March is shaping up to be a busy month indeed for mortgage rates, as a new low for the 5 Year Fixed popped up on Monday, at 2.74 per cent. That’s the lowest EVER for the 5 year fixed, which is the most popular mortgage rate among home buyers, and has been pushing the standard for rates progressively lower over the past year.
While the change is minimal, declining from Friday’s 2.77 per cent, it shows lenders may be stepping up their game to counter the reintroduction of BMO’s 2.99 per cent mortgage – the lowest offering out there by one of the Big Five.
Little Change Forecasted for Spring
While lenders continue to push the boundaries for 5 year fixed mortgage rates, this subtle movement is in line with RateSupermarket.ca’s Mortgage Rate Outlook Panels’ March forecast, which called for rates to stay close to current levels despite entering what is typically the hot spring mortgage market. According to panelist George Hugh, AMP and President at Taurus Mortgage Capital, this spring will lack the mortgage wars of seasons past.
“Due to a so called slower housing market and in general riskier global and domestic markets, the wars are NOT likely to happen,” he says. “All said and done, rates usually trend down, and this year they will stay just where they are which is not a bad thing at all. Take advantage now before it’s too late.” If you’re on the market for a new home, it certainly isn’t bad advice to jump on one of today’s extra low rates.
More About This Rate
At press time, the record low 2.74 per cent five year fixed mortgage rate is available through two lenders: Advent Mortgage Services and Butler Mortgages.
The AMS Low Down
AMS is offering the rate in Ontario, Northwest Territories as well as Yukon. High ratio borrowers qualify up to 95 per cent, meaning that those with even a five per cent down payment can take still take advantage. This mortgage comes with 10/10 prepayment privileges, meaning up to 10 per cent of the mortgage value can be paid off annually, or up to 10 per cent can be added to monthly mortgage payments – a surefire way to cut down on that amortization. AMS is also offering a 120-day rate hold, meaning those who prequalify have 120 days to keep the rate while on the househunt.
What Butler Brings to the Table
Butler is offering this rate in Ontario only, but with many of the same great options. High ratio borrowers still qualify, and prepayment is upped to 20/20 – meaning you can pay off a full 20 per cent of your mortgage with an annual lump sum payment if you can swing it. The rate hold on this one is capped at 124 days – ample time to find the dream home and cash in on this stellar rate!
How Much Will You Really Save With This Rate?
We’ve watched five year fixed rates nickle and dime their way to new lows for the past year. If you’re a homebuyer, will that slightly small bps spread really make a difference in your month to month payments?
Let’s compare what your payments will look like with the 2.74 per cent, compared with the last low of 2.77 per cent (seen only last Friday!).
First, let’s assume the following:
- A mortgage rate of 2.74 per cent
- A mortgage value of $363,740 (the national resale price average for 2012, CMHC Housing Market Outlook)
- A five per cent down payment of $18,187
- CMHC insurance premiums of $9501 (required on all down payments below 20 per cent)
- A total mortgage value of $355,055
- An Amortization of 25 Years
Run through our Mortgage Calculator, you’re looking at regular monthly payments of $1633.
Now, keeping the factors consistent but running the numbers with a mortgage rate of 2.77 per cent gives us a monthly payment of… $1639! There you have it, folks – a grand total of six bucks!
Keep in mind though, that six dollars turns into $1,800 over the course of 25 years – and if you’re planning to pay a larger down payment, or take advantage of those great prepayment privileges, the savings could be even more!
Best of luck, home buyers!