Our Thoughts For Mortgage Renewals

Man and woman touching fingertips over little wooden house

Global equities were higher on the week except for China. The yield on the US 10-year Treasury note fell slightly to 4.22% from 4.26% a week ago but looks set to end well above the intraweek low of 4.10%. The price of a barrel of West Texas Intermediate crude oil fell nearly $5 to $70.70 this week while volatility, as measured by the Cboe Volatility Index (VIX), was steady at 12.8.



There was an excellent article in the Globe & Mail on Friday for clients owing a variable rate mortgage. Key Points below:

  • Most variable rate mortgages have a 5-year term, but some lenders are now offering 3-years terms.
  • As we expect interest rates to start falling in the second quarter of 2024, this may be worth consideration as we expect the reduction in interests rates to be gradual. You will pay a slightly higher rate on a 3-year term, but you will have more flexibility.
  • Floating payments may be more popular in 2024. These are payments that fall as the mortgage rate falls.
  • Almost all variable rate mortgages let you switch to a fixed rate at any time. The choice most often offered is a 5-year term.
  • Penalties: Most lenders make you pay a three-month interest penalty if you break a variable rate mortgage before maturity, but some lenders require 3 percent of the principal or tax on fees. Ask about your lender’s terms.
  • It is easier to be approved for a new mortgage if you do not need to pass the OFSI mortgage stress test. Ask your mortgage broker about this. Our recommended mortgage broker is John Parker at Tudor Mortgage. His direct line: 604.807.8996.



Job gains in the United States were slightly stronger than expected in November as the economy added 199,000 hires and the unemployment rate dipped to 3.7% from October’s 3.9%. Average hourly earnings ticked up 0.4% on the month while holding steady at 4% year over year.



The expectation of European Central Bank rate cuts in early 2024 helped push Germany’s DAX index to record highs this week. German industrial production fell 0.4% in October to the lowest level since August 2020.

Euro zone Q3 GDP was unrevised at -0.1% quarter over quarter and unchanged year over year.



A harshly critical report published Wednesday in the Wall Street Journal suggested that China’s GDP growth is most likely less than half the 5% to 6% target China set for 2023.

China’s debt outlook has been downgraded to negative while retaining its A1 rating for the country’s sovereign bonds, saying that China’s use of fiscal stimulus to support local governments and its continued property downturn poses risks to the nation’s economy. China’s finance ministry pushed back against the action, saying the impact of the property downturn is well under control. On Friday, China’s Politburo pledged to strengthen fiscal and monetary measures, bolstering efforts to stabilize growth.
Italy has informed China that it will exit the Belt and Road Initiative.

A court in Hong Kong gave Chinese property developer Evergrande until the end of next month to come up with a restructuring plan to avoid liquidation.

Several Bank of Japan policymakers, including Governor Kazuo Ueda, helped lay the groundwork this week for the central bank to eventually abandon its negative interest rate policy.



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