I have been bad...not posting on my blog since September is just not acceptable. So I have posted a bunch of new posts tonight. We have had a very busy October with the re-launch of our B products, new lending areas, our new One-Charge, and great rates on our Insured/Accelerator products.
So I will try to do new posts every week going forward, time permitting.
Thanks.
Thursday, October 28, 2010
Focus on Refinance
A recent article suggested that more Canadians are choosing to stay in their current home and renovate rather than move to upgrade. In fact, the split between purchase and refinance business this year has shown up to a 50/50 split rather than the typical 25% refinance and 75% purchase split.
What does this mean for you? Tayloring your business to go with trends is a good way to keep deals flowing in the door. Advertise that you are the "refinance expert" and show clients ways that they can tap into their equity to refinance, pay for renovations, and ultimately increase the value of their home.
With great rates, like our 3.49% Rate Promo for 5 year Fixed, your clients can even save money while borrowing more.
What does this mean for you? Tayloring your business to go with trends is a good way to keep deals flowing in the door. Advertise that you are the "refinance expert" and show clients ways that they can tap into their equity to refinance, pay for renovations, and ultimately increase the value of their home.
With great rates, like our 3.49% Rate Promo for 5 year Fixed, your clients can even save money while borrowing more.
Social Networking
Social networking is catching on in a big way. Home Trust now has a Twitter account too. For you as a broker, social networking should be looked at as planning for the future. Currently (according to CMHC) only about 3% of new mortgages are sourced from social networking (Twitter, Facebook, Linkedin, etc.), but you have to look at the current demographic using social networking (approximate ages 18 to 35) as the future mortgage borrowers. These people continue to move into the "home buyer" category and it is important to get them thinking early of you as their first choice when it comes to mortgage financing. So set up a Twitter, Facebook, and/or Linkedin today and get your message out there (www.twitter.com; www.facebook.com; www.linkedin.com).
Bank Rate Forecast
Rate Forecast
Here is a good article from Canadian Mortgage Trends (www.canadianmortgagetrends.com) last week that talks about where Fixed and Variable rates are headed in the near future. This information will help you in your discussions with clients as to what to do today when choosing their mortgage options.
October 12, 2010
Canadian Interest Rate Forecast
After bursting out of the gates earlier this year, the economy is hobbling to the 2010 finish line. With inflation well-contained, interest rate expectations are down across the board since the last rate forecast in August.
Rate Forecasting In Perspective
Major economists are paid well to tell us where interest rates are headed. They have access to every data source, academic study, historical backtest, and analysis tool imaginable. While far from infallible, these forecasts serve as a point of reference when creating amortization models based on future rate assumptions.
Below you'll find a summary of the latest year-end interest rate projections from each of Canada's Big 5 banks. Use them only as a rough guide because rate outlooks have considerable margins of error.
Latest Overnight Rate Forecast
The Bank of Canada's overnight target has a direct impact on variable mortgage rates.
Bank 2010 2011
BMO 1.00 2.25
CIBC 1.00 1.75
RBC 1.00 2.25
Scotia 1.00 1.75
TD 1.00 2.00
Year-end Avg 1.00 2.00
Chg vs Today 0.00 +1.00
(All figures rounded to the nearest 1/4 point increment.)
Latest 5-Year Government Bond Yield Forecast
Government bond yields drive 5-year fixed mortgage rates.
Bank 2010 2011
BMO 2.03 3.05
RBC 2.45 3.50
Scotia 1.85 2.50
TD 2.30 3.10
Year-end Avg 2.16 3.04
Chg vs Today +0.29 +1.17
(CIBC's 5-year bond forecast was not available.)
Variable-Rate Mortgage Forecast
Most analysts now expect the Bank of Canada to remain on the sidelines until 2nd quarter 2011. On average, major economists now predict a 100 basis point increase in the overnight rate over the next 15 months. Their outlooks, if accurate, imply a 4.00% prime rate by December 31, 2011. Prime rate is currently 3.00% and the 10-year average of prime is 4.50%.
