Weird Rate Movements

I wish I had good news for you before the weekend, but I’m afraid it’s true. Rates are moving up…at least temporarily. In fact, I think it’s probably VERY temporary.

Right now, as you know, the market is going through a tremendous amount of turmoil. Presently, there is a shortage of liquidity in the credit markets (in other words, they’re tight for cash). There is a bailout plan in the works down in the US which, if it goes through, regardless of what you think of the politics of it, should ease the tension. As of this moment, however, it has not been finalized so there is some uncertainty.

How does that affect you and me? Well, as we know from Econ 101, when there is a shortage, prices go up. In this case, there’s a shortage of credit, so lenders have to pay more to borrow money, which they lend to consumers and mortgage borrowers. Of course, they pass on the price…so the rates you pay go up.

If you’ve already been pre-approved, you don’t have to worry – your rate is protected until your pre-approval expires. If you haven’t been pre-approved or approved yet, what are you waiting for? This is a good opportunity to apply and get a rate hold so we can protect you from any more short-term spikes. Otherwise, there are no guarantees.

Here at First Foundation we take a long-term view of things. This is a big blip – but still a blip. The fundamentals and banking structure in Canada are sound. Only 4% of mortgage in Canada were subprime in the past couple of years – vs. 40% in the US (source CBC News – The National). We’ve got some hiccups to deal with, but here at First Foundation it’s business as usual. If you are buying a home or want to refinance for whatever reason, please contact us or fill out an online application.

We do have “More choice and better rates than your bank”!