Interest rates – Sendika12 http://sendika12.org/ Wed, 18 May 2022 00:44:24 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://sendika12.org/wp-content/uploads/2021/10/profile-120x120.png Interest rates – Sendika12 http://sendika12.org/ 32 32 Interest rates have risen in Canada – Here’s what it could mean for your wallet https://sendika12.org/interest-rates-have-risen-in-canada-heres-what-it-could-mean-for-your-wallet/ Tue, 17 May 2022 23:12:48 +0000 https://sendika12.org/interest-rates-have-risen-in-canada-heres-what-it-could-mean-for-your-wallet/ As we all know by now, the Bank of Canada raised interest rates by 50 basis points in April, following a 25 basis point increase earlier in the year. It’s sort of a big deal, brought on by the mess that was the early 2020s. the Bank of Canada. But what does this really mean […]]]>

As we all know by now, the Bank of Canada raised interest rates by 50 basis points in April, following a 25 basis point increase earlier in the year. It’s sort of a big deal, brought on by the mess that was the early 2020s. the Bank of Canada.

But what does this really mean for young Canadians? Let’s focus on two financial areas that are directly affected by rising interest rates: bank loans and investments.

Why raise interest rates?

Raising interest rates by 50 basis points (0.5%) is not very common. But there are good reasons to raise rates. On the one hand, it helps reduce the effects of inflation for ordinary Canadians.

Inflation is an increase in the price of goods and services. According to Statistics Canada, the consumer price index, a measure of the prices of goods, rose 5.5% between March 2021 and March 2022 — and that excludes oil prices. In March, Canada experienced a month-over-month increase in gasoline prices of 11.8%!

Rising interest rates can also help cool the housing market.

How will rising interest rates affect the housing market?

Simply put, when the Bank of Canada chooses to raise or lower interest rates, every other bank in the country follows suit. Different banks may have slightly different rates, but they will all be close to the rate set by the Bank of Canada. A particularly affected market is the housing market.

When interest rates rise, this includes interest rates on a mortgage. So when interest rates are higher, mortgages are more expensive for long-term homeowners. Thus, high interest rates give potential buyers pause, which in turn may encourage sellers to lower their asking prices.

Conventional wisdom suggests that it’s best to take out a loan – like a mortgage – when the interest rates you’ll be charged are low. On the other hand, it may be better to invest when inflation rates are high.

How will rising interest rates affect investments?

When you make an investment, the hope is that your money will earn interest, that is, it will grow. There’s a whole world of investments out there, but for the purposes of this article, let’s focus on Guaranteed Investment Certificates (GICs).

Fixed-rate GICs are a low-risk way for Canadians to invest money. Basically, you invest money at a fixed rate (meaning the interest rate on the GIC won’t change) for a specific period of time. These GICs are guaranteed to grow at the fixed rate, hence their name.

The fixed rate of a GIC will depend on the interest rate set by the Bank of Canada.

This means that, for example, people who invested in a fixed-rate GIC when the interest rate was lower might get a lower payout than people who waited until now to invest.

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SBI loans are getting more expensive: check the latest interest rates here https://sendika12.org/sbi-loans-are-getting-more-expensive-check-the-latest-interest-rates-here/ Mon, 16 May 2022 07:47:14 +0000 https://sendika12.org/sbi-loans-are-getting-more-expensive-check-the-latest-interest-rates-here/ Business oi-Roshni Agarwal | Posted: Monday May 16th 2022, 01:17 PM [IST] The country’s largest public lender, the State Bank of India, has once again raised its MCLR or marginal cost-based lending rates on loans by 10 basis points (bps). The revised MCLR interest rates come into effect on May 15, 2022. The lending rate […]]]>

Business

oi-Roshni Agarwal

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The country’s largest public lender, the State Bank of India, has once again raised its MCLR or marginal cost-based lending rates on loans by 10 basis points (bps). The revised MCLR interest rates come into effect on May 15, 2022.

The lending rate based on the marginal cost of funds is the minimum rate below which financial entities are not authorized to lend. Introduced in April 2016, the MCLR rate was intended to allow borrowers to benefit from lower RBI rates.

