MORTGAGES FOR VICTORIANS
Mortgage loans from one of the leading Mortgage Brokers in Victoria. With a full range of services, we offer one-stop shopping for all your mortgage and financing needs. We have solutions to fulfill all your lending requirements.
Mortgage Brokers and the British Columbian Mortgage Market.
Over the last decade the Mortgage Broker Industry has grown dramatically. There are over 10,000 Mortgage Agents and Mortgage Brokers in British Columbia, they are licensed by the Financial Institutions Commission (FICOM) and regulated by the Mortgage Brokers Act 1996. FICOM ensures they have met specific education, experience and suitability requirements.
NB Bank employees are not required to be licensed, pass any examinations or meet any minimum levels of competence as they are covered by bank exemptions. Bank employees are trained on bank products only and have little knowledge of alternative channels or the wider marketplace.
Why A Mortgage Brokerage beats A Bank:
There are over a 100 financial institutions in British Columbia offering mortgages. They compete with banks by issuing mortgages to people that the banks reject and secondly, competing on price.
Most of these Lenders, although well known and established in the finance industry don’t have high street store fronts and deal directly with Brokers to save on administrative and advertising costs. The Brokers are effectively the store front for the Lenders. This is how non-bank lenders reduce costs, stay competitive and are usually able to offer better rates.
“The Canadian mortgage market is roughly segmented between a broker channel, in which price-sensitive borrowers are able to get a competitive interest rate, and the direct bank channels, in which borrowers’ ability and willingness to negotiate plays an important role. Importantly, other factors not related to mortgage rates could motivate borrowers to choose the direct bank channel. For example, borrowers may value the price discounts they receive on other financial products from having their services bundled at the same institution. They may also value the convenience of “one-stop banking” or may perceive the search costs as too high.” Bank of Canada Oct 2016
Why A Large Mortgage Brokerage Beats A Small Mortgage Brokerage:
As one of British Columbia’s largest and most active brokerage’s Lenders see us as a great source of new and ongoing business and offer us programs unavailable to smaller brokerages. Consequently, our clients get better mortgages and better rates.
Why We Beat Most Other Mortgage Brokerages:
Our modern, purpose built, high tech underwriting hub employs some of the Industries top underwriters, their breadth of experience and expertise helps us provide outstanding service and results.
Our use of industry leading mortgage origination software and our own unique proprietary systems makes deal processing faster, more efficient and helps us tailor the most appropriate solution for your needs.
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What Factors determine Canadian Mortgage Rates?
We know that bonds affect mortgage rates but why? It’s because bonds and mortgages are attractive to investors who want a fixed and stable return in exchange for low risk. There is a very strong correlation between mortgage rates and the Government of Canada bond yields. Bond yields change daily, therefore so can mortgage rates. There are many factors that affect mortgage rates. Here are a few:
Government of Canada Bond Yields
Government bonds are 100% guaranteed to be repaid, but mortgages are not. This means that mortgages carry more risk of default or early repayment and can disturb the return on the investment; therefore, mortgage rates must be priced higher to make up for that risk. But how much? Well, in a normal market, the average spread above the 100% secured government bonds is approximately 120 basis points or 1.2%. The spread also broadens and contracts with investor appetites, supply of available product and presence of competing investments (like corporate bonds or domestic and foreign equity markets).
When inflation is on the rise, bond prices fall and when inflation decreases, bond prices rise. This is because rising inflation weakens the purchasing power of the investment – meaning when the bond matures, the return on the investment will be worth less in today’s dollars.
Credit rating agencies assign credit ratings to bond issuers and to particular bonds. A credit rating provides information about an issuer’s capability to make interest payments and repay the principal on a bond. The higher the credit rating, the higher the likelihood of an issuer being able to meet payment obligations. If the issuer’s credit rating goes up, the price of its bonds will rise. If the rating falls, bond prices will also fall.
What are Fixed Mortgages and Variable Mortgages?
Market rates are usually 2% below ‘Conventional Mortgages’ rates. Different kinds of mortgages appeal to different types of borrowers. See Bank of Canada for current ‘Prime’ and ‘Conventional Mortgage’ rates. (Near bottom under ‘interest rates’)
Fixed Rate Mortgage
Fixed rate mortgage loans are primarily influenced by the yield on Canadian government bonds (bond yields) of corresponding maturity. The difference between the two rates (mortgage rates and bond yields) represents the yield that financial institutions require to lend the funds out on the mortgage market.
With a fixed rate mortgage, your interest rate won’t change throughout the term of your mortgage. There will be no surprises; your payments will always be exactly the same and you will know how much of your mortgage will be paid off by the end of the term. Regardless of what happens to interest rates you still pay the same rate.
Variable Rate Mortgage
Variable mortgage rates are essentially determined by commercial banks’ prime rates, which are mainly influenced by the Bank of Canada’s key interest rate. Thus, an increase in the key interest rate almost automatically leads to an equivalent increase in variable mortgage rates. The Bank of Canada raises its key interest rate when it wants to fight inflation.
When you have a variable rate mortgage for the length of you term, your payments will fluctuate depending on interest rates. (Rates go up and down dependent on the bank’s prime lending rate, and can change from month to month.) When rates change, your payment amount will stay the same, but the amount that is applied to the principal will vary. e.g if interest rates fall, more of the payment will be applied to the principal – if they go up, you will pay more to interest and less to the principal, which means it will take longer to pay the mortgage.
Fixed Mortgage Rate
You’re locked in at a specific rate for the term of the mortgage.
Stays the same whether rates rise or fall. Great if you need stability.
If the difference between the variable and fixed rate is significant, it may not be worth paying a premium for the stability protection of a fixed rate.
Variable Mortgage Rate
Your rate will go up or down dependent on the prime rate Bank of Canada
Examined historically, variable rates have proven to be less expensive over time.
Significant increases in the prime rate will increase your interest payable and you will end up paying more over the life of your mortgage.
Popularity of Fixed vs Variable Mortgage Rates
Fixed 66% of Mortgages
Variable 26% of Mortgages
Combination 8% of Mortgages
Source: Canadian Association of Accredited Mortgage Professionals (CAAMP) November 2013 Annual State of the Residential Mortgage Market in Canada Report