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  • Interest Rates: Looking Back & Looking Forward

    Author: Ramin Aminian Date: July 1, 2015

    A look back

    This August was the fifth anniversary of the beginning of what could of been considered as a global financial crisis. During this time, I'm sure you were reading the headlines of the day and wondering how this would affect your life. Almost out of nowhere, the implications of terms such as: sub-prime mortgages, ARM teaser rates, derivatives and swaps, threatened to bring down the global economy. Even now, we are still dealing with a fragile economy and the aftershocks of this crisis are still being felt in many parts of the world.

    Still the question has to be asked: What was the underlying cause of this crisis?

    Some experts believe the crisis happened based on people’s fears of higher mortgage rates. Long term fixed rates have previously been pushed up by rising bond yields. That's likely to continue as long as the economic outlook remains positive; however, some experts state that since April 2013, the bond yields have increased 90%, significantly higher than fixed rates, which have only increased about 30%.

    Canada Remains Strong

    For different reasons, including foreign investments and immigration policies, the real estate market in Canada still remains strong.

    Despite this, it is expected that in the near future Canadians will most likely be facing a higher fixed rate. Many of the major banks have already increased their 5 year fixed rates to 3.79%. People who have the option to use a 2.99% pre-approval rate, are eager to buy quickly, in order to hang on to this rate.

    Furthermore, in a policy announcement by the Bank of Canada, it was made clear that the Bank's benchmark interest rate, which is controlling the Prime Rate currently 3% will not likely change anytime soon. Rate watchers tend to believe that there will not be a move until this time next year; however, some believe the Bank may have to wait an additional year after that, possibly well into 2015. As a result, variable rate mortgages of prime-0.60% may be the way to go. This is especially true for strong borrowers who easily meet the income requirements, as applying for a variable rate mortgage requires qualification based on a 5 year Benchmark Rate currently sitting at 5.34%.

    Alternative Options

    For those self-employed borrowers who are interested in some type of equity program, there are some great equity/stated income programs for the self-employed,employed, new immigrant, retired and non-resident people who do not meet the stated income requirements. As long as you have significant assets and investments, these programs will allow you to invest in a number of different segments within Canada’s real estate market.

    Interest Rates Mortgages Fixed Rate Variable Rate

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Author : Ramin Aminian
I am a Mortgage Professional with VERICO, the largest broker network in Canada. Based in Vancouver, my business centers around providing clients with residential and commercial mortgages. In order to set myself apart from the rest, I guarantee the lowest interest rates & the best options.