According to the bank’s website, overnight, one-month, three-month and six-month MCLR rates were all raised by 10 basis points to 6.85%, 6.85%, 6.85 % and 7.15%. Similarly, the 1-year MCLR, 2-year MCLR, and 3-year MCLR are now revised to 7.2%, 7.4%, and 7.5%, respectively.

Tenor Existing MCLR (in %) Revised MCLR (in %)
Overnight 6.75 6.85
A month 6.75 6.85
Three months 6.75 6.85
Six months 7.05 7.15
One year 7.1 7.2
Two years 7.3 7.4
Three years 7.4 7.5

In April 2022, the bank raised the MCLR by 10 basis points.

Article first published: Monday, May 16, 2022, 1:17 p.m. [IST]

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How do higher interest rates lower inflation? https://sendika12.org/how-do-higher-interest-rates-lower-inflation/ Sat, 14 May 2022 09:00:11 +0000 https://sendika12.org/how-do-higher-interest-rates-lower-inflation/ This type of communication was less common 30 years ago. But a series of Fed chairs – Alan Greenspan, Ben S. Bernanke and Janet L. Yellen – expanded the practice. Jerome H. Powell, confirmed Thursday for his second term as head of the Fed, succeeded central. The Fed uses official statements, publicly released economic projections, […]]]>

This type of communication was less common 30 years ago. But a series of Fed chairs – Alan Greenspan, Ben S. Bernanke and Janet L. Yellen – expanded the practice. Jerome H. Powell, confirmed Thursday for his second term as head of the Fed, succeeded central. The Fed uses official statements, publicly released economic projections, speeches, interviews and press conferences to tell markets where it wants them to go.

Right now, Prof Phelps said, the Fed could be “scaring people in financial markets into thinking they should lower their inflation expectations”.

He added, “The Fed is saying we should believe the inflation rate will come down because of the Fed’s efforts.” The idea is that “markets already expect the Fed to succeed in lowering inflation expectations, and that will lower inflation itself.”

That’s the theory, at least. There is evidence that it works. Longer-term interest rates have risen significantly this year, not just in mechanical response to increases in the fed funds rate, but as a reflection of changing views in the markets as to where the Fed wants interest rates and inflation to be a year or two from now.

This approach, however, has a drawback. It’s like the old telephone game. Start by whispering “higher interest rates and a soft landing for the economy” and before you know it, that message, passed from person to person, has become totally different. Fed messages mean different things to different people. Some people hear “recession”.

This, in my opinion, is a major reason for the increased market anxiety and volatility. There is no stable consensus on where the Fed is headed or whether it can get there.

Professor Phelps is also skeptical. “I have no idea how much importance should be attached to this thinking, this forward-looking direction,” he said. “A lot of people will have their own opinion on future Fed policy and I’m not sure their expectations can be directly manipulated in this way, but it’s an interesting question. Really, I don’t know how effective central banks are at changing inflation expectations, at guiding people to a particular rate of inflation.

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As Interest Rates Rise, Lenders Offer Creative Mortgages, Incentives – Orange County Register https://sendika12.org/as-interest-rates-rise-lenders-offer-creative-mortgages-incentives-orange-county-register/ Thu, 12 May 2022 18:44:13 +0000 https://sendika12.org/as-interest-rates-rise-lenders-offer-creative-mortgages-incentives-orange-county-register/ A combination of post-pandemic cabin fever and a 75% reduction in new mortgage applications has left thousands of Southern California mortgage originators with nothing but free time at the recent California Mortgage Expo in Irvine. It was so surreal, I felt like I was part of an anthill. Of all the people and speakers, I […]]]>

A combination of post-pandemic cabin fever and a 75% reduction in new mortgage applications has left thousands of Southern California mortgage originators with nothing but free time at the recent California Mortgage Expo in Irvine.

It was so surreal, I felt like I was part of an anthill.

Of all the people and speakers, I was struck by how creative and aggressive lenders have become in solving the income puzzle for homebuyers. The median home price in the area has risen by $105,000, or nearly 17%, since March 2021. And mortgage payments have also risen steadily, hitting a record high of $2,738 for the median home price of 735,000 $. This is an increase of 8.8% in one month and 31% in one year.

