-GTA\’s Leading Mortgage Expert

My advice is to get a fixed rate mortgage and do it now. Over the past few months, the mortgage industry has undergone a dramatic shift. In developing countries, factory owners compete with one another by lowering the wages of their employees to offer Multinational Corporations the cheapest price for manufacturing their goods. This phenomenon is known as “The Race to the Bottom” and it’s occurring right now with the leading Canadian lending institutions. I had the pleasure of discussing this shift in the industry with an expert from RBC, whom I will keep anonymous.

Apparently, it all started when BMO (Bank of Montreal) wanted a bigger market share in the mortgage industry. They did something unheard of…they created the 2.99% 3 year fixed mortgage. In doing so, they shocked the industry, forcing both TD and CIBC to follow suit soon after. RBC joined the fray a little later on and the battle began. According to this expert, this new 2.99% fixed rate mortgage is unsustainable and banks are making very slim profits. BMO originally started this to get a bigger market share of the mortgage industry. With other leading institutions reacting, the Canadian mortgage market began its race to whom can get closest to the bottom while still making a profit. As I write this article, I’m able to issue mortgages even lower at 2.69% for a 3 year fixed rate. And it appears as though none of the banks will increase their rates anytime soon, since doing so would create a loss of market share.

The biggest problem with a fixed rate mortgage has always been the potential for the loss of savings. Variable rates have usually been better then fixed rates since they fluctuate but normally hover below fixed rates. However, I used to only advise those with a steady income and who are willing to follow mortgage trends to get a variable rate. This way, they will be able to afford the payments if something like the prime rate increased and they know when it may be better for them to break their contract and enter into fixed rate. But with these new low fixed rate mortgages, the industry is completely shifted and fixed rates are now the best choice for everyone. I say this because it’s unlikely that rates will get even lower so a variable rate could only do more harm than good. In addition, it seems as though rates may only go in one direction, up. Right now we are sitting at a point where the prime rate is very near its historical low point. With fixed rates hovering at a point even lower than that, there is no reason not to go for this mortgage. In addition, the lending practices have made it so many people can get this type of mortgage with even just 5% down on a property. Factoring in mortgage loan insurance and this rate is still spectacular.

With everything said and done, I do not advise that everyone go out and buy a new principle residence just because of this low fixed rate mortgage. There is no telling how long this mortgage will be around and if one just barely makes the cut for owning a property under these criteria, it may do more harm than good. Rates may jump dramatically at the end of your term and if you don’t have the capital to fund the new rates, your dream of homeownership can quickly turn into a nightmare of bankruptcy and debt. With that said, if you expect your income to increase within the term, then by all means, buy your dream home and take advantage of this rate. My personal recommendation is to use this low fixed rate mortgage to purchase an investment property, preferably a rent to own property. If you read my post from last month, you will see that coupled with this mortgage, buying a rent to own property will significantly reduce your carrying costs thereby increasing your monthly cash flow. For more information, please feel free to contact me at Narinder_Sidhu@centum.ca.

Narinder is a leading expert in the mortgage industry, focusing in the GTA. He works as a full time agent at Centum One Financial Group and in his spare time, both contributes articles and holds free seminars within the community. To learn more, please visit NarinderSidhu.com.

Narinder is a leading expert in the mortgage industry, focusing in the GTA. He works as a full time agent at Centum One Financial Group and in his spare time, both contributes articles and holds free seminars within the community. To learn more, please visit http://NarinderSidhu.com.

Author Bio: Narinder is a leading expert in the mortgage industry, focusing in the GTA. He works as a full time agent at Centum One Financial Group and in his spare time, both contributes articles and holds free seminars within the community. To learn more, please visit NarinderSidhu.com.

Category: Advice
Keywords: Mortgage Agent, Fixed Rate, Variable Rate, real estate, mortgage trends, Brampton, Mississauga