The Insider's Scoop

No one can ever know for certain when it is the best time to buy a house or if it is better to lock into a fixed rate versus a variable mortgage rate. What we do know is that prime rate (currently 3.50%) has been rapidly dropping and this leads many of us to think "should we have gone with a variable?" Maybe, maybe not. Returning from a recent lender presentation, a leading bank gave their opinions about the market and here is what they had to share:

• the Bank of Canada will likely further decrease prime rate in January on their next 'rate date ' - January 20th, 2009.

• this will likely be the last rate decrease for sometime at which point prime rate will begin to rise. When it does rise, it will do so at a speed much faster than it has taken for it to lower to the rate it is currently at.

• fixed rates will likely be at their lowest in February 2009. Keep in mind that most financial institutions have a 90-120 day rate hold so if you are looking to purchase a home or renew your mortgage within that time frame, February will be the time to lock that rate in.

Ultimately it is up to the individual consumer to determine whether or not they would be able to sleep at night (determining their own, personal risk-tolerance) if prime rate were to drastically increase or would you prefer a certain level of peace-of-mind with a fixed rate?

Crunching Statistics

For those of you interested in these mortgage statistics (and who wouldn't be?) I've highlighted the one's I've found to be especially enlightening in bold red. Now, correct me if I'm wrong but with an average of 1.59% off of posted bank rates, I think we should see the number of people using mortgage broker's these days increase from 35% onwards!

Leah Plaizier

CAAMP has released its annual mortgage report and it's chock full of mortgage stats. Here's a rundown on the more notable ones:

• 5,250,000: The number of Canadian home owners with mortgages.
• 29%: The percentage of Canadian homeowners who got a new mortgage in the last 12 months.
• 86%: The percentage of people renewing or refinancing that stayed with their existing lender.
• $136,000: The average mortgagor's equity. This equity equals 51.7% of their home value on average.
• 22%: The percentage of mortgagors who took equity out of their homes in the past 12 months. People are spending more because last year it was 17%.
• $41,000: The average equity that borrowers took out of their homes this year. That's up 16% from last year. The most common reason for borrowing this equity? Debt consolidation.
• 50%: The ratio of new mortgages taken out in the last year with amortizations greater than 25 years.
• 5.41%: The average Canadian's mortgage rate. Last year it was 5.56%.
• 0.40%: The average interest rate improvement realized by people who refinanced in the past year.
• 1.59%: The average discount off of bank-posted rates.
• 1.96: The average number of quotes people get when shopping for a mortgage.
• 0.28%: The percentage of Canadians who are 90 days or more past due on their mortgage. That's up just slightly from last year.
• 10%: The approximate decline in mortgage approvals that CAAMP foresees in 2009.
• 36%: The percentage of Canadians who are aware that insured 40-year and 100% LTV mortgages have disappeared.

Peoples' favourite mortgage terms:

• 1-3 years: 29% of borrowers
• 4-5 year: 61% of borrowers
• Over 5 years: 10% of borrowers

CAAMP says there's a noticeable trend in borrowers taking shorter terms when compared to last year.

There's also a big trend towards variable rates. 40% of mortgages were variable in the past year. In CAAMP's 2007 report the number was just 21%. CAAMP says that's because "consumers may be expecting interest rate reductions." We'd also like to think they're becoming more educated about the long-term advantage of variable rates.

Where did people get their new mortgages this year?

• Major banks: 47%
• Mortgage brokers: 35%
• Credit Unions: 11%
• Other: 6%

Facts gathered by The Mortgage Group Ontario