Based on a 75-basis-point discount from prime, these forecasts suggests 5-year variable rates in the 3.25% range by year-end 2011.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 117 basis points in the same 15-month timeframe. That would put the 5-year yield at 3.41% by the end of next year. The 10-year average of the five-year yield is 3.93%.
Assuming a typical 120 basis point spread above yields, these forecasts suggest deep-discounted 5-year fixed rates could rise to roughly 4.24% by year-end 2011.
______________________________________________
Things to Note: These forecasts are made by the banks and are subject to frequent change. This data is provided only for general interest. Always discuss your needs and risk tolerance with a mortgage professional before acting on any information you read online.
History has shown that it's near impossible to accurately predict interest rates long-term so use these figures at your own risk. That said, while economist projections are often wrong, they are still one of the better sources of educated opinion on interest rates.
"Chg" = the expected change in rates from today. In other words, Chg is the average forecast minus today's rates. All forecasts are based on the respective year-end.
Not all contributors have published updates since CMT's last rate forecast review. For banks providing mean quarterly overnight rate forecasts, we have averaged their Q4 and Q1 forecasts to estimate year-end figures for 2010 and 2011. Results are rounded to the nearest 1/4 point, in keeping with the Bank of Canada's standard rate setting increments.
Data Sources: BMO, CIBC, RBC, Scotiabank, TD
Here is a good article from Canadian Mortgage Trends (www.canadianmortgagetrends.com) last week that talks about where Fixed and Variable rates are headed in the near future. This information will help you in your discussions with clients as to what to do today when choosing their mortgage options.
October 12, 2010
Canadian Interest Rate Forecast
After bursting out of the gates earlier this year, the economy is hobbling to the 2010 finish line. With inflation well-contained, interest rate expectations are down across the board since the last rate forecast in August.
Rate Forecasting In Perspective
Major economists are paid well to tell us where interest rates are headed. They have access to every data source, academic study, historical backtest, and analysis tool imaginable. While far from infallible, these forecasts serve as a point of reference when creating amortization models based on future rate assumptions.
Below you'll find a summary of the latest year-end interest rate projections from each of Canada's Big 5 banks. Use them only as a rough guide because rate outlooks have considerable margins of error.
Latest Overnight Rate Forecast
The Bank of Canada's overnight target has a direct impact on variable mortgage rates.
Bank 2010 2011
BMO 1.00 2.25
CIBC 1.00 1.75
RBC 1.00 2.25
Scotia 1.00 1.75
TD 1.00 2.00
Year-end Avg 1.00 2.00
Chg vs Today 0.00 +1.00
(All figures rounded to the nearest 1/4 point increment.)
Latest 5-Year Government Bond Yield Forecast
Government bond yields drive 5-year fixed mortgage rates.
Bank 2010 2011
BMO 2.03 3.05
RBC 2.45 3.50
Scotia 1.85 2.50
TD 2.30 3.10
Year-end Avg 2.16 3.04
Chg vs Today +0.29 +1.17
(CIBC's 5-year bond forecast was not available.)
Variable-Rate Mortgage Forecast
Most analysts now expect the Bank of Canada to remain on the sidelines until 2nd quarter 2011. On average, major economists now predict a 100 basis point increase in the overnight rate over the next 15 months. Their outlooks, if accurate, imply a 4.00% prime rate by December 31, 2011. Prime rate is currently 3.00% and the 10-year average of prime is 4.50%.
Based on a 75-basis-point discount from prime, these forecasts suggests 5-year variable rates in the 3.25% range by year-end 2011.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 117 basis points in the same 15-month timeframe. That would put the 5-year yield at 3.41% by the end of next year. The 10-year average of the five-year yield is 3.93%.
Assuming a typical 120 basis point spread above yields, these forecasts suggest deep-discounted 5-year fixed rates could rise to roughly 4.24% by year-end 2011.
______________________________________________
Things to Note: These forecasts are made by the banks and are subject to frequent change. This data is provided only for general interest. Always discuss your needs and risk tolerance with a mortgage professional before acting on any information you read online.
