Bank of Canada Rate Change – Should I lock in?

Interest Rates Nathan Lawrence 13 Sep

This past week the Bank of Canada increased their lending rate for the 2nd time in as many months.  The changes in the Prime Lender Rates means that those with a variable mortgage rates will have seen that their mortgages rates adjusted alongside the changes to Prime Rate.  For those of you with variable rates, the first thing that probably crossed your mind was “should I lock in?”


Even though your interest rate may have increased, it does not mean that you should immediately lock into a fixed rate mortgage.  An associate of ours from B.C, Dustan Woodhouse had this to share earlier this week about the increase:


“If your discount from Prime (now 3.20%) is 0.50% or deeper – then the variable rate product remains a really great place to be.

 If your discount from Prime is 0.25% or less, then depending on which lender you are with you may consider converting to a fixed rate, BUT…

Keep in mind the penalty to prepay (i.e. refinance or sale of property) a variable early is ~0.50% of the mortgage balance, whereas if in a (4yr/5yr or longer) fixed rate mortgage the penalty can be closer to 4.5% of the mortgage balance ***depending upon which specific lender you are with and how long of a term you lock in for.

It is usually to the lenders greater benefit that you lock into a fixed rate, rarely is it to your own benefit.”


I could not have summarized it any better myself, so I won’t try.


So what should you do?

The first thing that you should be doing is avoiding the immediate draw or feeling of “I need to lock in”.  There are several different aspects of your mortgage and personal financial situation that should be considered prior to locking in.  There are many questions to ask yourself prior to locking in and most of which the lenders are unlikely to ask you. Your lender is re-active, not pro-active – you need to be pro-active. And sometimes being pro-active results in no action being taken at all.

Simply because the Bank of Canada increased interest rates twice, this does not immediately mean that they will do it again.  There are many economic factors outside of their control that will impact their decisions regarding future potential increases.

Presently, the key is not to react quickly.  If you have questions about your specific situation and how the increase may impact you, feel free to give us a call to chat about things in more detail.  Allow us the opportunity to ask the questions that need to be asked prior to making a quick switch.


Food for thought…

Back in 2010 rates increased 0.25% three times, and that sat stagnant for nearly five full years before two 0.25% decreases back downward.

In other words the last time Prime was pushed as high as it stands today, it sat there for five full years. And was then cut.


The next Bank of Canada meeting is October 25, 2017.

I will be watching and waiting.


5 Reasons to Refinance Your Mortgage

Refinance Nathan Lawrence 24 May

Every year our team recommends a quick review of your mortgage and overall financial picture.  The majority of those annual reviews lead to quick and simple changes such as a payment increase to tackle your mortgage debt quicker, making a one time lump-sum payment or a change to the payment schedule to better line up with payroll dates.  However, sometimes the conversation changes to discussions around the options available for refinancing your mortgage.

In short, a refinance is the restructuring of your mortgage to access equity which has built up over the years of the client making their mortgage payments in combination with regular growth in the value of the home.  That equity, can be accessed by the client through a refinance process.  A refinance can happen during the current term of your mortgage or on renewal date.  Understanding which option is best comes down to a benefit/cost analysist to ensure that the refinance will improve your overall financial picture.

NOTE: A refinance is not always the answer and may not put you in a strong financial position.  Its important to review what your needs are and balance those with the potential costs of breaking a mortgage term vs. the savings that you will generate.  A great Mortgage Broker will make sure you understand all of this before proceeding.


Here are some of the most common reason a mortgage holder would consider a mortgage refinance.

  1. Reduce Your Monthly Mortgage Payments

Sometimes life will throw us a curve ball; a strike at work, job layoff, sick family member, the list is endless.  Those curve balls might make your current mortgage payments a bit more than you can handle.  By refinancing your mortgage, you can re-amortize the payments for a longer term, reducing the minimum monthly commitment that you have to make each month, freeing up your cashflow to address everyday living expenses.

  1. Consolidate credit cards, loans, or other unsecured debt into a new low interest rate mortgage

If you find yourself in a position where you are paying a significant amount in interest payments every month on your unsecured debt, then refinancing might be a great solution.  Credit cards often come with interest rates around the 19% range and unsecured lines of credit tend to be around the Prime + 4 range or higher.    These high interest rates can make it difficult to actually tackle the debt and the add additional monthly payments into your personal budget.  Accessing the equity in your home by way of a refinance can allow you to pay off those debts and consolidate them into one, low interest, mortgage payment.

