Are Sub 1% Mortgages A Good Idea
Pros:
- The interest rate is the lowest on the market, meaning lower monthly repayments.
- Sub-1% mortgages could encourage more competition in the overall mortgage market anda reduction in rates across the board.
Cons:
- They typically come with high fees. Depending on the amount you are looking to borrow, you may find it cheaper to take out a deal with a higher interest rate but lower or no mortgage fees.
- There is a limited choice of lenders.
- Deals are typically only available to applicants with a deposit of 40%.
- Some may be restricted to remortgages only, and cannot be taken out for home purchases.
- The deals are only available for two years. Once those two years have passed, the rate switches to a much higher standard variable rate unless you remortgage before the deal expires.
Be aware: it is not guaranteed you will qualify for an advertised mortgage deal, and lenders often have strict criteria for who is eligible.
It can be worth speaking to a mortgage broker, who will have access to a range of deals across the market.
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What Is The Prime Rate
When you apply for a loan with a variable interest rate, your lender will give you an annual interest rate thats tied to the banks prime rate. All kinds of loans are based on this rate, including certain mortgages, car loans, personal lines of credit, and even some credit cards. Think of the prime rate as the anchor these other interest rates are based on. As the prime rate moves up or down, so too does the rate of interest you pay on your loan.
Compare Todays Best Mortgage Rates
By MoneySense Staff on March 25, 2019
Use the MoneySense Mortgage Rate Finder to help you compare the most current mortgage rates from the Big Banks and brokers instantly.
Once youve found a mortgage you would like to know more about, simply click the Inquire button and fill out the contact form to get an obligation-free call back from a representative of the provider youve selected.
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How Are Mortgage Rates Impacting Home Sales
The total number of mortgage applications inched lower during the week ending December 17, 2021. The 0.6% decline was driven by a decrease in the number of purchase loan applications, according to the Mortgage Bankers Association.
- The total number of purchase loan applications decreased by 6% week-over-week, breaking a five-week run of increases. Compared to the same week last year, there were 9% fewer applications.
- Refinance applications, on the other hand, increased by 2% from the week prior but were 42% lower year-over-year. Refis made up a little over 65% of all applications.
Look At Interest Rate And Apr
Most borrowers tend to focus on mortgage rates. But the APR you pay on a loan is often just as or even more important than the basic interest rate.
Annual percentage rate looks at all your costs of borrowing and spreads them over the potential life of your loan. So APRs are higher than straight rates. And they can tell you about what youre actually going to pay.
Just note, APR assumes youll keep your loan its full term, which most borrowers dont. They either sell or refinance before the mortgage term ends.
So look at APR, but remember that its not always the last word on what youll pay. You can learn more about how to compare interest rates and APR effectively in this article.
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Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn’t a substitute for professional advice. You should consider whether the products or services featured on our site are appropriate for your needs. If you’re unsure about anything, seek professional advice before you apply for any product or commit to any plan.
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The End Of The Fixed Period
Fixed-rate mortgages
When your fixed period ends the rate will move to the HSBC Standard Variable Rate, unless you switch your HSBC rate.
Tracker mortgages
The tracker mortgage will track the Bank of England base rate for a 2-year fixed period, then it will move to the HSBC Standard Variable Rate, unless you switch your HSBC rate.
Current standard variable rate
Our current standard variable rate for residential mortgages is 3.54%, effective from 1st April 2020. These rates only apply when a fixed or tracker rate no longer applies.
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How Much Mortgage Can I Afford
There are many ways to determine how big a mortgage you can afford. However, there are some guidelines Canadian lenders use when evaluating your eligibility for a mortgage.
Your down payment: How much you are able to put down upfront will inevitably impact how big a mortgage you can afford. This is because there are minimum requirements for a down payment in Canada, depending on the cost of the home.
On a home thats $500,000 or less, youre required to put down at least 5% upfront. On a home thats between $500,000 and $1 million, youre required to put down 5% of the first $500,000, and 10% of the rest of the principal. On a $1 million home, youre required to put down at least 20%.
Down payments that amount to less than 20% of a propertys value are called high ratio mortgages and homebuyers need to purchase insurance to guarantee their mortgage. The price of the insurance premium is added to the monthly mortgage payment. Down payments that are at least 20% or more are called conventional mortgages and not require insurance.
