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Issue No. 18                 "Representing Your Best Interest!!" December 4, 2009
5 year Rates to fall  to 3.99%!!!

Lots of rate movement these past 2 weeks, but nothing really has come of it...

 While we have seen many news notes about dropping rates, the actual activity has been spawned by lenders "catching up" to others who had previously moved, and rates have not changed a lot from the last newsletter! Some shorter terms have moved down a little, but our basic 5 year terms, both fixed and variable remain stable. The only difference today is that all lenders are heading back to that magical 3.99% 5 year rate - I predict for the last time!! See my prediction on the bottom of "The Mortgage Market" article!
** Please note, we only advertise full service rates, not quick close products as we do not want to mislead those relying on our rate sheets.
Call us today!! 
Rod Minnes
Managing Broker

Rates as of Dec 4, 2009
Fixed Rate Mortgages    
6 month convertible            4.60%
1 year open                           6.50%
1 year closed                        2.35%
2 year closed                        2.95%
3 year closed                        3.50%
4 year closed                        3.99%
5 year closed                        3.89% 

Variable Rate Mortgages    
5 year closed - Prime* - .10%  ****
5 year open   - Prime* + .80%

Home Equity Line Of Credit

Please call for product availability and rates.

Information from sources deemed to be reliable. Product availability and borrower qualification apply.
*Prime = 2.25%
Rod Minnes
Global West Mortgages
Mortgage brokers do the legwork for you
Vic Cotton, Canwest News Service
Who are mortgage brokers and who do they work for? The question is one I hear a lot these days.
Here in Canada, about 35 per cent of mortgages originate through mortgage brokers (versus about 75 per cent of mortgage dealers in the United States and Europe).
Most people just walk into their local bank and fill out the paperwork and believe they received the best deal.
Well, the best deal for you, or for the bank?
When you walk into the bank, you will be shown only the products the bank has to offer. With the vast number of lenders and mortgage options available today, this strategy just doesn't make sense anymore.
You will never know what other options are available without working with a qualified mortgage broker.
As a mortgage broker, I don't only deal with the major banks but also banks that specialize in mortgage lending.
With all these options available to you through a mortgage broker's resources, you can be assured that you will receive the best rates and mortgage products to match your individual credit and financial situation.
In the past, it was thought that only those who had poor credit ratings sought the help of a mortgage broker to obtain a home loan.
Today's educated borrower realizes that using the services of a mortgage broker will not only save them time and aggravation, but in most cases save them a substantial amount of money throughout the term of their mortgage.
Mortgage brokers work with borrowers of all credit types and specialize in finding a mortgage of any size and type on any given day.
Further to this, most mortgage brokers will work with their clients on credit issues to improve their ability to obtain financing.
They connect you to a lender and help you navigate through the steps the lender requires of you as well.
You are better off going through a mortgage broker and letting them do the legwork to find you the best deal available. It's like having an advocate on your side during the lending process.
Remember, a mortgage broker will take whatever time is necessary for you to understand all the options and requirements for mortgages.
The mortgage broker's experience will be able to identify the positives and negatives associated with all the mortgage options available to you.
The mortgage broker is a negotiator and will make your case to the appropriate lenders if your situation should contain some financial or credit challenges.
In most cases, the mortgage broker's negotiations will result in better terms or rates for those in situations that leave them not up to bank quality.
There is also a misconception that a mortgage broker costs you money. In 90 per cent of cases, a mortgage broker is paid by the lender based on the dollar amount of the mortgage.
In cases where he/she has to go to a private lender, or a lender who does not provide compensation for the mortgage broker's service, payment is made by clients and taken out of the mortgage's proceeds.
If you are being charged for the services of a mortgage broker, ask if they are also being paid by the lender.
An ethical mortgage broker will not double-end on payment received.
Mortgage brokers build their business on referrals, providing personalized service and education to their clients, which larger banks are simply unable to provide.
Because of this, you can rest assured that your mortgage broker has your best interests in mind with everything they do.
Most mortgage brokers will work with you and your schedule.
We know how busy you are without the added inconvenience of a 9 a.m. to 5 p.m. window to get mortgage advice.
If you can't come to the mortgage broker, the mortgage broker will come to you.
By providing you with "one-stop shopping," a mortgage broker can get you a good deal and educate you along the way.
If you are looking for a mortgage, discuss your needs with a mortgage broker and see what kind of deal they can offer you -- you might be pleasantly surprised at the results.
So let's recap. Who should use the services of a mortgage broker?
Everyone from the investor looking to use the equity in their home for further investments, to the self entrepreneur who needs someone to understand what running a business is all about and the financial challenges that go with it.
The first-time homebuyer will find a wealth of information and mortgage products through a mortgage broker.
Such buyers will find options like purchasing with no down payment, cashback mortgages -- and even debt consolidation programs which will enable a purchase in the near future.
Contact a qualified mortgage broker and see why more and more people have discovered that using a mortgage broker just makes sense.

