Posted To: MBS Commentary

As recently as January 10th, Jerome Powell unequivocally stated that the Fed's balance sheet wind-down was on auto pilot. In other words, they weren't going to be jumping back into buying bonds with balance sheet reinvestments any time soon. Now in the wake of the January 30th Fed statement, rehashing the balance sheet plan is all the rage. Today's line-up of speakers put an exclamation point on the topic with most of them clearly communicating a near-term end to the balance sheet run-off. In other words, there's a 2019 scenario (and a likely one, to hear them say it) where the Fed could begin buying bonds again. Keep in mind this isn't bond-buying in the QE sense. The Fed wouldn't be printing money or adding to its balance sheet. Rather, we're just talking about…(read more)

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Mortgage rates are most directly affected by the day to day movement in the bond market.  It’s interesting to consider that bonds improved quite a bit today, even though mortgage rates were only modestly higher.  In fact, some lenders continued showing rates that were roughly similar to yesterday’s.  What gives?!

Part of the problem is that yesterday saw bond markets fall (which implies higher rates) throughout the day, but not enough for many lenders to go to the trouble of changing their rate sheet offerings.  As such, they were left to raise rates this morning, assuming the bond market stayed at yesterday afternoon’s levels.  But because bonds improved today, lenders didn’t have to catch their rate sheets up to yesterday’s bond market weakness.

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Collateral ChargeThe beginning of the year is typically tough financially for most of us. Holiday bill payments, RRSP contributions, property tax bills, etc. And, if you’re self-employed, you probably have to make some sort of business tax or corporate tax payment. If December is the Holiday Season, then January and February feel like a hangover!

Banks and credit card companies love this time of year because this is when we’re most likely to carry a balance, forcing us to pay those crazy interest rates that range from 9% to 24%.

But, wait! Before you get too depressed, there may be a better option. There’s a less expensive way to manage your debt.

DEBT IS DEBT, JUST PAY LESS INTEREST

Canadians seem to think debt consolidation is a dirty word. Studies show that we’re paying down our mortgage balances faster (I like that trend), except we’re carrying other higher-interest debt such as car loans, unsecured lines of credit and credit card balances.

The big problem here is that these non-mortgage debts carry extremely high interest rates ranging from 6% to 24%. (Sorry Banksters, I’m leaking your secret!) So, when did it become okay to carry a smaller mortgage but still carry all that other debt? Don’t forget that mortgage rates today range from 2.9% to 3.85%. Which rate would you rather pay?

WHY THESE EGGS BELONG IN ONE BASKET

Professor Moshe Milevsky from Toronto’s Schulich School of Business published a study about debt diversification. The results show some clear differences between Canadians and Americans. We have better hockey players, better ski mountains and better beer… sorry, that’s not it LOL. His results showed that we don’t like to touch our mortgages… we’d rather use other credit facilities with higher rates. And this type of thinking has to change.

“Don’t put your eggs in one basket”.  Well, that may work for your assets, but it doesn’t work for your liabilities. I’m not sure why so many of us think this way. Maybe it’s because our parents told us to pay off our mortgage first. Good advice, but they didn’t say to borrow other money at higher interest rates at the same time. Or maybe it’s because we’re being hammered by the media with reports about ‘record personal debt levels’ and somehow we believe that if we don’t touch our mortgage, we aren’t part of that group.

TIME TO CHANGE AND SAVE $

Stop and think about your current situation. Do you have some equity in your home? Do you owe more than $20,000 in other debts? If so, then you could start saving money immediately. With house prices at all-time highs and mortgage rates still on the low side, it’s a great time to review your options. Speak with an experienced mortgage broker today.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca

Thanks !

Vitality is offering a unique strategy to get your life and serious illness cover sorted that may spark further conversation

Vitality has shown real initiative with its new Mortgage Protection Plan, which provides what all new homeowners crave: simplicity.

With all the paperwork and hurdles home-buyers go through to get a mortgage, the last thing on the to-do list is often life cover.

However, Vitality is offering terms for life and serious illness cover with just five underwriting questions (income protection requires more detail), meaning such an important job can be pushed up to number one priority.

Alongside this, it offers free mortgage cover, providing temporary cover should anything happen from the moment the property is owned to the policy starting. A great benefit, and one that advisers do not always talk about.

The downside to the offering is that the Vitality plan itself is not as simple as the application process.

One of the caveats is that it must include the “optimiser” option, meaning premiums aren’t fixed so could go up or down each year depending on how engaged the policyholder is with the healthy lifestyle plan.

