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Also below: There is more to a mortgage than a great rate
• TSX +56.27(Reuters)
• DOW -47.16
• Dollar +.17c to 92.12USD
• Oil -$.13 to $66.71US per barrel.
• Gold +$.60 to $993.10USD per ounce
• Canadian 5 yr bond yields +.01bps to 2.58. The spread, based on 5 yr rate of 4.09% is 1.51% This is up .07bps from a week ago, so we are returning to the comfort zone
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.55 and 1.75
There's more to a mortgage than a low rate
by Talbot Boggs
Monday, September 28, 2009provided by
(Special) - Homeowners and buyers are in a rather enviable position these days. Interest rates are at historic lows and the cost of borrowing for a home is about as low as it can get.
That's great news. But it's not the only thing homeowners and purchasers need to think about their mortgage.
There are a number of other features to consider before signing up for a mortgage and what is probably the largest debt that most Canadians will ever take on in their lives.
"When it comes to choosing a mortgage, getting a good rate is just the tip of the iceberg," says Mary Gronkowski, regional sales director with Mortgage Intelligence Inc., a national mortgage brokerage company. "You have to be aware of all the other features that may lie below the surface. All features of a mortgage should fit a homebuyer's personal goals, both now and down the road."
One type of mortgage to consider is an assumable mortgage.
An assumable mortgage means it can be transferred to another borrower. It allows a purchaser to take on your mortgage's terms and payments as part of the sale of your home. With extremely low interest rates today, that could be a big selling feature to a potential buyer in the future.
Given the low rates today, many homeowners are thinking about refinancing their mortgage.
Whether you should refinance your mortgage in a period of low interest rates depends on how much it will cost you to break your existing mortgage compared to how much you will save in interest payments.
If you break an existing mortgage you will have to pay the greater of three month's interest or the interest rate differential (IRD).
An IRD is a penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. Usually this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.
For example, if you had a $100,000 mortgage at nine per cent interest rate with 24 months remaining and wanted to renegotiate your mortgage at 6.5 per cent for 24 months, your IRD would be $5,000 ($100,000 x 2.5% $2,500 x 2 years $5,000).
It may only make sense to refinance your mortgage if the interest rate savings over the remaining life of your mortgage exceed the value of the IRD.
Another strategy is to take a variable rate mortgage. If interest rates go down and you keep your mortgage payments the same, you will be paying off more of your principal with each payment and will pay down your mortgage faster.
Many borrowers are taking advantage of low interest rates by accelerating payments on their mortgages. Many lenders will allow you to double up payments periodically or make lump sum payments of up to 20 per cent of the principal once a year.
You should make sure you understand the size and frequency of payments your lender will allow before you sign up.
Some mortgage lenders will have an option to skip a payment without penalty, which may come in handy in today's economy.
Another option that many mortgages have is portability.
This allows you to transfer your existing mortgage over to a new property, another big advantage if you have a mortgage at current low rates.
Not all portability features are the same, however. Some lenders allow up to 120 days to transfer the mortgage while others allow for only a few days or a week.
"Choosing the right mortgage involves considering where you are now and where you may be three to five years from now," says Gronkowski. "Working with a professional can help you make sense of the many options available to you."
Mobile banking expected to rise as smartphones gain ground
By LuAnn LaSalle
MONTREAL — The growing popularity of smartphones is expected to push up the use of mobile banking, allowing consumers to check balances, transfer money and pay bills.
In Canada, mobile banking is attracting small numbers of consumers who are essentially replicating their online banking habits.
Banks including RBC and Scotiabank offer the service and both say smartphones are key to its adoption.
While the Bank of Montreal says demand for mobile banking is still in its infancy and doesn’t offer it, it’s watching it with interest.
IDC Canada analyst Kevin Restivo said a lot of Canadians still don’t have access to the web on their mobile phones and that’s holding them back from trying the service.
“In the short term, it’s very new to Canadians,” said Restivo, who follows mobile devices and their applications.
Smartphones allow consumers to surf the internet, access email, watch video, listen to music, play games and run applications such as stock trading platforms and airline boarding information.
In the next three to five years, mobile banking should become more popular as more consumers get smartphones and wireless network speeds increase making the experience easier, Restivo said.
Scotiabank’s Mike Henry said its mobile banking service hasn’t had a high adoption rate, but noted that until recently cellphones didn’t have the speed or quality of browser to provide a great user experience for consumers.
“We’re seeing interest in this area growing now as smartphones become the norm,” said Henry, senior vice-president of sales and service.
Analyst Emmett Higdon said mobile banking won’t replace online banking because of the screen size and user experience.
“In most cases, it’s simply more difficult to do something on your mobile than it is to go and do it online,” said Higdon, senior analyst in electronic business at U.S.-based Forrester Research.
However, consumers who use mobile phones to do banking are doing it because “it’s in their pocket, it’s available any time, anywhere,” Higdon said from Charlotte, N.C.
Devin Sawyer, director of mobile channel for RBC, said customers using it have smartphones and an “untethered lifestyle” that often has them away from their desk and computer.
“It’s safe to say adoption is relatively low but steadily growing,” Sawyer said.
Younger consumers will push the adoption of mobile banking, he said.
“This younger generation is born to the view that there is no limit as to what a smartphone can do. So they will have an expectation going forward that there is no limit to where online banking can go.”
Aran Hamilton, of Toronto-based EnStream which has launched a mobile payment service called Zoompass, said one of the challenges to get consumers to adopt banking on cellphones is the “so what factor.”
“They don’t actually know why they want to do mobile banking,” said Hamilton, vice-president of strategic partnerships.
Hamilton believes that will change when consumers can do transactions with family and friends and businesses, making the mobile phone like a digital wallet.
EnStream is a joint venture owned by the three major Canadian wireless carriers, Bell Mobility, Rogers Communications Inc. and Telus Corp. Hamilton said he is discussing partnerships with several Canadian banks for Zoompass.
Higdon said banking on cellphones isn’t expected to really take off until mobile payments and commerce really start to take off.
“Right now, the biggest hurdle quite simply is the mobile banking that’s out there is, really, simply duplicating what the customer already has available in many other channels, be that the branch, the ATM and particularly online.”
Higdon said in the United States, about 10 per cent of consumers say they have used mobile banking.
“It’s smaller in Canada simply because the Canadian institutions haven’t pushing it as much as in the U.S.”
The Canadian Press
