interest rates 02 02 11

Interest RatesWhat does the future hold?

Presented by: Brad Compton

Tonight’s Discussion

Fixed vs. VariableWhat drives rates?Where have we been?Where are we going?New Mortgage rules

Fixed VS. Variable

Fixed VS. Variable

VARIABLE FIXED

Payments Fluctuate Payments Remain Constant

You can set payment amount Payments can’t be set

Penalty is 3 month’s interest Penalty is 3 month’s interest or IRD

Open product available No open product

Re-advanceable Product None available

What Drives Rates

Variable – Bank of CanadaFixed – Canadian Bond market

Bond Yield

Risk

Expenses

Profit

Mortgage Rate

10 Year Stats

Average Prime Rate: 4.46%Highest Prime: 7.25%Lowest Prime: 2.25%

3.00%

Average Fixed: 6.49%Highest Fixed: 7.75%Lowest Fixed: 5.19% 5.24%

Where Are We Going?

UP

WHEN???

Where Are We Going?

Variable – Overnight Index Swaps (OIS)

Where Are We Going

Canadian 5 yr Bond Yields

New Mortgage Rules

Reduced amortization to 30 yearsRefinances up to 85%CMHC no longer backing HELOCsMarch 17th deadline

New Mortgage Rules

Financial Ruin!

New Mortgage Rules

Roughly 30% of mortgages last year had 35 yr amortization. Most were FTHB

TD estimates the amortization decrease will impact 20,000 sales

Amortization reduction will drop average affordability by 6-7%

Roughly 10% of mortgages currently refi above 85%

Current default rate of .42%

New Mortgage Rules

New Mortgage Rules

Default rate below .5%CMHC Net Income $931M71% of book is on loans with an LTV of

less than 80%9% return on securitization activity

Who is Responsible?

Thank You

Brad ComptonInvis Mortgage Agent

Twitter: bcomp123www.YourLowMortgage.ca