Rates are NOT rising- well, not the way you think - UPDATED
Joel Olson • July 10, 2017
UPDATE: The Bank of Canada has increased their overnight rate to .75% as of July 12, 2017.
Despite many articles predicting interest rates going up. They are not. Well, not in the way you think.
This week the Bank of Canada will meet, as they do several times over the year to determine if its necessary to
increase the Bank of Canada Prime Rate. They have not done so since 2010. Although, it is yet to be confirmed,
there is a possibility that this could in fact be the time they do exactly that.
The prime rate effects every variable rate mortgage, line of credit, investment in Canada. This alone is one of the
major reasons that this decision is made with extreme caution. Essentially, in a very broad view the Bank of
Canada rate is related to how much a bank pays to obtain and access funds. The bank then has their own prime
rate that is directly linked to the Bank of Canada. Almost 100% of the time these prime rates match. However, last
time the prime rate went down, it worthy to note that the banks didn’t pass on the discount right away, and they still
do not pass on the full discount. The major bank world of Canada is small though, so there is very little room for
difference between the major banks on these things, without the prospect of losing instant market share.
So, let's then assume that prime rate is increased, and the banks raise their prime rate to match that. That is likely
what would happen. This means that if you have a line of credit or a variable rate mortgage that your interest rate
will increase. The Bank of Canada hasn’t increased prime beyond .25% in over 25 years. So, let’s prepare for
doomsday, if you have a $500,000 mortgage, your payment would in the most extreme examples increase by $62
per month. Obviously, as balances will be even lower for most people, that increase will be even less. To further
frame this, it is a little know fact, that many variable mortgages do not increase the payments. This means that
your payment remains the same, but the ratio of principal to interest changes, so the risk of a rising payment is
eliminated. The other thing to remember is that with a higher prime rate, it's often a case that lender will create even
bigger discounts on variables.
But- why bother? Still seems risky to you. The value of having a variable still will outweigh a fixed rate in many
situations, here is a great rundown of that, by a great mortgage broker friend of mine:
In any case, the world of interest rates has changed a lot in the past twelve months. Be worried of anyone quoting
you a mortgage rate after a brief two minute conversation. There is much to consider for your life, situation, future
and also many terms on mortgages that restrict you in a way that it is unlikely you would even ask.
Mortgage Registration 101: What You Need to Know About Standard vs. Collateral Charges When you’re setting up a mortgage, it’s easy to focus on the rate and monthly payment—but what about how your mortgage is registered? Most borrowers don’t realize this, but there are two common ways your lender can register your mortgage: as a standard charge or a collateral charge . And that choice can affect your flexibility, future borrowing power, and even your ability to switch lenders. Let’s break down what each option means—without the legal jargon. What Is a Standard Charge Mortgage? Think of this as the “traditional” mortgage. With a standard charge, your lender registers exactly what you’ve borrowed on the property title. Nothing more. Nothing hidden. Just the principal amount of your mortgage. Here’s why that matters: When your mortgage term is up, you can usually switch to another lender easily —often without legal fees, as long as your terms stay the same. If you want to borrow more money down the line (for example, for renovations or debt consolidation), you’ll need to requalify and break your current mortgage , which can come with penalties and legal costs. It’s straightforward, transparent, and offers more freedom to shop around at renewal time. What Is a Collateral Charge Mortgage? This is a more flexible—but also more complex—type of mortgage registration. Instead of registering just the amount you borrow, a collateral charge mortgage registers for a higher amount , often up to 100%–125% of your home’s value . Why? To allow you to borrow additional funds in the future without redoing your mortgage. Here’s the upside: If your home’s value goes up or you need access to funds, a collateral charge mortgage may let you re-borrow more easily (if you qualify). It can bundle other credit products—like a line of credit or personal loan—into one master agreement. But there are trade-offs: You can’t switch lenders at renewal without hiring a lawyer and paying legal fees to discharge the mortgage. It may limit your ability to get a second mortgage with another lender because the original lender is registered for a higher amount than you actually owe. Which One Should You Choose? The answer depends on what matters more to you: flexibility in future borrowing , or freedom to shop around for better rates at renewal. Why Talk to a Mortgage Broker? This kind of decision shouldn’t be made by default—or by what a single lender offers. An independent mortgage professional can help you: Understand how your mortgage is registered (most people never ask!) Compare lenders that offer both options Make sure your mortgage aligns with your future goals—not just today’s needs We look at your full financial picture and explain the fine print so you can move forward with confidence—not surprises. Have questions? Let’s talk. Whether you’re renewing, refinancing, or buying for the first time, I’m here to help you make smart, informed choices about your mortgage. No pressure—just answers.
Thinking About Buying a Home? Here’s What to Know Before You Start Whether you're buying your very first home or preparing for your next move, the process can feel overwhelming—especially with so many unknowns. But it doesn’t have to be. With the right guidance and preparation, you can approach your home purchase with clarity and confidence. This article will walk you through a high-level overview of what lenders look for and what you’ll need to consider in the early stages of buying a home. Once you’re ready to move forward with a pre-approval, we’ll dive into the details together. 1. Are You Credit-Ready? One of the first things a lender will evaluate is your credit history. Your credit profile helps determine your risk level—and whether you're likely to repay your mortgage as agreed. To be considered “established,” you’ll need: At least two active credit accounts (like credit cards, loans, or lines of credit) Each with a minimum limit of $2,500 Reporting for at least two years Just as important: your repayment history. Make all your payments on time, every time. A missed payment won’t usually impact your credit unless you’re 30 days or more past due—but even one slip can lower your score. 2. Is Your Income Reliable? Lenders are trusting you with hundreds of thousands of dollars, so they want to be confident that your income is stable enough to support regular mortgage payments. Salaried employees in permanent positions generally have the easiest time qualifying. If you’re self-employed, or your income includes commission, overtime, or bonuses, expect to provide at least two years’ worth of income documentation. The more predictable your income, the easier it is to qualify. 3. What’s Your Down Payment Plan? Every mortgage requires some amount of money upfront. In Canada, the minimum down payment is: 5% on the first $500,000 of the purchase price 10% on the portion above $500,000 20% for homes over $1 million You’ll also need to show proof of at least 1.5% of the purchase price for closing costs (think legal fees, appraisals, and taxes). The best source of a down payment is your own savings, supported by a 90-day history in your bank account. But gifted funds from immediate family and proceeds from a property sale are also acceptable. 4. How Much Can You Actually Afford? There’s a big difference between what you feel you can afford and what you can prove you can afford. Lenders base your approval on verifiable documentation—not assumptions. Your approval amount depends on a variety of factors, including: Income and employment history Existing debts Credit score Down payment amount Property taxes and heating costs for the home All of these factors are used to calculate your debt service ratios—a key indicator of whether your mortgage is affordable. Start Early, Plan Smart Even if you’re months (or more) away from buying, the best time to start planning is now. When you work with an independent mortgage professional, you get access to expert advice at no cost to you. We can: Review your credit profile Help you understand how lenders view your income Guide your down payment planning Determine how much you can qualify to borrow Build a roadmap if your finances need some fine-tuning If you're ready to start mapping out your home buying plan or want to know where you stand today, let’s talk. It would be a pleasure to help you get mortgage-ready.
