Mortgage rates in Canada are derived from the Bank of Canada Rate, both the bank rate and mortgage

rates over the past year have been at decade lows.

– Bank of Canada rate currently at .25%, bank prime rate at 2.25%

– 5 year posted mortgage rates at 5.25%

– Decade average for 5 year rates is 6.76%

Who is taking advantage of these rates?

New home buyers

– Following the market crash of 2008, deflated home prices as well as great mortgage rates convinced many Canadians to purchase new homes.

– Unfortunately for our new home buyers, there were demand factors working against them

* New housing starts did not dramatically increase. January 2009 in Ontario there were 54,700 new home starts. In January 2010   there were 55,500

* 800 additional new houses per month were not enough to satisfy the demand so resale prices rose. In January 2009 the  average MLS resale price in the GTA was $343,632. In January 2010 the average price rose to $409,058.

– Although new home buyers are receiving great mortgage rates, the prices they are paying for homes are inflated due to increased demand.

Home owners refinancing or renewing mortgages

– The greatest opportunities lie with exiting home owners looking to renew or refinance  existing mortgages.

– This group enjoys the savings associated with the lower rates but does not faced with increased prices of new homes.

Let’s look at an example

Mr and Mrs Smith have a balance of $250,000 on their mortgage. They have 2 years remaining on their term with 15 years remaining in their amortization. They currently have a rate of 5.54% and their penalty for breaking the deal is 3 months interest. Redwood Capital Management has found them a rate of 3.64%.

  Option 1, Refinance  Option 2, Stay with existing deal
Rate                3.64%             5.54%
Balance + Penalty     $250,000 + $3375      $250,000 + $0
Payment             $2048.02         $2048.02
Balance after 2 years          $221,572.85      $227,369.08
Balance after 5 years (assume renew in 2 years at 4.5%)         $169,317.82       $181,387.25

If the Smith’s refinance their mortgage now, over 2 years they will have increased their net worth by $5,796.23, over 5 years they would have increased their net worth by $12,069.43.

If you are currently paying a mortgage with a rate greater than 3.64% fixed or any variable rate contact us to see if there are savings available for you.

Daily Rate Update

Rates Effective as at: April 23, 2010

Financial Institution 3 Year 5 Year 5 Year Variable
CENTUM Primo 3.75 4.34 1.85
Concentra 3.95 4.64 2.25
First National 3.85 4.64 1.85
FirstLine 3.95 4.60 1.85
Home Trust 3.29 4.54 1.85
ING 3.99 4.59 1.75
MCAP 3.95 4.39 1.85
Scotia 3.95 4.64 2.10
Street Capital 3.85 4.64 1.85
TD 3.85 4.64 2.05
Xceed 4.14 4.64

Information provided by Centum Financial Group Inc.

*Rates subject to change without notice. E&OE.