History has shown that it's near impossible to accurately predict interest rates long-term so use these figures at your own risk. That said, while economist projections are often wrong, they are still one of the better sources of educated opinion on interest rates.
"Chg" = the expected change in rates from today. In other words, Chg is the average forecast minus today's rates. All forecasts are based on the respective year-end.
Not all contributors have published updates since CMT's last rate forecast review. For banks providing mean quarterly overnight rate forecasts, we have averaged their Q4 and Q1 forecasts to estimate year-end figures for 2010 and 2011. Results are rounded to the nearest 1/4 point, in keeping with the Bank of Canada's standard rate setting increments.
Data Sources: BMO, CIBC, RBC, Scotiabank, TD
Rate Projections from Ben Tal
Rate Uncertainty & Ben Tal's Call
Choosing between a fixed or variable mortgage can seem like throwing darts with your eyes closed.
Borrowers today are seeing headlines like this:
Economists want BoC to keep raising interest rates
Then they turn the page and see this:
Could the Bank of Canada be forced to cut rates again?
Even the Bank of Canada's Mark Carney isn't too sure of the future.
On CBC yesterday Carney said, "Upside risks are balanced by downside risks...The upside is as likely as the downside."
At a FirstLine Mortgages event yesterday, CIBC economist Benjamin Tal translated that. "What Carney is telling us," Tal said, "is (the Bank of Canada) has no clue what is going to happen."
Tal added:
"The bond market is pricing in inflation below 1.50% for the next ten years." (But he believes "the bond market is mispricing inflation.")
The Bank of Canada now predicts the economy won't reach its full potential until year-end 2012, one year later than previously expected.
The BoC doesn't need to raise rates to slow consumer credit because "it's already happening."
Consumers' spending capability is at a "30-year low." It won't take many rate hikes to slow the economy from here.
As a result, Tal asserted: "I don't expect (variable or fixed) mortgage rates to rise in any significant way in the next 12 months." There is "no rush to make a mortgage decision."
When someone in the audience asked him which mortgage he'd take today (fixed or variable), Tal replied:
"I'm almost convinced that over the next 2-3 years variable will be better. In the last two years fixed will be better. But, the gap (between fixed and variable) will not be significant over five years."
That said, if he had to choose today, he feels that "mathematically speaking," variable-rate mortgages will "probably" outperform fixed rates.
Choosing between a fixed or variable mortgage can seem like throwing darts with your eyes closed.
Borrowers today are seeing headlines like this:
Economists want BoC to keep raising interest rates
Then they turn the page and see this:
Could the Bank of Canada be forced to cut rates again?
Even the Bank of Canada's Mark Carney isn't too sure of the future.
On CBC yesterday Carney said, "Upside risks are balanced by downside risks...The upside is as likely as the downside."
At a FirstLine Mortgages event yesterday, CIBC economist Benjamin Tal translated that. "What Carney is telling us," Tal said, "is (the Bank of Canada) has no clue what is going to happen."
Tal added:
"The bond market is pricing in inflation below 1.50% for the next ten years." (But he believes "the bond market is mispricing inflation.")
The Bank of Canada now predicts the economy won't reach its full potential until year-end 2012, one year later than previously expected.
The BoC doesn't need to raise rates to slow consumer credit because "it's already happening."
Consumers' spending capability is at a "30-year low." It won't take many rate hikes to slow the economy from here.
As a result, Tal asserted: "I don't expect (variable or fixed) mortgage rates to rise in any significant way in the next 12 months." There is "no rush to make a mortgage decision."
When someone in the audience asked him which mortgage he'd take today (fixed or variable), Tal replied:
"I'm almost convinced that over the next 2-3 years variable will be better. In the last two years fixed will be better. But, the gap (between fixed and variable) will not be significant over five years."
That said, if he had to choose today, he feels that "mathematically speaking," variable-rate mortgages will "probably" outperform fixed rates.
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