Real Estate

The Official Mortgage Rates Thread

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  • Oct 22nd, 2017 12:27 pm
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DentDude wrote:
Aug 5th, 2017 9:46 am
I could use some expert advice. In the past I have always traditionally gone variable and it has worked out very well. In the past two years, I have gone with successive 1 year fixed as the rate I got has been so good. Now with renewal time coming up in about 4 months, I have to decide on a term again. It seems most are not recommending the variable now due to the very low spread between the variable and the 5 year fixed now and the further imminent rate hikes in the next year. Everyone is talking about 5 year fixed rates right now but to me, 5 years seems like an awfully long time. I did a 5 year fixed just once at the very beginning and regretted it completely back then and thought, never again. What do others think about a 2 or 3 year fixed instead? Or is a 5 year fixed vs the 2 or 3 just about right for everyone at this point. Thanks for any advice.
I've never done >1 yr fixed since first mortgage nearly 2 decades ago. Always took the lowest rate available since then which has been in the form of 1-yr fixed or 5-yr variable (about 4-5x 1-yr and 2x 5-yr variables).

Rates went down/up/down/up... during that time. I think even in an increasing rate environment you come out ahead unless you take a 5-yr variable with a tiny spread - but that's what the 1-yr fixed rates were for ... to say 'no' to crappy P-0.5 or 0.6% 5-yr variable discounts and wait for ones like P-0.9% or 0.95% :)

If you can get P-0.96% at HSBC or comparable I'd go for that. Even with 4 more hikes evenly spread out you'd be at 2.99% and have come out with a weighed average lower than the 2.49% mid-point since rates earlier in your term have more weight since the principal is higher then.

If the rates increase more steeply or more than 4 times you MIGHT lose. Or if rates stay low or go down again after increasing you will win. That's the risk/benefit of the variable. People who want certainty pay the "insurance premium" of the higher starting rate with a 5-yr fixed. Usually, "optional" type extra insurance is a waste of money and you can safely save by skipping out on it. Insurance against disaster is certainly not worth skipping out on, but the rates increasing by a percent or more I wouldn't put into the "disaster" camp. Disaster is car written off or house burns down. Buy insurance for that.
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ace604 wrote:
Aug 5th, 2017 1:07 pm
I've never done >1 yr fixed since first mortgage nearly 2 decades ago. Always took the lowest rate available since then which has been in the form of 1-yr fixed or 5-yr variable (about 4-5x 1-yr and 2x 5-yr variables).

Rates went down/up/down/up... during that time. I think even in an increasing rate environment you come out ahead unless you take a 5-yr variable with a tiny spread - but that's what the 1-yr fixed rates were for ... to say 'no' to crappy P-0.5 or 0.6% 5-yr variable discounts and wait for ones like P-0.9% or 0.95% :)

If you can get P-0.96% at HSBC or comparable I'd go for that. Even with 4 more hikes evenly spread out you'd be at 2.99% and have come out with a weighed average lower than the 2.49% mid-point since rates earlier in your term have more weight since the principal is higher then.

If the rates increase more steeply or more than 4 times you MIGHT lose. Or if rates stay low or go down again after increasing you will win. That's the risk/benefit of the variable. People who want certainty pay the "insurance premium" of the higher starting rate with a 5-yr fixed. Usually, "optional" type extra insurance is a waste of money and you can safely save by skipping out on it. Insurance against disaster is certainly not worth skipping out on, but the rates increasing by a percent or more I wouldn't put into the "disaster" camp. Disaster is car written off or house burns down. Buy insurance for that.
Thanks, that does help. I haven't done greater than a 1 year fixed (was always previously variable) for a while now too. But now there is all this talk that these low current rates for the past little while we have not seen before so this is a different situation and that now fixed, especially longer fixed, is the way to go. I guess like you said it depends on how much P minus I can get. If only P-0.5 then maybe look at the 1 year fixed again and see if the P-0.95's come back again in the next couple of years.
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DentDude wrote:
Aug 5th, 2017 2:04 pm
Thanks, that does help. I haven't done greater than a 1 year fixed (was always previously variable) for a while now too. But now there is all this talk that these low current rates for the past little while we have not seen before so this is a different situation and that now fixed, especially longer fixed, is the way to go. I guess like you said it depends on how much P minus I can get. If only P-0.5 then maybe look at the 1 year fixed again and see if the P-0.95's come back again in the next couple of years.
HSBC has an advertised 1.99% 5-yr variable rate currently.
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ace604 wrote:
Aug 5th, 2017 2:42 pm
HSBC has an advertised 1.99% 5-yr variable rate currently.
I wonder though, as for all the cheaper rates I have seen advertised, is this most likely only for high ratio mortgages plus for properties under $1 million. My situation is a renewal for a property over $1 million and a low-ratio mortgage.
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DentDude wrote:
Aug 5th, 2017 3:10 pm
I wonder though, as for all the cheaper rates I have seen advertised, is this most likely only for high ratio mortgages plus for properties under $1 million. My situation is a renewal for a property over $1 million and a low-ratio mortgage.
I think the big banks tend to have more of the same rate across the board whereas the monoline lenders who rely more on bulk insurance would have different rates adjusted to reflect their higher cost of funds when they have to insure on their own or can't insure at all.

