you the same rate for five years at 3% or 2.8% (discounts on prime were lower at one point) to begin with and the chance rates will rise, the risk to save 20 basis points is not worth it.

The market showed that consumers were making the only sane choice. The Canadian Association of Accredited Mortgage Professionals (CAAMP) found in its last survey that fixed rate mortgages were 85% of new origination. That’s well above the historical average.

The narrow gap drove people away from variable rate products as much as government policy. One of Mr. Flaherty’s subtle changes to mortgage rules was to force people to qualify based on the five-year posted rate which is now 5.14%. However, if you secured a fixed rate product for five years or longer you could use the much lower rate on your contract which made it easier for those consumers to qualify and borrow more money.

But the spread is widening and today’s gap is more the historical norm, says York University Prof. Moshe Milevsky. Mr. Milevsky is the usually unnamed author behind a report that says you do better going with variable about 88% of the time. The report was done a few years ago and has not been quoted much in today’s low long-term rate environment.

Look at the premium now. There have always been periods over the past 40 years where this thing widens,” says Mr. Milevsky. “This one of the larger ones because of the steepening of the yield curve. On the short end they are holding the curve down and the Bank of Canada sees no indication they will be raising [the overnight rate]. On the long end you have the bond market. Who is going to win? The Bank of Canada or the bond market? Place your bets.”

Before you step to the betting window consider the cost of locking in. Let’s use a 25-year amortization and a $500,000 mortgage with 2.60% vs. 3.59%. Over five years, the variable rate product would cost you approximately $58,752.99 in interest. The locked in rate would mean approximately $80,943.67 in interest. That’s one expensive insurance policy. ($22,190.68)

“It’s abnormal to have the same rate on variable and fixed. We are going back to normal,” says Prof. Milevsky, who thinks the gap will widen. “Nothing has changed; you have to look at your personal balance sheet [to decide if you can handle the risk].”

The Big Banks are working hard to “scare” people to lock in. The thought is that long-term rates are going to move much further up but on the short-end the thought is that there’s going be more room to discount off of prime.

It’s important to remember that the discount you negotiate off of prime on your variable rate product is what you have to live with for the term of the contract, often five years.

There is a real opportunity if you are disciplined to take advantage of a variable rate, and with proactive mortgage management, you get to understand changes in the mortgage market real time. With a proactive plan and our inflation hedge strategy, which is designed to protect you from future payment shock, you get a strategy that protects your equity and allows you to build a better future. This is where The Angela Calla Mortgage Team is here to help you.

Feel free to call or email us to discuss your own mortgage or the mortgage needs of someone you care about!

Angela Calla, AMP, Dominion Lending Centres 604-802-3983 callateam@dominionlending.ca

Goverment finally addressing credit card companies?

General Angela Calla 22 Aug

When the first round of changes came regarding the mortgage market in the last few years, Angela Calla was quoted in the Vancouver Sun as the changes being misguided as it’s the credit card companies that need intervention in regulation. Years later its great to see this being noted!
Courtesy of Mortgage Broker News
Mortgage brokers’ prayers may finally have been answered – Finance Minister Jim Flaherty is raising the possibility that he will attack the credit card problem from a regulatory front.
This move by Flaherty comes on the heels of a major case brought against Visa Canada and MasterCard that was dismissed by the Competition Tribunal – a decision that came with the suggestion a “proper solution” will have to come from the government.
“I will be carefully reviewing the Competition Tribunal’s decision and also monitoring any potential appeal,” Flaherty told reporters after the anti-trust body rejected the Competition Bureau’s arguments against the credit card giants. The bureau had alleged that they were imposing undue fees on retailers.
Brokers are all-too familiar with Ottawa’s intervention in the mortgage sector over the past few years through ever-tightening regulations. Requests to ease or reverse previous decisions from associations like CAAMP have slowed that pace. Nor has the government directly answered criticism levelled at the major banks about a “laissez-faire attitude” towards consumer credit cards. 
“Recognizing the importance of this issue to all involved,” says Flaherty, “I have also asked that a special meeting be convened of the government’s FinPay committee – a consultative committee on payments issues that includes representatives from the credit card industry, small business, retailers, consumers, and many more – to discuss this matter and next steps.”
Brokers have repeatedly cried foul that the mortgage and housing sector were being unfairly targeted by the finance minister – while personal debt continued to spiral upwards with seemingly no regulation on how many cards a consumer could have, or how high the credit limit.
Any intervention being considered by Flaherty is likely to stop short of addressing those concerns.
Although not speaking directly on the ruling, the minister issued a statement that “as job creators and drivers of economic growth, Canada’s small business owners and entrepreneurs – along with consumers – deserve clear information and fair and transparent rules on the type of payment system they use.”
End of article
Questions on your Mortgage? Contact The Angela Calla Mortgage Team 604-802-3983 callateam@dominionlending.ca

Backing out of your mortgage early?

General Angela Calla 22 Aug

Backing out of a mortgage early? You probably won’t be able to avoid fees entirely, but you can limit them. A rise in interest rates appears imminent, so folks with big mortgages may want to lock in the current low rates now! But, for some, that means getting out of an existing mortgage early.

