October, 2013 | MorCan Direct
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Oct 24
Newsletter

Balance Sheet vs. Non Balance Sheet

Balance Sheet vs. Non Balance Sheet

A “Balance Sheet Lender” is any chartered bank in Canada. They are referred to as “Balance Sheet Lenders” because they hold your mortgage on their books as an asset. These Lenders can only increase the value of their asset (your mortgage) by increasing the spread between their cost of funds and the rate at which you pay interest on your mortgage. The opportunities to do this occur when a variable rate client is looking to lock into a fixed rate and when a client’s mortgage is maturing. Everyone realizes that there are penalties associated with breaking a variable rate mortgage (3 months interest) and that even with a maturing mortgage there is a level of inconvenience associated with collecting documentation and moving to another lender for a slight decrease in rate. “Balance Sheet Lenders” will use these barriers to exit to their advantage and charge marginally higher rates to existing clients. Continue reading →

Oct 24
Newsletter

Is The Bank of Canada hinting that we should go Variable?

Is The Bank of Canada hinting that we should go Variable?

Is the Bank of Canada hinting that we should all have Variable Rate Mortgages? Did you read our last newsletter?.

The Bank of Canada speaks a little differently than we do, so let me translate.

First, they said it by dropping one line that was in all of their reports over the past few years:

“Over time, as the normalization of these conditions unfolds, a gradual normalization of policy interest rates can also be expected…”

 They replaced it with this line: 

“the substantial monetary policy stimulus currently in place remains appropriate”

Then they said they were worried that prices don’t seem to be moving up as they expected despite of all the new money that was printed. Here is how they said that:

“the fact that inflation has been persistently below target means that downside risks to inflation assume increasing importance.”

The Bank of Canada doesn’t think they will have to act to slow growth until at least the end of 2015, which means no movement in the Prime Rate for at least 2 years. Continue reading →

Oct 17
Newsletter

Take the Variable Rate

Take the Variable Rate

Variable Rate Mortgages (VRM’s) are gaining in popularity in Canada, and with good reason.

Five year fixed rates have been hovering around 3.5% for the past several months and Canadians are starting to see the benefits of a nice low rate locked at prime – 0.5%. Canada’s Prime Rate is at 3% right now, and probably will be for another year or two, so maybe it’s time for you to consider a VRM?

Variable Rate Mortgages aren’t for the faint of heart. Mortgage rates move up and down on a weekly if not daily basis and if you think this may cause you to lose some sleep it might not be worth the stress. If however you feel you can handle the uncertainty, a Variable Rate Mortgage will probably save you some money over the next few years. We believe that there are some keys to saving money and protecting yourself in a VRM. Continue reading →

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