  1. Finance home renovations

Perhaps you need to complete some much-needed home renovations that are either planned or unplanned but you currently do not have enough money set aside for the projects.  Rather than using a line of credit (or worse a credit card) you can refinance your home, pull out the equity, and cover the cost of the renovations using the home equity. This debt would then be worked into your new mortgage at a much lower interest rate, while at the same time you’re increasing the resale value of your home.  Ask us about how a Refinance Plus Improvements mortgage might work well for you.

  1. Planning for a big purchase.

Thinking about buying a car, an rental property, investing money in a business, early inheritance to family, covering education costs for a child or grandchild?  The list is endless.  The equity you have in your home can be used for anything like this and can be much cheaper than financing a similar plan by way of unsecured debt.

  1. Finding a new Lender

Not all mortgages are created equal, the rates are always changing, some are no-frills, and some have great features.  Or, maybe you are simply frustrated with the service that you are receiving from your current lender.  Depending on what you are looking for, refinancing may put you in a better position to take advantage of lower interest rates or the ability to pay off your mortgage faster.


With mortgage financing, it all comes down to finding the right plan and product to fit you needs.   Take the time annually to review your financing and if you think that one of the above refinance reasons hits close to home, give our team a call.  We are here to review those options with you, discuss the pros/cons and help guide you to a solution that meets your household needs!

The Rate Mentality

Interest Rates Nathan Lawrence 11 Nov

By: Nathan Lawrence

THIS JUST IN, MORTGAGE INTEREST RATES ARE…..and there it is again…headline news about another low rate from one of the main lenders.  But what does it all mean and why does it continue to grab the headlines on the evening news?

It probably comes as little surprise that mortgage financing in Canada is big business and very competitive business.  When you sit back and think about it for a moment you’ll probably start to realize that all of those headings, almost every one of them, are talking about the low rates.  “Great no frills Special”, “Employee Pricing”, “First Lender to drop their rate”.    For the most part Media puts the focus on the interest rate and as a result mortgage consumers are geared,…or better yet, are driven to make the interest rate the first and only thing they ask their mortgage specialist about.

Now don’t get me wrong, the interest rate is a big part of the conversation you should be having with your mortgage specialist.  It is after all, the cost you’re paying to borrow the funds.  However, the conversation should never stop at just the interest rate.  There are a number of other key details that you should understand as a mortgage consumer before you sign on the dotted line.

The conversation should focus on what your plans are over the next few years (paying special attention to the time frame that is reflective of your mortgage term length).   Have you thought about any of the following?

  1. What are the chances you will experience a job change over the term of the mortgage? (lay off, role change, transfer, etc)
  2. Do you have any major life changes in the near future (getting married, new child, etc)
  3. How about major expenditures? (Wedding, expanding family, replace a vehicle, etc)

These are just a few important details that your mortgage specialist is likely to want to know about.  How you answer those questions will likely impact the recommendations they have for you with regards to lender or term.

So what gives?  How will knowing those details impact their term/lender recommendations?

Well to sum things up, they want to know how to save you money upfront but also over the term of the mortgage.  Lump sum payments and portability options are just two ways that they make this possible.  In addition, knowing if there are any special restrictions or how the pre-payment penalty is calculated can save you thousands should you have to break your mortgage term early.

The bottom line?

When it comes to mortgages products, there is way more to the decision than simply the rate.  It is important to understand restrictions, flexibilities and how the pre-payment penalty is calculated.  Never simply assume that the lender with the lowest rate is the best.  Sometimes it will be, sometimes it won’t…When shopping for apples, don’t buy lemons…you probably won’t be happy with the outcome.

What Happens When Interest Rates Rise

Interest Rates Nathan Lawrence 7 Oct

By: Nathan Lawrence

With interest rates at historic lows, would you be able to afford a rate increase on your mortgage? In the short interest rates are not expected to adjust very much, but if you are in a mortgage that does not renew for a few years, you could be facing an adjustment at renewal time.

There are some fairly simply things that you, as a mortgage holder could do to better prepare yourself for when the rates start to increase:

  1. Take advantage of increase allowances to your mortgage payment.
  2. Make at least one annual additional payment against your mortgage.
  3. Or simply start using a projected increased payment when doing a monthly household budget.

The option 1 or 2 are going to have the best and biggest impact on your mortgage amortization and the overall interest you pay. However, if that is not possible start planning for an increase so that you know how your budget would be affected down the road.