For many, the new year might mean it’s soon time to renew an existing mortgage. And even though interest rates continue to hover at remarkably low levels, there are still instances where a lender’s version of its ‘best‘ interest rate is a far-cry from the truth.

Take the face-rate of what any given financial institution is offering for a particular mortgage product. Then peel away the layers of the onion (so to speak) and often times that face-rate is significantly different than the actual best rate that can be obtained – especially on a renewal.

So when I came across this online article, it reminded me about the need to be aware of whether or not your best interests are truly being served by your lender…

Some great tips and basic insights in this article, worth noting:

1) Don’t be so quick to ‘bite’ on the rate ‘carrot’ that some lenders offer in their renewal letters. In fact, continue to do your homework, check out what they’re also offering online, or at their branch (if possible) and simply cut to the chase. Ask them to provide you with, “their very best terms up front, with no games.”

2) Knowledge is power. More and more of us now use online websites, blog sites, social media, etc to access current information on rates, products, and to compare and shop around. This is profoundly effective when it comes to assessing whether your lender actually has your best interests in mind. If they do – they should be more than willing to compete with the best rates you can find out there. Period.

3) Don’t be afraid to use a mortgage specialist to help you find the best rate. Remember – it’s their job to shop around for the best rate and product to meet your needs. And by doing so, they can also often provide a more personal level of service, because they’re usually more accessible and less biased when it comes to the competition.

Of course, the final decision is up to you. And surely there are some traditional lenders which do an excellent job of giving their customers the best rate, terms and service possible (depending on who you talk to). But I’ve also heard from countless consumers who admit they’re downright angry when, for instance, after 20 years of being with the same bank or financial institution – their calls are ignored, communication is terrible, and they realize they actually weren’t given the best rate, like they were told they got.

Something to chew on, the next time your lender tries to get you to ‘bite’ on their supposed best rate.

Comments?

Finally some positive news, south of the border, where the numbers from Nov of ‘09 show that several American real estate markets appear to be on the rebound.

A recent RISMedia article points out that below average prices (or at least below what was considered the norm just several years ago), coupled with the Obama government’s buyer tax-credit incentive, led to a surge in home sales in areas like Nevada, Ohio, the Midwest and upstate New York.

Perhaps one of the most interesting stats worth noting is the actual number of registered foreclosures in some areas. Take Las Vegas for example – as Sin City was one of several markets hit hard by the latest recession.  While the market drop took it’s toll, Vegas is in it’s 5th month (and counting) of steadily declining numbers of foreclosures.

Head east to Ohio and the Midwest, and there’s suddenly a feeling of cautious optimism, thanks to above average gains in sales and average home price, as buyers made a mad dash to beat the federally legislated tax-credit deadline. Collectively, home sales are up nearly 60% over November of ‘08 (when the ripple-effect from the economic meltdown was beginning to fully take shape).

Here we are in the dawn of 2010, and many real estate markets appear to have bounced-back rather nicely.  Glance at the latest national numbers, and at some of the major markets across Canada, and the numbers are far less bleak than we thought they would be back in, say, Nov ‘08 or Jan ‘09.

Then all of a sudden the rumor-mill begins to churn. The media-machine drums up the latest ‘what-if’ scenario, and starts making us fear anything seemingly too good to be true (which is ironic considering how often too good to be true is, in fact, actually just life being what it is).

And now, after threats of a pre-emptive strike by the feds, to kybosh any sort of building real estate bubble, now the talk seems to have shifted to government and financial officials thinking twice about cracking the whip, when it comes to imposing measures aimed at putting the squeeze on any further positive real estate gains.

A recent CBC News article hints the Bank of Canada (BOC) is now, quote, “backing away from recent warnings about a housing bubble in Canada.” And, in turn, that means that a knee-jerk by the central bank would be premature as it would quite likely mean muffling the momentum currently being experienced by the Canadian economy.

So the debate continues. There are still many who feel housing prices are still over-inflated and and they’re waiting for the other shoe to fall when it comes to the market. And there’s the other side of the equation which includes those whom are insistent that factors like pent-up demand, record-low mortgage rates, and a steadily declining inventory of homes to choose from (in most markets) are what is actually creating the sales activity and consumer spending (on real estate) that we’re currently experiencing.

Who’s right? Well, as usual, we won’t know until we get there. What’s more interesting to me is the idea that Canadians need to think about other factors which might affect them – in the not too distant future. For example, we will most certainly see a change in market conditions, sales activity, and prices if the feds decide to raise the downpayment requirement to something above the current 5% minimum, or if they decide to change the maximum amortization period to 25 years, down from the current 35 year maximum.

And as I mentioned in an earlier post, combine the two above proposed changes, with inflation and with predicted rise in interest rates in Q3 or Q4 of this year and suddenly the warning-bells for some Canadians should be going off regarding how much these measures could increase their already tight ability to service and qualify for their debt.

“The bank’s worry is that homeowners with large mortgages that are manageable now with interest rates at record lows won’t be able to afford their monthly payments once interest rates start rising, as is expected later this year.”

A legitimate concern but one that shouldn’t instill widespread panic, remembering that the fate of Canada’s recovery shouldn’t rely (and historically has never relied) on the housing market alone.

“On the economy as a whole … recovery is still dependent on government support and that growth driven by the private sector has yet to materialize.”

So we shouldn’t be surprised that the answer isn’t a simple one. And we also shouldn’t be surprised we can’t come up with the answer right away, today, this minute.  Hindsight is 20-20, so hopefully we’ll know what to watch out for this time. But even still, a lot of other factors will have to play out, organically, before we’ll know for certain whether any sort of bubble builds or bursts.

Thoughts Bubbling? Bursting? Send me your comments.

CIBC World Markets economist Benjamin Tal recently released a report outlining several different facts, forecasts, and concerns about the amount many Canadians have borrowed (and currently are borrowing) with regards to their homes and their total debt.

At a time when many (including myself) are predicting interest rates to rise by the coming spring or summer, talk is suddenly shifting to whether or not many Canadians will be stuck servicing debt loads they can’t handle – due to rising rates. Sure many can handle it now – but what about the future? And does this suddenly mean we can expect an influx of mortgage defaults on the market in the next 8-12 months?

Well, whether your glance toward the horizon involves a primarily pessimistic peer, or more optomistic ogling, a posting on canadianmortgagetrends.com is worth checking out, with regards to highlighting some of the more probable outcomes related to rising interest rates, and the effect this rise will have on the number of mortgage defaults in our country.

I think the most important point to consider (and both the website and Tal allude to this) is the idea that ‘biting off more than you can chew’ when it comes to debt-servicing your mortgage, and other debt, will hit a lot closer to home when inflation kicks-in and interest rates rise. I think a lot of us have grown very comfortable with the current, historically low, rates. And that’s dangerous if you’re relying on those rates to stay where they are – since it will surely cost you more to service that debt if you’re suddenly required to pay multiple basis-points above what you’re used to.

Perhaps the best thing many of us can do right now is, in fact, pay down as much debt as possible – instead of taking too much on. A calculated risk to be sure, as I’ve often also said sitting on the fence and refraining from actually getting into the market (for fear of rising rates, and increased expenses) isn’t necessarily helpful either.

Keep your eye on the prize, watch where you’re spending, and remember to seek out expert advice when you need it. That way it should be easier to weather any future storm, and also reap the benefits when times are good.

Comments?