Having a down payment that exceeds 20% will help you pay off your loan sooner and save you money in the long run. However, interest rates on high-ratio mortgages tend to be lower than the rates on conventional mortgages. Thats because the added insurance reduces the risk of the bank losing its investment.
How Does The Federal Reserve Affect Mortgage Rates
Home loans with variable rates likeadjustable-rate mortgages andhome equity line of credit loans are indirectly tied to the federal funds rate. When thefederal funds rates increase, it becomes more expensive for banks to borrow from other banks. The higher costs for the bank can mean a higher interest rate on your mortgage. ARM loans that are in their fixed period are not impacted by this increase. However if you suspect a federal increase is about to happen or it has just happened, you’ll want to move fast if you’re looking to make changes or have yet to lock in a fixed-rate mortgage.
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Whats Going To Happen To Interest Rates In 2022
Some experts believe that the base rate wont increase this year some say its unlikely so close to Christmas while others cite the new Omicron variant and the potential impact that could have as a reason why the rise will be delayed until next year.
But whenever the first rate rise happens there is already speculation there will be two further rate rises next year, with the base rate reaching 1% by the end of 2022.
A rising base rate means youll pay more on your mortgage each month if youre on a tracker mortgage or if youre on your lenders SVR and your lender passes on the increase. If youre on a fixed deal it wont impact you until you come to remortgage.
Find out more in our guide How can I protect myself against rising interest rates?
Buy To Let Interest Rates
The Fixed and Variable Rates shown below are applicable from 1st June 2013. These rates are available to existing EBS customers only.
Buy to Let – Standard Variable Rate
Cost per ‘000
Buy to Let – Fixed Rates
Cost per ‘000
Im a Tracker Rate Mortgage Holder
- If you avail of a fixed rate, our tracker rate commitment to you is deemed to be at an end and the lenders prevailing variable rate will apply on expiry of this fixed term. Just so youre in the know, if you avail of a fixed rate, you will lose the ability to avail of a Tracker Rate Mortgage in the future.
- If you wish to convert your mortgage to a fixed rate and you are on a tracker rate, you will need to contact your local EBS office to get an additional Tracker to Fixed Conversion Declaration. This can then be completed and submitted together with the Existing Business Fixed Rate Conversion Form.
- Take note, if the tracker to Fixed Conversion Declaration is not completed, your request to convert your mortgage account to an existing business fixed rate will not be processed.
A Final Note on Interest Rate Conversion
Fixed or Variable?
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What Are Prepayment Options
Prepayment options outline the flexibility you have to increase your monthly mortgage payments, or pay down your mortgage principal as a whole. The monthly prepayment option is a percentage increase allowance on your original monthly mortgage payment.
For example, if your monthly mortgage payment is $1,000 and your prepayment allowance is 25%, then you can increase your monthly payments up to $1,250. The lump sum prepayment option on the other hand, applies to the original mortgage amount. So, if your lump sum prepayment allowance is 25% on a $100,000 mortgage amount, then you can pay $25,000 off the principal every year.
How Are Mortgage Rates Determined
Mortgage rates are set by the lender. The lender will consider a number of factors in determining a borrower’s mortgage rate, such as the borrower’s credit history, down payment amount or the home’s value. Inflation, job growth and other economic factors outside the borrower’s control that can increase risk also play a part in how the lender sets their rates. There is no exact formula, which is why mortgage rates typically vary from lender to lender.
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Insured Insurable And Uninsurable Mortgages
Theinsurability of your mortgagewill affect your mortgage rate. Insured mortgages are those with CMHC mortgage default insurance or private default insurance from Canada Guaranty or Sagen. The borrower will pay for the mortgage insurance premiums.
Since the lender has zero risk, they will offer the lowest mortgage rates for insured mortgages. The mortgage rates that you see advertised online are often only for insured high-ratio mortgages, which are mortgages with a down payment less than 20%. Insured mortgages will need to meetCMHC mortgage requirements.
With insurable mortgages, the borrower wont pay for mortgage insurance. The mortgage wont be individually insured either. Instead, the lender can choose to bulk insure their portfolio of insurable mortgages and pay for this insurance themselves.
What this means to you is that the cost of mortgage insurance isnt directly paid by you if mortgage insurance isnt required. Insurable mortgages will have to meet the same requirements as an insured mortgage, but the only difference is that an insurable mortgage will need to have a down payment of at least 20%. Insurable mortgage rates are also slightly higher than insured mortgage rates.
