Rates are NOT rising- well, not the way you think - UPDATED

Joel Olson • July 10, 2017

UPDATE: The Bank of Canada has increased their overnight rate to .75% as of July 12, 2017.


Despite many articles predicting interest rates going up. They are not. Well, not in the way you think.

This week the Bank of Canada will meet, as they do several times over the year to determine if its necessary to
increase the Bank of Canada Prime Rate.  They have not done so since 2010. Although, it is yet to be confirmed,
there is a possibility that this could in fact be the time they do exactly that.

The prime rate effects every variable rate mortgage, line of credit, investment in Canada. This alone is one of the
major reasons that this decision is made with extreme caution. Essentially, in a very broad view the Bank of
Canada rate is related to how much a bank pays to obtain and access funds. The bank then has their own prime
rate that is directly linked to the Bank of Canada. Almost 100% of the time these prime rates match. However, last
time the prime rate went down, it worthy to note that the banks didn’t pass on the discount right away, and they still
do not pass on the full discount. The major bank world of Canada is small though, so there is very little room for
difference between the major banks on these things, without the prospect of losing instant market share.

So, let's then assume that prime rate is increased, and the banks raise their prime rate to match that. That is likely
what would happen. This means that if you have a line of credit or a variable rate mortgage that your interest rate
will increase. The Bank of Canada hasn’t increased prime beyond .25% in over 25 years. So, let’s prepare for
doomsday, if you have a $500,000 mortgage, your payment would in the most extreme examples increase by $62
per month. Obviously, as balances will be even lower for most people, that increase will be even less. To further
frame this,  it is a little know fact, that many variable mortgages do not increase the payments. This means that
your payment remains the same, but the ratio of principal to interest changes, so the risk of a rising payment is
eliminated. The other thing to remember is that with a higher prime rate, it's often a case that lender will create even
bigger discounts on variables.

But- why bother? Still seems risky to you. The value of having a variable still will outweigh a fixed rate in many
situations, here is a great rundown of that, by a great mortgage broker friend of mine:
 
In any case, the world of interest rates has changed a lot in the past twelve months. Be worried of anyone quoting
you a mortgage rate after a brief two minute conversation. There is much to consider for your life, situation, future
and also many terms on mortgages that restrict you in a way that it is unlikely you would even ask.
Joel Olson
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3 Questions To Ask Yourself Before Listing Your Home!

By Joel Olson • April 8, 2025
Deciding to list your home for sale is a big decision. And while there are many reasons you might want/need to sell, here are 3 questions you should ask yourself; and have answers to, before taking that step. What is my plan to get my property ready for sale? Assessing the value of your home is an important first step. Talking with a real estate professional will help accomplish that. They will be able to tell you what comparable properties in your area have sold for and what you can expect to sell your property for. They will also know specific market conditions and be able to help you put a plan together. But as you’re putting together that plan, here are a few discussion points to work through. A little time/money upfront might increase the final sale price. Declutter and depersonalize Minor repairs A fresh coat of interior/exterior paint New fixtures Hire a home stager or designer Exterior maintenance Professional pictures and/or virtual tour But then again, these are all just considerations; selling real estate isn’t an exact science. Current housing market conditions will shape this conversation. The best plan of action is to find a real estate professional you trust, ask a lot of questions, and listen to their advice. What are the costs associated with selling? Oftentimes it’s the simple math that can betray you. In your head, you do quick calculations; you take what you think your property will sell for and then subtract what you owe on your mortgage; the rest is profit! Well, not so fast. Costs add up when selling a home. Here is a list of costs you’ll want to consider. Real estate commissions (plus tax) Mortgage discharge fees and penalties Lawyer’s fees Utilities and property tax account settlements Hiring movers and/or storage fees Having the exact figures ahead of time allows you to make a better decision. Now, the real wildcard here is the potential mortgage penalty you might pay if you break your existing mortgage. If you need help figuring this number out, get in touch! What is my plan going forward? If you’re already considering selling your home, it would be fair to guess that you have your reasons. But as you move forward, make sure you have a plan that is free of assumptions. If you plan to move from your existing property to another property that you will be purchasing, make sure you have worked through mortgage financing ahead of time. Just because you’ve qualified for a mortgage in the past doesn’t mean you’ll qualify for a mortgage in the future. Depending on when you got your last mortgage, a lot could have changed. You’ll want to know exactly what you can qualify for before you sell your existing property. If you’d like to talk through all your options, connect anytime! It would be a pleasure to work with you and provide you with professional, unbiased advice.

What is a “No-Frills” Mortgage?

By Joel Olson • March 25, 2025
A no-frills service or product is where non-essential features have been removed from the product or service to keep the price as low as possible. And while keeping costs low at the expense of non-essential features might be okay when choosing something like which grocery store to shop at, which economy car to purchase, or which budget hotel to spend the night, it’s not a good idea when considering which lender to secure mortgage financing. Here’s why. When securing mortgage financing, your goal should be to pay the least amount of money over the term. Your plan should include having provisions for unexpected life changes. Unlike the inconvenience of shopping at a store that doesn’t provide free bags, or driving a car without power windows, or staying at a hotel without any amenities, the so-called “frills” that are stripped away to provide you with the lowest rate mortgage are the very things that could significantly impact your overall cost of borrowing. Depending on the lender, a “no-frills” mortgage rate might be up to 0.20% lower than a fully-featured mortgage. And while this could potentially save you a few hundreds of dollars over a 5-year term, please understand that it could also potentially cost you thousands (if not tens of thousands) of dollars should you need to break your mortgage early. So if you’re considering a “no-frills” mortgage, here are a few of the drawbacks to think through: You'll pay a significantly higher penalty if you need to break your mortgage. You'll have limited pre-payment privileges. Potential limitations if you want to port your mortgage to a different property. You might be limited in your ability to refinance your mortgage (without incurring a considerable penalty). Simply put, a “no-frills” mortgage is an entirely restrictive mortgage that leaves you without any flexibility. There are many reasons you might need to keep your options open. You might need to break your term because of a job loss or marital breakdown, or maybe you decide to take a new job across the country, or you need to buy a property to accommodate your growing family. Life is unpredictable; flexibility matters. So why do banks offer a no-frills mortgage anyway? Well, when you deal with a single bank or financial institution, it’s the banker’s job to make as much money from you as possible, even if that means locking you into a very restrictive mortgage product by offering a rock bottom rate. Banks know that 2 out of 3 people break their mortgage within three years (33 months). However, when you seek the expert advice of an independent mortgage professional, you can expect to see mortgage options from several institutions showcasing mortgage products best suited for your needs. We have your best interest in mind and will help you through the entire process. A mortgage is so much more than just the lowest rate. If you have any questions about this, or if you’d like to discuss anything else mortgage-related, please get in touch. Working with you would be a pleasure!
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