Chad Moore Calgary Mortgage Broker

Hey Guys!

Here’s how I envision some of your conversations happening over this coming Christmas season …yes, I have fun writing these emails :-). 

These topics and questions might be good, once the political conversation dies down ;-).

Mortgage Interest Rate Conversation:

Your Question:  Hey (insert name), do you know where Mortgage interest rates are now?

Their Answer: No, I don’t know where interest rates are now.

Your Answer:  Last Christmas, if I was to refinance my Mortgage a 5-year fixed interest rate would be around 5.80%.  If I purchased a home with less than 20% down payment a 5-year fixed interest rate would be around 5.20%.   

Their Next Question:  Why is there a difference between these fixed interest rates??

Your Answer:  Back in 2018, Canada’s banking regulator made Mortgages for refinancing and for purchasing rental properties “uninsurable.”  

[you continue, leaning back in your chair, as others gather around]

Purchasing a home with less than 20% down payment requires “default insurance.”  One reason why insured Mortgage rates are lower than uninsurable Mortgages rates is due to the fact the bank cannot lose if the borrower defaults with an insured Mortgage. 

[without getting too far into the weeds, you quickly move on …]

You Moving On: Today, if I were to refinance my Mortgage a 5-year fixed interest rate is around 4.80%.  And if I was to buy a home with less than 20% down payment, rates are around 4.50%.   On average, that means a $400K Mortgage payment is about $250 less per month than last year. 

Fixed Versus Variable Rate Conversation:

This one will make you shine ;-) …

You:  It’s pretty crazy the Bank of Canada has dropped interest rates by 1.75% since June, hey.

Them: Yeah [grabs a huge handful of nuts-and-bolts].

You:  Did you know that fixed interest rates haven’t really dropped lower since the Bank of Canada started cutting interest rates though.  

Them: What? [speaking through mouthful of nuts-and-bolts]

You:  When the Bank of Canada lowers the central interest rate, the Prime rate comes down too.  The Prime rate is what variable rate Mortgages are based on.  Fixed interest rates move based on the change of government bond yields.  And bond yields have not really changed much since the Summer. 

Did You Know Conversation:

You: Did you know there is a difference between variable and adjustable rate Mortgages in Canada?

Them: [finishes a huge sip of rum and eggnog] No, and I bet you’re going to tell me. 

You: Variable rate Mortgages have a static payment.  When rates go up or down, the payment stays the same.  When rates go down more of that same payment goes to paying down the  principal.  If interest rates go up, more of that same payment goes to interest.  If interest rates go high enough, the clients entire payment might not cover all the interest.  This is what happened when interest rates peaked recently.  When the payment does not cover the interest cost, the clients amortization starts going backwards.  The Mortgage holder either needs to refinance, or make a lump sum payment toward their principal, or convert to a fixed interest rate.  Lenders with variable rate Mortgages are RBC, CIBC, BMO, National Bank, ATB and TD.  An adjustable rate Mortgage adjusts the clients payment up and down when rates change. 

Them:  [Feeling trapped in this conversation, they pour another rum and eggnog]

You: [sit back in your chair, toss a hard-candy in the air, and land it in your mouth.  Wink with your right eye]. 

Back Pocket Numbers:

• Bank of Canada rate: 3.75%
• Commercial bank Prime rate: 5.45%
• Bank of Canada next rate announcement is Wednesday, January 29th. 
• Average Calgary detached home price is $785,814 in November 2024.  Average Calgary detached home price in November 2015 was $523,430. 
• Median Calgary detached home price is $710,000 in November 2024. 

Conclusion:

At your family/friends gathering this Christmas season, the white-hot political conversation of when Justin Trudeau might finally resign, or how long he’ll clinging to power, is sure to come up.  

If that comes up, you’re likely going to also discuss when the pension sell-out Jagmeet Singh might vote non-confidence at the next Parliamentary sitting.  

When all of this is done, you can open up this email in your phone, take a quick peek at it under the table, and you’ll be ready to go with the next conversation!  

I hope this has been helpful, and mildly entertaining to read.

Merry Christmas!

Cheers,

Chad Moore