I hate to say it, but summer months are almost gone and I hope that you’ve had the opportunity to enjoy the fantastic weather that we’ve had. Between busy weekends and holidays with friends and family, there’s been a lot going on in the financial world that may have passed a lot of you by.
At the end of June (coinciding with the end of school and super busy times for most Canadian families), the department of finance passed new mortgage regulations that shook the mortgage world by surprise, lower amortizations, the end of cash back mortgages for down payments (no more ‘zero’ down payment mortgages), refinancing values have also dropped to 80% of the value of your home and dropping the loan to values on Home Equity Lines of Credits to 65% are the most prominent ones to note.
To top that off, the banking world in London is being shaken by more corruption by a few of its major banks, and somehow the U.S. institutions were able to hide themselves from this scandal. Interest rates are typically set by individual banks to meet their own fiscal quotas however what was happening over in London was that 16 members of the banking elite would meet weekly to discuss what their internal lending rates would be set at.
This meeting pejoratively set up programs to deliberately increase or decrease their rates as they saw fit and let the consumer end up holding the bag had it cost them money. These meetings essentially set up interest rates for their own personal gain and have intentionally held up interest rates when they may have fallen further than they actually did during their tenure.
Since the scandal broke interest rates have broken through new territory. One to five-year fixed rates are between 2.39 – 3.09% respectively. In Ontario and B.C. there are a couple of small credit unions offering five-year rates at 2.94 or 2.99% and here in Alberta we are at 3.04 – 3.09% for five-year money, depending on speed of funding. I haven’t been able to find rates lower than this anywhere in our past.
The timing of these interest rates seems to coincide with the programs of the setting of the LIBOR rates, which is the programs set up by the band of 16 elite in London, which I haven’t heard anyone write or mention before but it sure does seemingly correlate to one another.
There have been numerous executives that have resigned, some major fines being paid but no arrests yet.
A lot of the publicity that these events would typically garner are being overshadowed by the Olympics and also of the aloofness of the holiday season by the masses.
So if you’ve ever questioned yourself about why you should care what happens overseas or even if these events affect you, this is just one simple example of the global times we are living through. Another is if Greece, Spain and Italy were in okay financial shape then our world would look a lot differently, but their financial catastrophes are affecting the likes of our interest rates half a world away.
As I’ve said a hundred times before, we in Alberta are currently shielded from some of the pain many other jurisdictions are feeling.
We definitely aren’t without risk in our economy but we’ve been fortunate that millions of dinosaurs lived on this lush land millions of years ago.
Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion lending Centres-Regional mortgage Group and can be contacted for appointments at 403-343-1125 or emailed to firstname.lastname@example.org.