As Freddie Mac fixed mortgage rates climbed to 5.3% on May 12 from 3.22% in early January, rate cut refinancing has all but disappeared. While the Mortgage Bankers Association is reporting an increase in application volume, I suspect there are many pre-approved homebuyers who still can’t get a deal, and many mortgage borrowers aren’t getting anywhere fast.

Here are some of the alternative mortgages and incentive lenders shared at the exhibit…

Admittedly, the most aggressive loan program I encountered was a way for self-employed borrowers to qualify by using the last three months of business or personal bank account statements to qualify. The program adds up three months of deposits, including transfers from other accounts, and divides that by three.

Barring a good CPA letter explaining the drop in business expenses, most business owners will need to take a 50% discount to cover overhead – if you’re using business bank statements. For example, let’s say your last three months of business deposits and transfers totaled $300,000. Take 50% of that ($150,000) and divide by three months. Qualifying income reaches a generous $50,000 per month.

This loan only works for the purchase or refinance of a single owner-occupied home with loan amounts up to $3 million. The rates are between 6% and 7%. Ouch.

In another example, a lender allows income qualifications based on liquid assets.

Let’s say you have $1 million between your bank account and your stock market holdings. Divide that by three years and you get an annual income of $333,333. The maximum loan amount on this transaction is $4 million with interest rates ranging from 6.5% to 8.5%.

Perhaps the main difference between today and the mortgage meltdown of yesteryear is that this lender requires 30% equity or down payment. Back then, there were wild loans with little or no down payment.

And who said you need your own money to buy rental properties? One program I came across allows 100% donation funds (say mom gives you a wad of cash) with a FICO score as low as 620. Can you say straw buyer?

Mortgage originators are also continually pressured by real estate agents to close quickly in order to help their buyers.

A lender offering a fast-closing guarantee caught the eye of Lake Forest-based participant and mortgage originator Ed Personius.

“We can offer (the lender) a $2,500 guarantee that the purchase will close within a quick 15 days,” Personius said. In other words, if the lender has everything they need up front but can’t close within 15 days, they’ll give the buyer $2,500 credit at closing.

By moving toward vacation investment properties, a lender made it easier to qualify for a purchase or refinance by using average vacation rents instead of average neighborhood rents.

Let’s say the vacation rental income is twice the annual income of a long-term renter. For example, $100,000 per year (vacation) versus $50,000 (yearly tenant). You can use 80% of this average vacation rental income ($80,000) to earn qualifying income, instead of using $50,000.

Are you interested in financing an area with a house or without a house on the property? How about a wine estate? Or a farm? House hidden on a huge plot? All it takes is a 30% down payment with a lender. With few exceptions, most conventional mortgage lenders are reluctant to lend on parcels where most of the value is in the land.

Build from scratch? There is a construction loan available for a buyer contributing as little as 15% of the completed value. If the appraiser concludes that the final value will be $1 million, your investment is $150,000.

The offers also included instant home insurance quotes. An online seller was offering 20% ​​off the first year owner’s premium. The system claims to print proof of insurance in minutes. Not bad, especially for first-time buyers who may not have an agent.

How busy was the exhibition?

“There were just under 2,000 attendees,” said Vincent Valvo, CEO of American Business Media, organizer of the Connect expo. “Non-QM (exotic mortgages) were the hot topic.”

For better or worse, walking away after the show made me think that pretty much anyone can be financed if they have decent credit and a 20% down payment.

Freddie Mac Rate News

The 30-year fixed rate averaged 5.3%, three basis points higher than last week. The 15-year fixed rate averaged 4.48%, four basis points lower than last week. The 5-year ARM averaged 3.98%, two basis points higher than last week.

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What to do if interest rates rise again https://sendika12.org/what-to-do-if-interest-rates-rise-again/ Wed, 11 May 2022 06:08:58 +0000 https://sendika12.org/what-to-do-if-interest-rates-rise-again/ The pendulum swung after a season of historically low interest rates, dragging the country into a cycle of interest rate hikes. Scheduled to meet again in May, the MPC may choose to raise interest rates further. Owners are advised to assess their finances prior to the announcement to ensure they can afford the potential increase. […]]]>

The pendulum swung after a season of historically low interest rates, dragging the country into a cycle of interest rate hikes.