Trying to discharge your mortgage early comes with a cost. After all, banks are in the business of making money, right? The sad truth is banks can be very greedy when it comes to calculating the interest penalty on a mortgage you’re trying to renew early.

 Once upon a time, the standard in the industry was to charge a three-month interest penalty for early discharges. CMHC paved the road for that because they had it written into their policy. But when they removed it back in 1999, they’ve created a feeding frenzy among banks who now want to charge what’s called the Interest Rate Differential: a calculation they can do any way they want because there’s no uniform system among lenders or regulation by the Bank Act.


Click here to read more from MoneySense.


The Angela Calla Mortgage Team looks to place your mortgage first (provided you qualify) with a lender that does not have posted rates to minimize any breaking early costs to help you optimize the market to your best ability.

Questions on your mortgage? Contact The Angela Calla Mortgage Team directly 604-802-3983 callateam@dominionlending.ca

Goverment Mortgage Policy Changes Done for now…

General Angela Calla 22 Aug

Finance Minister Jim Flaherty said he isn’t planning new measures to restrain the country’s housing market because his past four rounds of action have already worked to avoid a bubble.


“So far, I’m satisfied that we have a balance in the real estate sector,” Flaherty told reporters in Wakefield, Quebec, at the start of a policy retreat with business leaders. “There are some bumps along the road in Toronto and Vancouver, in particular in the condo markets, but overall, I’m satisfied.”


Flaherty has warned consumers to avoid mortgages that could become unaffordable when borrowing costs rise, after Canadians took on record household debts relative to disposable income.


Flaherty said that “we have been watching the condo market and the housing market very closely for at least five years.” He also said that he does have “contingency plans” he can use if the need arises. 


Click here for full details from the Financial Post.


Questions on your mortgage? Contact The Angela Calla Mortgage Team 604-802-3983 callateam@dominionlending.ca



Mortgage Changes-Angela Calla on Global TV

General Angela Calla 20 Aug

 Following the recent announcement by CMHC to impose limits on the amount of government-guaranteed mortgage-backed securities (MBS) that a lender can sell to investors or hold on its balance sheet, I joined Global TV’s morning news to discuss what this means to borrowers in a brief interview that can be watched here:


Top Points Covered:

1. Reasons for the new limits

2. How the lenders will adapt

3. Effect on borrowers

4. Best advice for dealing with rising rates

In this ever-changing mortgage market, The Angela Calla Mortgage Team cares about helping you and those you care most about. We want to ensure you benefit from our experience and proactive approach to market changes. Please contact us directly with any questions or to see how we may be able to help you.


Angela Calla, AMP

Dominion Lending Centres-Angela Calla

Host of ” The Mortgage Show” Saturdays @ 7pm on CKNW AM980

Phone: 604-802-3983



Globe & Mail Special Report on Mortgages with Angela Calla

General Angela Calla 16 Aug

The prospect of loading up with debt to buy a home is daunting to most Canadians – and doubly so for first timers. Which is why it’s crucial to have an expert to depend on for good mortgage advice. While most lenders have well-trained in-house consultants to support their clients through the application and approval process, many borrowers turn to independent mortgage brokers to gain a broader view of their options before committing to a specific lender.

The Canadian Association of Accredited Mortgage Professionals (CAAMP) points out that mortgage brokers work for both the borrower and the lender. Brokers are paid a commission by the lender and act as a bridge between the two until an agreement is concluded.

In 2004, CAAMP launched the Accredited Mortgage Professional (AMP) designation for Canada’s mortgage brokers as part of its ongoing commitment to increase the level of professionalism in the industry. One of the first pieces of advice that Angela Calla, an AMP at Dominion Lending Centres, gives new clients is to assess the credentials of mortgage lenders in the same way they would evaluate an investment adviser. “Let’s say you’re going to get a mortgage for $300,000. Approach it as if you were going to invest $300,000,” she says… Read the full article HERE.

Contact The Angela Calla Mortgage Team 604-802-3983 callateam@dominionlending.ca 

4 tips of financial advice reconsidered

General Angela Calla 15 Aug

Some financial advice is so oft-repeated that everyone takes it for granted: You shouldn’t bring debt into retirement. Debit cards are safer than credit cards. Older folks should invest more conservatively. As they used to say on Seinfeld: yadda, yadda, yadda.

The problem is a lot of that is bad advice. At best, it fit a bygone era; at worst, it was never right and is dangerous.


Click here for a list of favourite financial chestnuts courtesy of the Globe and Mail.


Questions on the right mortgage for you?

Contact The Angela Calla Mortgage Team

callateam@dominionlending.ca 604-802-3983


Protect yourself against 6 top real estate scams

General Angela Calla 15 Aug

Fraud and investment scams abound at all levels of the real estate market – whether it be a contractor who charges hundreds of dollars for work not done to an “investment agent” who embezzles hundreds of millions.

 Protecting yourself can require a measure of vigilance and legwork, but it can also come down to exercising skepticism and common sense.


Click here for the top six real estate scams and how to avoid them from the Globe and Mail.


Have questions on a mortgage?

The Angela Calla Mortgage Team is here to help

callateam@dominionlending.ca 604-802-3983