An insurable mortgage can have a mortgage rate that is around 20 basis points added on top of an insured mortgage rate. Uninsurable mortgage rates will have around 25 basis points to 35 basis points added on top of insured mortgage rates.
What Are Origination Fees
An origination fee is what the lender charges the borrower for making the mortgage loan. The fee may include processing the application, underwriting and funding the loan as well as other administrative services. Origination fees generally do not increase unless under certain circumstances, such as if you decide to go with a different type of loan. For example, moving from a conventional to a VA loan. You can find origination fees on the Loan Estimate.
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Good Mortgage Rates Look Different To Everyone
What is a good mortgage rate? Thats a tricky question. Because many of the rates you see advertised are available only to prime borrowers: those with high credit scores, few debts, and very stable finances. Not everyone falls into that category.
Of course, you can look at average mortgage rates. But how reliable are those as a guide?
On the day this was written, Freddie Macs weekly average rate for a 30year, fixedrate mortgage was 2.99%. But the daily equivalent on Mortgage News Dailys website was 3.13%. So theres clearly a lot of variance across the market.
Who Benefits From A Fixed Mortgage Rate
Those who have a set limit as to the total mortgage payment that they can afford will benefit the most from Canadian fixed mortgage rates. All you have to do is determine the maximum amount you can pay for a mortgage, and get a fixed-rate mortgage that sets the payment at or below what you can afford. This payment will never change, so there is never any worry as to whether you will be able to pay the loan in the future. Again, if you like stability, the fixed-rate mortgage is right for you.
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How To Get The Best Mortgage Rate
Mortgage rates change daily and can vary widely depending on a variety of factors, including the borrower’s personal situation. The difference in mortgage rates can mean spending tens of thousands of dollars more in interest over the life of the loan. Here are some tactics to help you find the best mortgage rate for your new home loan:
How To Find A Good Mortgage Rate
Everyone wants the lowest mortgage rate possible. But what is a good deal? And how do you know youre getting the best rate available?
The first question is hard to answer, because a good rate is different for everyone. It could be 2.75% for one borrower and 3.25% for another on the same day.
But the second question how to find your best rate is an easy one.
All you have to do is check with a few different lenders. Their estimates will show you what a good rate looks like for your unique situation.
> Related: 7 Tips to get the best refinance rate
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Is It A Better Time To Buy Or Sell A Home
There are more economic factors on balance, putting downward pressure on home prices than upward pressure. However, that was also the case in the first three months of 2021 when Canadians desperate for more living space pushed home values higher.
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If you believe that the rise in buying activity is explained by Canadians seeking more living space, then the end of pandemic restrictions coming this summer might trigger an end to this economic real estate cycle.
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If you believe that interest rates are the primary driver of home prices, then the forecasted rise in rates would indicate prices will moderate in the second half of 2021.
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Population growth is also expected to remain below average in 2021, so population growth shoudnt come into play until 2022.
Homebuyer Advice
If you plan to buy in the next three years, be mindful that there is a risk that prices will fall in the short run, so that a wait-and-see approach may be appropriate.
The low mortgage rates provide more purchasing power for buyers who are still employed than in 2019, but less than six months ago. In a weakened market, low rates are a gift to homebuyers however, it inflates the value of a standard home in markets with low supply.
Home Seller Advice
Unemployment is still high, and if we use past recessions as a guide, there will likely be a weakening in home valuations.
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Compare Moving Home Mortgages
Both of Cumberland BSs two and five year fixed offers at a 90% loan-to-value ratio include a free valuation as an incentive.
Those who can only afford a 5% deposit on their new home and are looking for a two year fixed mortgage, could consider Digital Mortgages by Atom Bank. While the offer includes a free valuation as an incentive, it is not available to anyone self-employed. Therefore, self-employed first-time buyers in England and Wales might want to consider Nottingham BS, whose rate stands at 2.82%. It does also include a free valuation as an incentive. The product fee, however, stands at £999.
If you are looking to fix your mortgage for a longer period, then you can also consider Digital Mortgages by Atom Banks offer, which includes the same incentive and restriction for a five year fixed term. Therefore, self-employed first-time buyers could consider TSB instead. This mortgage comes with a product fee of £995, a free valuation, £500 cashback and a rate of 3.04%.
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