Scheduled to meet again in May, the MPC may choose to raise interest rates further. Owners are advised to assess their finances prior to the announcement to ensure they can afford the potential increase.

At the previous MPC meeting, two members favored a 50 basis point hike in the repo rate while three were in favor of a 25 basis point hike.

To play it safe, Adrian Goslett, Regional Director and CEO of RE/MAX Southern Africa, recommends homeowners check what their monthly repayments would be if interest rates were to rise by 50 basis points at the next meeting.

“There are various online calculators that can help homeowners determine possible home loan repayments. BetterBond, for example, has a repayment calculator that helps homeowners figure out what their repayments will be based on the size of their home loan and their given interest rate,” Goslett explained.

Armed with this information, homeowners can then look at their budget to find the funds needed to pay the higher repayment amount if interest rates do indeed increase.

“Being well prepared in this regard can mean the difference between being financially secure or falling behind on repayments,” Goslett said.

On top of that, Goslett warned that unless the accompanying interest charges are fixed, repayments on other debts will also increase, should interest rates rise at the next MPC meeting. .

“The disposable income of those who have other forms of debt will decrease with each rise in interest rates. My advice, especially for those repaying a home loan, is to channel extra cash into other debt repayments ahead of the upcoming announcement,” he said.

Elaborating on this point, Goslett explained that when deciding which debt to settle first, it is advisable to go for the debt with the highest interest rate.

“Things like a car loan or a personal loan will often incur higher interest rates than a home loan, and it might be a good idea to pay off those debts as soon as possible,” Goslett suggested.

However, everyone’s situation is unique. Those wishing to obtain advice tailored to their circumstances are encouraged to speak to a professional financial adviser.

Those who are unable to meet their home loan repayments should speak to a real estate professional about other options available.

“Moving to a smaller, more affordable home could relieve financial pressure and create a less stressful home environment. You’ll never know what’s available unless you start looking. Having a reliable real estate expert while you search can also make the experience less stressful. For those feeling the financial pressure, I recommend talking to the professionals before things get out of hand,” Goslett concluded.

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Why Mortgage Interest Rates Are Rising https://sendika12.org/why-mortgage-interest-rates-are-rising/ Mon, 09 May 2022 16:40:00 +0000 https://sendika12.org/why-mortgage-interest-rates-are-rising/ The recent increase marks the end of the historically low mortgage rates that homebuyers experienced after the financial crash of 2008 and 2009. On May 4, the Federal Reserve raised its benchmark interest rate by half a percentage point in an effort to tackle the nation’s worst inflation in 40 years. It’s the Fed’s most […]]]>

The recent increase marks the end of the historically low mortgage rates that homebuyers experienced after the financial crash of 2008 and 2009.

On May 4, the Federal Reserve raised its benchmark interest rate by half a percentage point in an effort to tackle the nation’s worst inflation in 40 years. It’s the Fed’s most aggressive move since 2000, reports the Associated Press.

On the same day people claimed on social networks that the 30-year mortgage rate in the United States had also reached its highest level since 2009.

THE QUESTION

Is the 30-year mortgage rate the highest since 2009?

THE SOURCES

THE ANSWER

Yes, the 30-year mortgage rate is the highest since 2009.

WHAT WE FOUND

It’s a common misconception that the Federal Reserve sets mortgage rates — but the agency influences them, Rocket Mortgage explains on its website. If the Fed raises its interest rate, banks and lenders usually raise mortgage rates soon after. On May 4, the Fed raised its key rate to a range of 0.75 to 1%.

Data from mortgage lender Freddie Mac and Bankrate show that the 30-year mortgage rate in the United States is currently at its highest level since 2009. The increase “marks the end of the historically low rates that characterized the period that followed the global financial crash of 2008”. and 2009,” says Bankrate.

Freddie Mac reports that the 30-year rate averaged 5.27% for the week ending May 5, down from 5.10% the previous week. Freddie Mac’s rates have historically trended slightly lower than Bankrate, which reports, based on its national survey of major lenders, that mortgage rates climbed to 5.38% from 5.22% in the week. previous.

