With interest rates hovering near dramatic lows, many Canadian home owners have been taking advantage of rock-bottom mortgage rates to break their existing contracts and refinance at a lower rate.
But mortgage rates rose quickly and dramatically last week, leading some to wonder if they have missed the sweetest mortgage recession sale in recent history.
Despite last week's increase, and the penalties associated with breaking the contract, mortgage brokers say that many home owners can still trim their payments.
Gary Siegle, a manager at mortgage broker Invis, joined us on Tuesday for a live, online discussion about home mortgages. Your questions and his written answers appear below.
Mr. Siegle has been in the real estate industry for 37 years. He currently works out of Calgary, where he is a regional manager at Invis.
“We are not going to see these rates again for a while, not in the immediate horizon and maybe never,” says Mr. Siegle. “But rates are still at historical lows. Depending on what your penalties are, there is still money to be saved.”
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Roma Luciw, Globe Investor: Hi Gary. Thanks for joining us today to talk about what has proven to be a very hot topic among our readers. Before we get started, I would like to let everyone know that we have removed the names of the lending institutions from your questions. Given the volume of questions, it simply wasn't possible to do a thorough fact checking on all the rates and numbers cited for each institution. The numbers tell their own story and we think they'll give you the answers you need. Let's get started.
Michael Davies: Hi, I have a variable rate mortgage that is 0.5 per cent below prime and the spread to the current 5 year is 280 basis points. With a remaining term of 4.5 years, does it make sense to lock it in or do you think the variable rate will ultimately be the best option over the remainder of the term? Thank you.
Gary Siegle: The stay or lock-in question comes up often and the answer depends on your circumstances and assumptions about the trend in rates. Most mortgage brokers are not in the business of economic forecasting, however, they are well positioned to work with you and show you the financial impact of various assumptions. Go see a qualified mortgage professional and they will sit down with you and show you the numbers you need to make an informed decision based on your situation.
Edward: My wife and I live in Edmonton and are looking to buy a larger home and start a family. Initially we were going to wait another year, however, with the mortgage fire sale, it has been difficult to pass up the opportunity. My question is: Should we go with a variable or fixed rate mortgage? Can you briefly give some insight on how each product is tied to the prime lending rate and the bond market respectively? Thanks in advance.
Gary Siegle: Good question. The price of variable rate mortgages are typically based on the prime rate and changes when the Bank of Canada makes a policy decision to change rates. The fixed rate mortgages are based on the bond market, which is much more heavily influenced by market factors such as supply and demand and investor sentiment.