From prices to perks

To earn these points and move up from Bronze to Platinum, policyholders need to do a variety of activities, from investing in a fitness tracker for steps to joining a gym and taking part in local park runs. If these activities do not take place, the price will increase year-on-year.

There are also the minimum monthly premiums to access the full Vitality benefits: £30 for a single plan and £40 for a joint plan, plus an additional monthly fee which opens the door to all the bells and whistles of your free Starbucks and cinema tickets.

This means it can be more expensive than its competitors. When you have just taken on one of your biggest financial commitments, are you going to be happy spending more on a plan to offset an extra 20 minutes on the phone? As one of the main drivers for consumers to buy protection, more should be done to highlight the need for cover when taking out a mortgage.

Making the right decision

There is still a misconception that people must have cover as a requirement of getting the mortgage, which simply is not the case.

That said, it is incredibly wise to do so and then to ensure cover is renewed as mortgage terms and balances change over time.

It is said there are 11.1 million mortgages in the UK, with around three million households having no cover in place. We have a lot more to do as an industry to highlight the importance of taking out protection, and this step from Vitality might shine a well-needed light on the topic of protecting one of the most important purchases we ever make.

Emma Walker is chief marketing officer at LifeSearch

The post Insurance Watch: Shining a light on mortgage cover appeared first on Mortgage Strategy.

Important Info

Collateral ChargeThe beginning of the year is typically tough financially for most of us. Holiday bill payments, RRSP contributions, property tax bills, etc. And, if you’re self-employed, you probably have to make some sort of business tax or corporate tax payment. If December is the Holiday Season, then January and February feel like a hangover!

Banks and credit card companies love this time of year because this is when we’re most likely to carry a balance, forcing us to pay those crazy interest rates that range from 9% to 24%.

But, wait! Before you get too depressed, there may be a better option. There’s a less expensive way to manage your debt.

DEBT IS DEBT, JUST PAY LESS INTEREST

Canadians seem to think debt consolidation is a dirty word. Studies show that we’re paying down our mortgage balances faster (I like that trend), except we’re carrying other higher-interest debt such as car loans, unsecured lines of credit and credit card balances.

The big problem here is that these non-mortgage debts carry extremely high interest rates ranging from 6% to 24%. (Sorry Banksters, I’m leaking your secret!) So, when did it become okay to carry a smaller mortgage but still carry all that other debt? Don’t forget that mortgage rates today range from 2.9% to 3.85%. Which rate would you rather pay?

WHY THESE EGGS BELONG IN ONE BASKET

Professor Moshe Milevsky from Toronto’s Schulich School of Business published a study about debt diversification. The results show some clear differences between Canadians and Americans. We have better hockey players, better ski mountains and better beer… sorry, that’s not it LOL. His results showed that we don’t like to touch our mortgages… we’d rather use other credit facilities with higher rates. And this type of thinking has to change.

“Don’t put your eggs in one basket”.  Well, that may work for your assets, but it doesn’t work for your liabilities. I’m not sure why so many of us think this way. Maybe it’s because our parents told us to pay off our mortgage first. Good advice, but they didn’t say to borrow other money at higher interest rates at the same time. Or maybe it’s because we’re being hammered by the media with reports about ‘record personal debt levels’ and somehow we believe that if we don’t touch our mortgage, we aren’t part of that group.

TIME TO CHANGE AND SAVE $

Stop and think about your current situation. Do you have some equity in your home? Do you owe more than $20,000 in other debts? If so, then you could start saving money immediately. With house prices at all-time highs and mortgage rates still on the low side, it’s a great time to review your options. Speak with an experienced mortgage broker today.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca

Mortgage rates may be close to their lowest levels in more than a year, but they were slightly higher versus yesterday.  Yesterday’s rates were close enough to 1-year lows that no one would take exception with the claim.  That said, rates on January 31st were slightly lower for most lenders.  

Why all the fuss?  No fuss, per se.  It’s just that many mainstream news outlets are running stories today about the “lowest rates in more than a year” due to Freddie Mac’s weekly mortgage rates survey.  Indeed, if we’re just comparing the Monday/Tuesday 30yr fixed rate averages (which is essentially what Freddie’s survey does), this week definitely qualifies as having the lowest rates in a year.  As is always the case with delayed data, by the time you read about it, the story has often changed.

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Rising housing costs are forcing many families across the country to change their financial habits, including postponing saving for retirement. And the biggest barrier to buying, according to 33% of respondents to a survey commissioned by Sotheby’s International Realty Canada, are the day-to-day expenses like rent, groceries and utilities. The figure was even higher in […]