If you were to buy a house for $400,000 with a 10% down payment and a 3% interest rate, your monthly payment would be approximately $1,500, not including home insurance and taxes. land. In the same scenario with an interest rate of 5%, your mortgage would probably be over $1,900 per month.

In 2009, Freddie Mac recorded the highest average 30-year mortgage rate of the year at 5.59% in the week ending June 11. The average 30-year mortgage rate for that year was 5.4%, according to data from Bankrate.

This is also a marked increase from the 30-year rate recorded a year ago, with Bankrate indicating it was 3.16% and data from Freddie Mac also showing the rate hovering around 3%.

“Low interest rates were the cure for the economic recovery from the financial crisis, but the recovery was slow so rates never rose much,” said Greg McBride, chief financial analyst at Bankrate. “The rebound in the economy, and particularly inflation, in the latter stages of the pandemic has been very pronounced and we now have an environment of mortgage rates rising at the fastest pace in decades.”

Interest rates reached their highest point in history in 1981, exceeding 18% at their peak, according to data from Freddie Mac. They steadily declined throughout the 1990s and early 2000s as inflation began to subside, reports Rocket Mortgage.

The VERIFY team strives to separate fact from fiction so you can understand what’s right and wrong. Please consider subscribing to our daily newsletter, SMS alerts and our YouTube channel. You can also follow us on Snapchat, Twitter, Instagram, Facebook and TikTok. Learn more “

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How high will interest rates go? https://sendika12.org/how-high-will-interest-rates-go/ Sat, 07 May 2022 19:00:00 +0000 https://sendika12.org/how-high-will-interest-rates-go/ However, it took the bank about six years – from May 2002 to March 2008 – to roll out its next hiking cycle. This is partly because in the late 1990s and early 2000s Australian mortgage lending boomed, partly as a result of the liberalization of the banking system, which encouraged competition from banks foreign […]]]>

However, it took the bank about six years – from May 2002 to March 2008 – to roll out its next hiking cycle.

This is partly because in the late 1990s and early 2000s Australian mortgage lending boomed, partly as a result of the liberalization of the banking system, which encouraged competition from banks foreign and small lenders, which drove down lending rates.

Debt got cheaper, so Australians borrowed more. This meant that the same percentage increase in interest rates – applied to a much larger mortgage loan – consumed a much larger share of excess household cash flow.

And the same thing just happened again during the COVID-19 pandemic, with ultra-low rates encouraging more borrowers to take out bigger mortgages. This is a fact of which the RBA is well aware.

Yet central bank governor Phil Lowe warned everyone this week that it was not unreasonable to expect the official exchange rate to return to something like 2.5% at a given time – although he staunchly refused to give a deadline, despite repeated questions from reporters. .

“Over time, it is not unreasonable to expect interest rates to reach 2.5%. How quickly we get there, and if we get there, will be determined by how events unfold,” Lowe said.

Why the escape? Two reasons.

The RBA really doesn’t know how events will unfold. If the past few years have taught us anything, it’s to expect the unexpected. It may be appropriate for the central bank to withdraw all support from the economy and move the interest rate to a level where it is “neutral” – that is, it exerts no effect of stimulation or contraction on the economy (at the moment it clearly still very stimulating).

But it could also happen that some support is still needed. Maybe workers are less successful than expected in getting pay raises. Perhaps there is yet unimaginable economic hell ready to unleash, which means it is still appropriate for monetary policy settings to be stimulative.

The second reason Lowe is a bit vague about where rates are headed is that the bank really doesn’t know for sure what the “neutral” cash rate would be. Estimates vary wildly and depend on a host of external factors, including what the government does with fiscal policy. If the government is spending on the rise, the neutral cash rate may be a bit higher, to ensure that the economy stays in balance. If the government cuts spending sharply, the neutral cash rate may be a little lower, to offset this contractionary impulse.

Nobody – not even the best economists in the country, let alone the media commentators – knows for sure what a neutral exchange rate looks like.

As my colleague Shane Wright made very clear in our Please Explain podcast this week, the neutral exchange rate is a bit like the famous American judge who said of pornography “I’ll know when I see it”.

