5.28.2010

Mortgage Rates Will Stay Low

"The general feeling over the past few weeks—courtesy of the myriad of economists being quoted in the media—is that mortgage rates are about to go through the roof, so let's quickly lock ourselves in at a fixed rate."

"But the thing to keep in mind is that economists work for banks, and banks have a vested interest in promoting the most profitable course of action. That would be fixed rate mortgages which yield much more money for banks than variable mortgages. So recently, fixed rates went up not once, but twice just a few weeks ago. Who led the way? The Royal Bank, the bank that traditionally offers the highest rates on the block."


"Why did some of the banks raise their fixed rates? According to media reports, it was in anticipation of the Bank of Canada increasing the Prime Rate on June 1st. In my own opinion they jumped the gun to soon and too high—in fact, TD Canada Trust actually lower their fixed rate at the same time."

"But who cares when a variable rate will save a significant amount of interest compared to a traditional 5-year fixed term? My prediction is that the Bank of Canada will keep the Prime Rate lower for much longer that anyone thinks. Why? An unravelling economic crisis in Europe, an expensive currency at home, and a big neighbour still in an economic mess; to significantly raise borrowing rates under these circumstances would make little sense."

"My advice: Take anything in the news with a grain of salt. Go with a variable rate mortgage, preferably a 3-year term. You would pay only 1.7% interest! Sounds good to me."

Vasko DeLev, AMP
Verico Capital Mortgages Inc.
106-18 Deakin St, Ottawa ON K2E 8B7
Direct Line: 613-882-7603
Fax: 613-228-2555
Email: vasko@CapitalMortgages.com