Interest Rates: Looking Back & Looking Forward
Author:
Ramin Aminian
Date: July 1, 2015
A look back
This August was the fifth anniversary of the beginning of what
could of been considered as a global financial crisis. During this time,
I'm sure you were reading the headlines of the day and wondering how
this would affect your life. Almost out of nowhere, the implications
of terms such as: sub-prime mortgages, ARM teaser rates, derivatives
and swaps, threatened to bring down the global economy. Even now, we
are still dealing with a fragile economy and the aftershocks of this
crisis are still being felt in many parts of the world.
Still the question has to be asked: What was the underlying cause
of this crisis?
Some experts believe the crisis happened based on people’s fears
of higher mortgage rates. Long term fixed rates have previously been
pushed up by rising bond yields. That's likely to continue as long as
the economic outlook remains positive; however, some experts state
that since April 2013, the bond yields have increased 90%,
significantly higher than fixed rates, which have only increased
about 30%.
Canada Remains Strong
For different reasons, including foreign investments and
immigration policies, the real estate market in Canada still remains
strong.
Despite this, it is expected that in the near future Canadians
will most likely be facing a higher fixed rate. Many of the major
banks have already increased their 5 year fixed rates to 3.79%.
People who have the option to use a 2.99% pre-approval rate, are
eager to buy quickly, in order to hang on to this rate.
Furthermore, in a policy announcement by the Bank of Canada, it
was made clear that the Bank's benchmark interest rate, which is
controlling the Prime Rate currently 3% will not likely change
anytime soon. Rate watchers tend to believe that there will not be a
move until this time next year; however, some believe the Bank may
have to wait an additional year after that, possibly well into 2015.
As a result, variable rate mortgages of prime-0.60% may be the way
to go. This is especially true for strong borrowers who easily meet
the income requirements, as applying for a variable rate mortgage
requires qualification based on a 5 year Benchmark Rate currently
sitting at 5.34%.
Alternative Options
For those self-employed borrowers who are interested in some type
of equity program, there are some great equity/stated income programs
for the self-employed,employed, new immigrant, retired and
non-resident people who do not meet the stated income requirements.
As long as you have significant assets and investments, these
programs will allow you to invest in a number of different segments
within Canada’s real estate market.
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Interest Rates Mortgages Fixed Rate Variable Rate