So, in summary, the Reserve Bank does not know what a neutral cash rate is, or that such a rate is still the appropriate setting. Only time will tell.

So what should mortgage holders think?

Well, it’s definitely time to take a hard look at your household budget and see if you can afford a 2.5% increase in prevailing mortgage interest rates – and, if you can’t , where you can shrink to make sure you can.

You can use the government’s “Moneysmart Mortgage Calculator” (google it) to play around with different scenarios for your loan.

If I cancel my fixed interest rate of 1.84% in the middle of next year in a world where the cheapest variable interest rate in effect will probably be around 4.39% (1.99 % plus 2.4 percentage points), this will mean that my monthly rate of repayments goes from about $2,550 per month to about $3,500.

Ouch!

Luckily, I know I have a monthly budget surplus that can absorb that. Although I suspect I will have to cut back on my vacations or find ways to increase my income to stay comfortable.

Remember that you should have been stress tested by your lender when evaluating your loan, to ensure that you can afford interest rate increases of 2.5 percentage points or more. However, given the modest estimate of living expenses that loan appraisers typically apply, things could be about to get tough for many borrowers.

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No more Shiraz and Wagyu for you – or me – my friends. But don’t worry too much: mince and water can do just fine.

  • The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. They should always seek professional advice that takes their personal circumstances into account before making financial decisions.

Jessica Irvine is the author of the new book Money with Jess: Your Ultimate Guide to Household Budgeting. You can follow Jess’s other money adventures on Instagram @moneywithjess and sign up to receive her weekly email newsletter.

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Fixed or variable? How to Choose a Mortgage as Interest Rates Rise – National https://sendika12.org/fixed-or-variable-how-to-choose-a-mortgage-as-interest-rates-rise-national/ Mon, 02 May 2022 20:38:25 +0000 https://sendika12.org/fixed-or-variable-how-to-choose-a-mortgage-as-interest-rates-rise-national/ The Bank of Canada’s efforts to calm the housing market by raising interest rates is causing house hunters and homeowners to re-examine the type of mortgage they can take out. Global News spoke to mortgage experts and economists to help break down the factors consumers should consider when calculating monthly housing payment numbers in a […]]]>

The Bank of Canada’s efforts to calm the housing market by raising interest rates is causing house hunters and homeowners to re-examine the type of mortgage they can take out.

Global News spoke to mortgage experts and economists to help break down the factors consumers should consider when calculating monthly housing payment numbers in a rising interest rate environment.

How are mortgage rates determined?

First, find out about the different types of mortgages available to you.

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A fixed rate mortgage offers homebuyers a stable interest rate for a fixed term, usually fixed in three to five year increments over the term of the mortgage.

These rates are not immediately affected by Bank of Canada interest rate movements – although expected increases may be built into the rate offered to you – and therefore offer a little more predictability in your monthly payments throughout long term.

A variable rate mortgage changes in response to interest rate decisions by the Bank of Canada, as financial institutions link their prime rates to the central bank’s benchmark rate. You will then get a discount on top of that.

For example, today’s variable rate mortgage contract could get you the prime rate of 3.2 per cent minus 0.6 per cent, according to Leah Zlatkin, mortgage broker and expert with lowerrates.ca.


Click to play the video:







Speculation by Canadians ‘absolutely’ plays role in soaring home prices: expert


Speculation by Canadians ‘absolutely’ plays role in soaring home prices: Expert – April 24, 2022

Variable rates are “generally” lower than their fixed-rate counterparts, Zlatkin says.

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To understand how these two types of rates might affect monthly payment strategies, the key factor is the “spread” between them.

Read more:

Major banks raise prime interest rate after Bank of Canada decision

Today, Zlatkin pegs the typical variable rate mortgage between 2.3% and 2.6%, while fixed rates hover around 3.89%. The difference is therefore approximately 1.6%.

This spread will tend to contract as the Bank of Canada raises interest rates. Prime rates offered by banks will increase, closing the gap between today’s fixed rate monies and future floating rate payments.

Bank of Canada Governor Tiff Macklem has made no secret that the institution will be “vigorous” with rate hikes in an effort to curb soaring inflation.