You should contact HSBC and find out... and a broker too.
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ace604 wrote:
Aug 5th, 2017 1:07 pm
I've never done >1 yr fixed since first mortgage nearly 2 decades ago. Always took the lowest rate available since then which has been in the form of 1-yr fixed or 5-yr variable (about 4-5x 1-yr and 2x 5-yr variables).

Rates went down/up/down/up... during that time. I think even in an increasing rate environment you come out ahead unless you take a 5-yr variable with a tiny spread - but that's what the 1-yr fixed rates were for ... to say 'no' to crappy P-0.5 or 0.6% 5-yr variable discounts and wait for ones like P-0.9% or 0.95% :)

If you can get P-0.96% at HSBC or comparable I'd go for that. Even with 4 more hikes evenly spread out you'd be at 2.99% and have come out with a weighed average lower than the 2.49% mid-point since rates earlier in your term have more weight since the principal is higher then.

If the rates increase more steeply or more than 4 times you MIGHT lose. Or if rates stay low or go down again after increasing you will win. That's the risk/benefit of the variable. People who want certainty pay the "insurance premium" of the higher starting rate with a 5-yr fixed. Usually, "optional" type extra insurance is a waste of money and you can safely save by skipping out on it. Insurance against disaster is certainly not worth skipping out on, but the rates increasing by a percent or more I wouldn't put into the "disaster" camp. Disaster is car written off or house burns down. Buy insurance for that.
Every time I've looked into it (which is only a few times admittedly), 1-year fixed has cost more than 2-year fixed, or else has been about the same. However, I'm not including buy-down rates from small brokers.

BTW, does any lender ever have any decent 6-month fixed rates? When my 2.29% 2-year fixed finishes, I will have less than a year left in the amortization.
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PaulMeredith wrote:
Aug 3rd, 2017 5:48 pm
Lowest rate on a 5 year fixed right now is 2.64% which can be held up to 120 days. Better terms and conditions than HSBC as well.
What lender is this?
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EugW wrote:
Aug 5th, 2017 7:01 pm
Every time I've looked into it (which is only a few times admittedly), 1-year fixed has cost more than 2-year fixed, or else has been about the same. However, I'm not including buy-down rates from small brokers.

BTW, does any lender ever have any decent 6-month fixed rates? When my 2.29% 2-year fixed finishes, I will have less than a year left in the amortization.
Did you look into it outside of just CIBC?

My 1-yr fixeds were 2-3 with Scotia, one with London Life, and one with RMG.
I always took a 1-yr when it was lower than variable, and the 2-yrs were never better for me.
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ace604 wrote:
Aug 6th, 2017 3:47 am
Did you look into it outside of just CIBC?

My 1-yr fixeds were 2-3 with Scotia, one with London Life, and one with RMG.
I always took a 1-yr when it was lower than variable, and the 2-yrs were never better for me.
Mainly banks this time. Last time more lenders though.

I don’t know what RMG is.

Edit:

Ah I see. Small Toronto lender. Are you talking about no frills mortgages BTW? I never get no frills mortgages.
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RMG is not a "small Toronto lender". They lend across the country, and are a fairly large lender. RMG is owned by Mcap.
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valuemortgage wrote:
Aug 6th, 2017 11:04 am
RMG is not a "small Toronto lender". They lend across the country, and are a fairly large lender. RMG is owned by Mcap.
Yes I see that now. Thx. However I didn’t mean that they just lend in Toronto, but that they were a smaller lender and based in Ontario. But how big are they and what is their focus?

