Ontario Mortgage News – Mortgage Interest Rates Increased by Two of Canada’s Banks

In Ontario mortgages news this week it seems that the rate wars are over; with RBC and TD Banks recent announcement that they are increasing their mortgage interest rates. Their five year closed interest rate will be increased by .2% to 5.44% and their fixed 4 year interest rate will be increased by .5% to 3.49%. Likely the rest of the banks will follow suit in coming days and weeks. 

This change comes amidst growing concerns from bank economists and even the Canadian Government about the ability of some Canadians to manage their high personal debt loads. The CBC reported that the mortgage interest rate increases follow recent comments by Finance Minister Jim Flaherty Thursday, criticizing banks who have called on Ottawa to tighten lending and saying that it’s their job. 

In recent Ontario mortgage news, a TD bank economist suggested that Minster Flaherty should further tighten CMHC lending guidelines by increasing the amount of down payment that Canadians have to make in order to qualify for high ratio mortgage financing and it seems that, at least for the time being, Minister Flaherty is sending a message to the banks that he has no intentions of doing so.

Household debt does continue to be a growing concern and a concern that has been repeatedly raised by The Bank of Canada. The average ratio of debt to personal disposable income is now over 150% and economists are predicting that this will rise over 160% in the next year. The CBC and in other Ontario mortgage news outlets reported that TD Bank chief economist Craig Alexander has estimated more than one million Canadian households, or about 10 percent of those that currently have debt, will have to devote 40 percent or more of their income to making their monthly debt payments if rates rise by two-to-three points to more normal levels.

The Canadian Government has already intervened a number of times to tighten up on high ratio mortgage financing requirements in recent years and while Minster Flaherty is not prepared to do so again, immediately he has been clear that he is prepared to tighten mortgage insurance rules again, if necessary.

Canadians who own homes and are currently in debt should be thinking of a plan to deal with their debt. Looking at a home equity loan to consolidate debt is often a great option. Home equity loans can enable homeowners to cut the interest on their debt, reduce their monthly income which increases cash flow and do away with dangerous high interest credit cards.

The fact remains that if an improvement in the job market doesn’t occur resulting in Canadians incomes increasing and Canadians don’t come up with a way to deal with their debt, Canadians will be at risk of CMHC further tightening lending guidelines which will make it more difficult and more expensive for the average Canadian to obtain a mortgage. If you have been thinking about buying a home and have been waiting for the right time, now is it. The wait and see approach could have consequences that include not being able to obtain a mortgage at all.

For more information about mortgage interest rates or to see if you qualify for mortgage financing please visit www.gtamortgagematters.com  or call Paul Mangion at 416-204-0145.

Canadian Mortgage Interest Rates, Going Up or Down?

It appears as though there is constant speculation as to whether Canadian interest rates will go up or down. Interest rates have been low for so long and many consumers have been taking advantage of low interest variable rate mortgages.

Canadian interest rates were originally reduced to historic lows after the attacks on the World Trade Centre in 2001. Into the mid 2000’s, the Bank of Canada began to inch interest rates upwards, but the recession that began in 2008 forced the Bank of Canada to bring the national lending rate back down.

They have remained low for the past 3 years, however in the past the Bank of Canada has raised interest rates 3 times.

When the Bank of Canada begins inching up interest rates, those who have variable rate mortgages begin to question whether or not it might be time to lock in.

A variable rate mortgage is one that floats with prime. If interest rates go up, so will the interest rate on a variable rate mortgage and in accordance so will the monthly mortgage payments. Many folks who have low interest variable rate mortgages will closely monitor the Bank of Canada’s announcements. This is because many variable rate mortgage products carry an option to lock-in.

This is one reason why we often write about the topic of whether or not Canadian interest rates will stay low or go up.

If you want to determine whether or not interest rates may go up, rather than paying attention to the Bank of Canada, pay attention to the strength of the Canadian dollar. A large part of Canada’s economy and Ontario’s economy is tied to the manufacturing sector. We export a lot of products. However, when our dollar is strong it makes it more expensive for other countries to trade with us.

Compared to the currency from other countries we currently have a strong Canadian dollar, and this is due to Canada’s strong bank system. Economic instability in countries around the world will only continue to strengthen our dollar. While Standard and Poor's recently announced that it was downgrading the U.S.’s world credit score from AAA to AA, it has been announced that Canada will continue to maintain its AAA world credit score status. This is yet another indicator that our dollar will continue to soar.

Unfortunately this also means that we could lose a lot of jobs in the Canadian and Ontario manufacturing sectors. This reason alone may be one reason that the Bank of Canada decides to leave interest rates where they are (as they did in their most recent interest rate announcements) or even lower it. There are other economic indicators that the Canadian mortgage interest rates will continue to stay low, therefore now is a better time than ever to take advantage of a low interest variable rate mortgage.


For more information about Canadian mortgage interest rates please visit http://www.gtamortgagematters.com/