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The central bank took a rare step of 50 basis points last month to raise its overnight rate to 1.0%. Some economists are predicting another half-percentage-point hike in the next rate announcement in June.

“Everyone has an opinion on where rates are going and no one really knows unless you’re at the Bank of Canada, in which case you’re probably not telling anyone,” Zlatkin says.


Click to play the video:







The Bank of Canada raises its key rate by 0.5%


The Bank of Canada raises its key rate by 0.5% – April 13, 2022

Desjardins said in a mortgage rate forecast last week that it expects the central bank to “raise the key rate quickly” over the coming year, but that it will be kept below 2.5%.

The Bank of Canada said last month it believed the “neutral rate” — the point at which interest rates neither fuel nor hinder the country’s economic growth — is between 2.0% and 3.0%. .0%.

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If the central bank raised rates this high in the current cycle, variable rates would rise 100 to 200 basis points and mortgage holders with this type of loan would immediately set monthly payments to reflect the higher rates.

Is it time to lock in a fixed rate mortgage?

Jimmy Jean, chief economist at Desjardins, told Global News that the Bank of Canada’s plans to rapidly raise interest rates could end the popularity of variable-rate mortgages after years of low rates influenced by the pandemic economy.

“We have seen strong demand for variable rate mortgages. But the further we go, the more this gap will narrow. … It might make sense in this context to lock in (the) interest rates that we can get now,” he says.

Sung Lee, mortgage officer at RATESDOTCA, told Global News that in the short term, there is still a “compelling reason” to go for a variable mortgage today, even with more rate hikes on the horizon. . He points to the spread of about 150 basis points between most variable offers and the current fixed rate.

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Read more:

Home prices could rise 15% in 2022 despite efforts to cool the market, says Royal LePage

Although she warns she doesn’t have a “crystal ball”, Zlatkin expects a 0.75% aggregate increase in the central bank’s overnight rate before the end of 2022. For this reason, she asserts that variable rates will remain the cheapest option in the long term. But she notes that the bottom line is not the top priority for the most risk-averse market watchers.

“If you’re the type of person who’s going to watch those Bank of Canada ads every time you have a heart attack, it’s not worth it,” she says. “Just pay a few hundred dollars more and go for a fixed rate.”

Why you might not qualify for so many mortgages

There’s another factor to consider with rising interest rates, and it could affect the price of the home you can afford.

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The mortgage stress test allows potential buyers – as well as those looking to refinance an existing mortgage – to qualify for the loan at the higher of two rates: either the offered rate plus 2%, or the qualifying rate of 5 .25%.

While those who have sought pre-approval for a mortgage over the past few years may have grown accustomed to qualifying at the 5.25% mark, the current rate hike could mean 3% mortgages being taken. .5% or more.

With the extra 2%, these buyers are now considering qualifying for mortgages at 5.5% or higher. Zlatkin says a couple who might have qualified for a $500,000 mortgage three months ago might only be able to get around $473,000 today.

“Therefore, your budget for the new house has to change as well,” she says.


Click to play the video: “63% of Canadian non-homeowners give up on buying a home: Ipsos poll”







63% of Canadian non-homeowners “give up” on buying a home: Ipsos survey


63% of Canadian non-homeowners “give up” on buying a home: Ipsos survey

However, just because your buying power doesn’t extend that far in the current market doesn’t mean it’s not the time to buy.

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Rising interest rates are already having a cooling effect on the Canadian housing market, Jean says, with sales starting to “moderate” in most markets and prices in provinces like Ontario and Quebec having potentially peaked.

Lee adds that with rates rising for the foreseeable future, your mortgage is unlikely to stretch much further in the months ahead.

“I don’t think rates are going to come down any further in the near term,” he said. “So if you can now get into something that fits your budget, I think that’s a great plan.”

© 2022 Global News, a division of Corus Entertainment Inc.