I also just read that this year RMG had sent out letters to brokers encouraging them to go after low credit score borrowers so that makes me wonder if they might be more heavily weighted towards no frills mortgages.
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EugW wrote:
Aug 6th, 2017 2:47 pm
Yes I see that now. Thx. However I didn’t mean that they just lend in Toronto, but that they were a smaller lender and based in Ontario. But how big are they and what is their focus? I read that MCAP’s aborted IPO last year was only targeting $275 million and RMG is just a part of them.

I also just read that this year RMG had sent out letters to brokers encouraging them to go after low credit score borrowers so that makes me wonder if they might be more heavily weighted towards no frills mortgages.
Low credit score borrowers and no-frills mortgages are two completely different things. People with low credit scores would be suited to a B type lender. Many A lenders now have B sides as well. MCAP, RMG, Merix, B2B and Street Capital all have B sides to handle this type of borrower. Completely different from what you are looking for.

A no-frills mortgage is just a mortgage with lower prepayment privileges and quicker closing dates. Often 30 days closing and prepayment privileges of only 5%. This would still allow you to prepay up to $20,000 per year on a $400,000 mortgage... more then most ever use. Other than that, they are still full-featured mortgages for the most part, so the term 'no-frills' is a little misleading. No-frills mortgages haven't been very common in the past couple of years however.
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bprintz wrote:
Aug 5th, 2017 10:00 pm
What lender is this?
The lender offering the 5 year fixed at 2.64% does not like us posting this rate with their name publicly as it is a special rate and not their general offering. It's a large credit union lending primarily in the GTA and Ottawa areas.
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PaulMeredith wrote:
Aug 6th, 2017 3:23 pm
Low credit score borrowers and no-frills mortgages are two completely different things. People with low credit scores would be suited to a B type lender. Many A lenders now have B sides as well. MCAP, RMG, Merix, B2B and Street Capital all have B sides to handle this type of borrower. Completely different from what you are looking for.

A no-frills mortgage is just a mortgage with lower prepayment privileges and quicker closing dates. Often 30 days closing and prepayment privileges of only 5%. This would still allow you to prepay up to $20,000 per year on a $400,000 mortgage... more then most ever use. Other than that, they are still full-featured mortgages for the most part, so the term 'no-frills' is a little misleading. No-frills mortgages haven't been very common in the past couple of years however.
I know they are very different things. However, it would seem to me that lower credit score borrowers might on average be more interested in no frills mortgages than higher credit score borrowers. I may be mistaken, but that would be my suspicion. The fact that RMG was specifically targeting lower credit score borrowers, made me wonder also if they had more no frills mortgages as well.

Also, for context: The posts relate to my previous exchange with ace. He had stated his lowest rates have always been 1-year fixed or variable, whereas I had mentioned that the few times I had actually inquired about 1-year fixed, they were usually at best equivalent to the 2-year fixed rate quotes I was getting, or else sometimes worse. However, I was not interested in no frills mortgage rates, and had asked ace if his 1-year fixed (one of which was from RMG) was no frills.

BTW, while I have not used more than 5% of the pre-payment room every year, most years I have, with some years well over 10%. Why? Because I much prefer setting up my mortgage payment schedule with a bit lower payments, but allowing me to pay way more when possible. I do this by choosing longer amortizations than I have needed, but increase the payments using flexible monthly (or non-monthly) pre-payment options. Also, in many of these mortgages, once you have made pre-payments, you can also lower payments up to the same amounts. This allows a lot of flexibility in my repayment schedule. As mentioned earlier in the thread, it allows me to vary my payment amounts nearly at will. This is impossible with no frills mortgages.
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EugW wrote:
Aug 6th, 2017 7:40 am
Mainly banks this time. Last time more lenders though.

I don’t know what RMG is.

Edit:

Ah I see. Small Toronto lender. Are you talking about no frills mortgages BTW? I never get no frills mortgages.
No I'm not talking about no-frills mortgages. I don't even think those exist/are very common at all these days. I've never had a mortgages with lower than 15 or 20% prepayment privileges as far as I can remember. Maybe I had a 10/10 once? I dunno because I don't prepay ... with rates so low I'm glad my money has been going into investments for the last 2 decades that have trounced my mortgage rates.
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