First Foundation Best Rates to open the week:
Term Mortgage Rate
1 Yr 2.60%
2 Yr 3.04%
3 Yr 2.90%
4 Yr 3.79%
5 Yr 3.89%
Line of Credit – 3.25%
Qualifying Rate – 5.59% ( Down form last weeks rate of 5.79%)
- Did you know that a lower Qualifying Rate will make it easier for applicants to qualify for terms that are four years and less? That’s because lenders must use the Qualifying Rate when approving applicants for shorter terms as they need to ensure that applicants can qualify for probable increased interest rates when the mortgage comes up for renewal.
For instance, the 3 year interest rate is fantastic at the moment at 2.90% but the lenders will want to ensure that you can handle a rate nearly twice that much in 3 years when that term is up. So, they will qualify your application based on a rate of 5.59% but the actual rate you would receive on your contract will be 2.90%.
In other financial news:
The Toronto Stock Exchange’s S&P/TSX composite index finished the day up 24.51 points, or 0.21 percent, at 11,552.76 with six of its 10 main sectors higher.
Dollar is up .12% to 96.03 USD
Oil is down to $75.39 USD per barrel although energy shares were up 0.31%
Gold is up $.10 to $1214.90 per ounce as investors abandon other riskier assets for safer investments due to gloomy Japanese economic data
And lastly, I always think this is interesting….
Canadian 5 Yr Bond Yields is 2.17.
Because fixed mortgage rates are tied to the bond yield, watching for movement in the bond yield is important when trying to anticipate whether interest rates will move up or down. Here’s how it works:
Compare the bond yield of 2.17% with the 5 yr term interest rate from one of our lenders that is advertising a rate of 3.89%. If we subtract 2.17% from 3.89%, we are left with a spread between the two rates of 1.72%.
Currently lenders are looking for a spread between 1.50% and 1.75%, so rates should stay where they are if we remain at the 1.72% mark.
If the bond yield improves, the spread will shrink and this could be a trigger for interest rates to rise.
Check our blog every Monday for interest rates, market news and expectations for the week. At First Foundation, we believe that regardless of the market conditions, the right time to buy is when you can comfortably qualify to do so – contact one of our Mortgage Brokers to discuss if the time its right for you!