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Business leader concerned about ‘possibility’ of rising interest rates Business & Finance https://sendika12.org/business-leader-concerned-about-possibility-of-rising-interest-rates-business-finance/ Sun, 01 May 2022 00:11:49 +0000 https://sendika12.org/business-leader-concerned-about-possibility-of-rising-interest-rates-business-finance/ KARACHI: Chairman of the National Business Group Pakistan and Chairman of the Pakistan Businessmen and Intellectuals Forum, Mian Zahid Hussain, said the possibility of another interest rate hike by the central bank has disrupted the business community. He said a further increase in interest rates would negatively affect businesses, so before taking such a step, […]]]>

KARACHI: Chairman of the National Business Group Pakistan and Chairman of the Pakistan Businessmen and Intellectuals Forum, Mian Zahid Hussain, said the possibility of another interest rate hike by the central bank has disrupted the business community.

He said a further increase in interest rates would negatively affect businesses, so before taking such a step, its implications should be carefully considered.

Mian Zahid said rising interest rates would increase the cost of servicing debt. The private sector would feel the pain as the cost of doing business would rise, many businesses would close and jobs would be cut. Both exports and investments would be affected.

He said this decision would affect the growth rate which is already unsatisfactory. A continuous decline in the central bank’s foreign exchange reserves in recent months, the continuity of unnecessary imports, the sharp rise in the prices of oil, gas and other raw materials on the international market and the IMF’s demand for eliminate oil subsidies have made the situation worrying.

The increase in interest on loans granted to commercial banks by the government only aggravates the problems.

Mian Zahid said commercial banks would go along with a proposal to get more profit from loans, which deserves investigation.

The previous government, he said, had estimated the budget deficit to reach 3.9 trillion rupees, but wasteful and wasteful spending has made the situation worse and now Finance Minister Miftah Ismail has said the deficit budget could reach 6.4 trillion rupees, which would be equal to 10% of GDP.

In such a situation, when the government has only a limited amount of rupees left and business is spiraling out of control, it would be better to take out foreign loans instead of borrowing from local sources; it would also reduce the difficulties of drawing up the next budget.

He said there is a possibility of enhanced cooperation between the International Monetary Fund (IMF), Saudi Arabia and China for the good governance of Mian Shehbaz Sharif. Such a result will be good for the country.

India and Bangladesh do not need IMF loans, but Pakistan cannot function without the help of international institutions because its economic model is failing.

At present, it is necessary to design a viable strategy to increase foreign exchange reserves, he added.

Copyright Business Recorder, 2022

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Is it time to buy bank stocks in a rising interest rate environment? https://sendika12.org/is-it-time-to-buy-bank-stocks-in-a-rising-interest-rate-environment/ Fri, 29 Apr 2022 10:00:00 +0000 https://sendika12.org/is-it-time-to-buy-bank-stocks-in-a-rising-interest-rate-environment/ What banks do in the second half of this year and into 2023 will depend a lot on what the Fed does and how it reacts. In this Motley Fool Live excerpt from “Ask Us Anything”, recorded on April 11Fool.com contributor Lou Whiteman explains why simply buying good companies and keeping them may be the […]]]>

What banks do in the second half of this year and into 2023 will depend a lot on what the Fed does and how it reacts. In this Motley Fool Live excerpt from “Ask Us Anything”, recorded on April 11Fool.com contributor Lou Whiteman explains why simply buying good companies and keeping them may be the best approach right now.

Lou Whiteman: Basically, banks are in the business of buying and selling money. It’s a very pure business and so the rates, the spread between what they borrow or your savings rate and what they lend, your lending rate is how they make their money. Almost universally, rates on the lending side go up first, so banks, in normal times, have a real shot in a rising interest rate environment. They rate loans first before or more aggressively than they come back by increasing your savings rates and they tend to make more money. I guess according to ProShopGuy, yes, we will see that in the coming quarters. Whether it’s sustainable or not and whether or not there’s advice, I tend to agree with Jamie, that there’s the greatest free get out of jail card of any company that will give advice this year between what the Fed is doing with Ukraine, with supply chains, with energy prices. Why bother giving advice? You have so many excuses not to, so I’m not going to blame them for that.

But I mean it, again I tend to be the one who fears that inflation will last much longer than some say I’m not really in the Transtar camp but again to use this word again and again this morning what the business side of the banks will do in the second half of this year through 2023. Much will depend on what the Fed does and how it reacts. It’s really hard to say if this is sustainable, but the best banks know how to handle it. Buy good companies and keep them.

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