Brokers discuss the future of rates

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In what was described by one broker as “the most significant mortgage interest rate news in ten years,” the BoC’s surprise decision to axe its overnight rate target may have an unexpected effect on one type of mortgage product.

“I personally think if we stay where we are, I think you might see five year mortgage rates drop to 2.69 per cent and I’m talking about non-discounted rates,” Brian Matthey of Verico the Mortgage Professionals told “It’s going to make the fixed rate from a qualification standpoint very attractive compared to the variable.”

The Bank of Canada announced Wednesday that it has changed its target for the overnight rate for the first time in over four years, dropping it by one-quarter of a percent to ¾ per cent.

The reason for the cut was due to sharp declines in oil prices, which are expected to result in negative growth and inflation for the country.
And while the initial inkling may be that the news will make for an attractive time to take on a variable rate mortgage, brokers aren’t completely sold.

For his part Gord McCallum of First Foundation echoes Matthey’s sentiments, believing the market may be in for record-low five year fixed rates.

“I wouldn’t be surprised if we see a five year at 2.5 per cent,” McCallum told “No, variable won’t necessarily be the most attractive option for clients; I think some of that has to do with the fact that it’s easier to qualify for a five year fixed and there is enough of a perspective out there that people who are qualifying right now and they’re just barely qualifying they don’t want to take that extra risk.”

Indeed, with rates expected to drop across the board, brokers are in a position to school clients on the ins and outs of the products available.

“Everybody’s got a good rate right now and the battleground is in the fine print – what you get for that rate is going to be very different from institution to institution,” McCallum said.

BoC interest rate a surprise?
  • kac on 2015-01-22 1:14:03 PM

    in all honesty is the interest rate decline a good thing? the economy was rolling at a lot better pace when the 5 year rate was 4.5%,lenders were obliged to lend money,qualification were much lighter,money was being spent in local communities and people were at work. With the decline in rates we have seen house prices dropping,the govt resorting to knee jerk reactions to implementing so many restrictions that soon you will have to be a 6 figure plus earner to even have a shot at being a home owner and with the drop in Oil prices Alberta will be in a downward spiral which will very soon catch up with the rest of the country if it hasn't already. To get your hands on a low variable rate for an established person who the generous banks have given out hefty loc's regardless of if they are being utilized or not has made it next to impossible for even high earners with great credit to obtain financing through the broker channel. I look at my own financing particulars having 2 locs that the banks just set up years ago and have never been touched if i was to try and get a mortgage approved for myself i would be looking at $2000 added to my debt servicing before i even applied for a mortgage. Obviously this is my opinion possibly not agreed with by some however give us a 0% bank of canada rate and see the economy go further into the hole.

  • @kiltedbroker on 2015-01-22 1:21:07 PM

    I agree with Brian Matthey and Gord McCallum, we are probably going to see fixed rates drop a little here shortly.

    Now, If fixed rates continue to go down and homebuyers are taking the 5 yr fixed because they don't qualify for the variable... how long do you think it will be before we see more rule changes? How long until every term (including the 5 yr fixed) is being qualified at the benchmark?

    It will be interesting to see how this plays out.

  • Dominc on 2015-01-22 2:34:45 PM

    Past 10 years were the best chance for the economic growth, but our government chose to be on the wrong side of the fence with their policies. Our government bet on a single horse and that horse broke his legs. The oil dropped down and the dollar subsequently is at $0.78xx after BoC rate drop and this is not the end. The wave of unemployment that our government is withholding information on is going to increase and increased is the defaults in obligations. Canadians are victims of manipulation of information as to the economy and to my estimation we are in recession for past 12 months. It was a wrong move and lack of prudence to go against US. They have cleaned their house already from the disaster in 2009, but our government denied part of and responsibility for. Bottom line: You pay now or you will pay later. Later seems to be logical choice for our institution result of which is increased unemployment (yet to be announced in 60-90 days) with sky rocketing household debt with 163% ratio announced last time about year ago as a part of misleading process for the public it is today at lot higher rate. As a result, million dollar properties will go back to their true values of $450,000, $800,000 back to $250.000. Liberal provincial government will implement carbon tax not as a result to tax for the environment, but as a result of catching up with revenues as the believe is that you could have done it without complaint when the gas was at $5-$6/gallon.

  • Donna on 2015-01-22 4:42:10 PM

    has anyone thought of this twist? could be a Harper move? he cannot go back on promises it is an election year, revenues have dropped. cost of interest for Gov't Debt was same... reduction in overnight rate decreases the cost to service that debt...

  • Kuldip S Panesar Homeland Mortgage Corp. on 2015-01-23 4:03:38 PM

    I respect the Bank of Canada's decision for reducing the over night rate of interest.This is the right decision ,at present the economic activities need Govt. intervention and support.
    Let see how the Lenders react to this .

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