The Mortgage Market Explained
With the year 2009 coming to an end, I thought it was a good time to provide some much needed information on "The Mortgage Market", because as we roll into 2010, drastic changes are coming in interest rates and affordability as we have been accustomed to recently!
As we all know, real estate financing plays an integral role in the affordability of real estate to most Canadians. In fact, every 1% increase in residential mortgage rates literally ends the dream of home ownership for thousands of Canadians. When these rates play such an integral role in the availability of housing for Canadians, how is it that so many people have so little understanding of how these rates and mortgage pricing models are arrived at?
The mortgage market is definitely a segment unto itself in the financial marketplace. Still, to understand what is occurring in the mortgage market, one must understand how it interacts with the overall market for funds, commonly referred to as the capital market. The very cornerstone of the capital market is simply this: at any one point in time, some segments of the economy have surplus capital (investors) while others in the economy have a use for that surplus capital (borrowers).
 One of the largest determining factors of the supply and demand for funds is the interest rate that governs the process. This provides a measurement for the reward of saving, while providing the cost of borrowing. In economic terms, the interest rate is the point where there
is a close balance between the amount borrowed and the amount saved. In economic terms, the interest rate is the "price" of borrowed money.

In the past, banks primarily lent mortgage money from the deposit base of their customers. In today's market this is increasingly no longer the case. The competition for deposits has now escalated to the point where there is no longer a sufficient deposit base for banks and trust companies to lend from. Today, much of the bank's lending capital comes from their own ability to borrow from the debt capital market.
The debt capital suppliers have the primary responsibility of making sure that they preserve the capital of their investors while getting a fair rate of interest for the money they lend based on what it is lent for. The key driving forces behind the cost of that money (interest rate) is the relative credit worthiness of the borrower coupled with the expected rate of inflation for the period of time the money is being used.
So how are almost perfectly secured investments like prime residential mortgage rates priced the way they are? The comparison is really quite simple. Commonly in the financial markets, government backed financial instruments serve as the entry point being viewed as the risk-free investment. That is to say, governments have almost zero default risk through their ultimate ability to increase our taxes and control money supply (among many other variables).

In this case of mortgages, that comparative instrument is the federal government bond. This bond represents a promise by the Canadian Government to pay the interest stated and to repay the original capital at the stated maturity date.
Today, the largest determining factor is the relative price of the government bond for the term of the mortgage selected. In order to encourage those who invest in debt capital to invest in mortgages instead of government bonds there must be some kind of premium given as a reward for the extra risk associated with investing in mortgages.

This risk in financial terms is referred to as the spread. The spread effectively determines the premium charged for investing in mortgages instead of government bonds. This spread must take into account all of the extra costs incurred to fulfill a mortgage portfolio, and it must also factor in a profit. What you will find is that these spreads generally remain fairly constant. These are the number I quote when I see that rates are on the move!

So, next time you want to predict a mortgage rate movement, spend less time watching the Bank of Canada and more time watching the movements in the bond market. By tracking the day-to-day movement of these rates in the financial markets you may have much better success at predicting which way mortgage rates will move next.
PREDICTION - We will see rates drop to below 4.00% again here almost immediately based on the spreads, and it is my prediction that this will be the last time we see these rates! By spring there will hints that rates are on the move up, and by the end of 2010 we will see a 1% increase in fixed and variable rates! In the meantime housing prices seem destined to climb by at least 10% as well nationally! The combination of these factors will mean affordability right now will not be matched in the years coming! Inflation will the target word for 2011 and on!