spreads increasing

Isnt it interesting - if you read the newspapers - all you see are doom and gloom headlines.
Subprime this, subprime that - writeoffs, job layoffs, slow down - all the words that cause people to 'turtle' - pull in their feet and huddle in their homes...a slow down is coming - it will be self fulfilling.
but as i look at the market an interesting phenomena is unfolding
the 5 year govt bond rate is approx 3.4% and the discounted 5 year mortgage rate is just shy of 6% - this is a spread of 2.6%
this tells me lenders are making huge profits - they say money is hard to get - and they have to pay higher yields to investors - but i dont see it my world - traditionally the spread should be approx 1.6% so i would think 5 year money should in the range of 5%...will lenders drop rates ?
I dont thinks so - they will drop the prime rate (variable or floating rates) and keep the fixed rates high.. then when the floating rates move up - people will panic and jump to the higher fixed rates..i saw this before in the 80's...what goes around comes around...

greygoose out.....

HAPPY NEW YEAR - 2008

2008 - wow how time flies - this June will mark my 30th anniversary in the mortgage market. Times sure have changed - and unfortunately now, the consumer is being told to use mortgage brokers then go back to their institutions for matching - this is frustrating since we do the work and the lender - knows its approved so they match the rate and scoop the file. It would appear that simple common decency is disappearing in our society - certainly a shame.
In any event - rates rose prior to Christmas on the fixed side from 5.79-to as high as 6.14 for 5 year money. Is this to slow the Christmas rush and allow lenders to drop rates back to where they were and look like heroes in the new year ....??? time will tell.
gold is skyrocketing - oil is skyrocketing the US dollar is sinking - nothing lasts forever but dont stand in the way of a runaway train. If you have debt call us to reifnance, lower payments and batten down the hatches - now is the time to plan to reduce your debt levels

greygoose out.........

bank prime drops

the bank of canada reduce the bank rate to 4.25% today - a reduction of .25
this will translate to a drop in bank prime from 6.25% to 6.00%which will mean the floating interest rates will be as low as 5.4% versus the fixed 5 year at 5.79-5.99
rest assured the US fed will reduce rates next by .25-.50 and this will precipitate the possibility of a further reduction to our prime on Jan 22........unless.........
the US is building a fund to protect their dollar and their housing market. They are intent on allowing cities states etc to issue tax exempt bonds which will provide funds to enable them to buy back the subprime paper whose rates are being reset at higer interest rates.
this should put a floor under the subprime problem - investors will be happy to invest their funds tax free into the mortgage market provided the borrowers are qualified and the rate provides payments which will not trigger a default....time will tell ...but i think the US will try to put a run on the shorts and cause a stampede thus higher bank and stock prices..time will tell
greygoose out...by the way....red wine is tasty

turmoil.....continues

as outlined last month - the canadian finance minister outlined tax cuts to keep everyone happy. The canadian dubloon continues to stay above par in respect to the us greenback - oil is nearing 100 per barrell- gold is over 800 and yet the markets are dropping like stones as the financial institutions and others admit to their transgressions with respect to the mortgage market and subprime market.
This will continue for a few more months - but rest assured people will grow tired of this news and focus on something else shortly.
for now - if you want to refinance call us - its time to get rid of credit card debt / consolidate to lower payments and batten down the hatches.

greygoose
out

fed moves - flaherty budget update.....

tomorrow the fed reserve in the US will likely reduce the interest rates by 1/4 of 1 percent
this has caused the canadian dollar to spike in anticpation near the 1.05 level.
and finance minister James Flaherty will spew more information tomorrow after the market close - will he destroy the market further like the trust unit debacle of last halloween..or will he reduce personal and corporate taxes.
my bet is he will propose lower taxes of some sort - since they are raking in a surplus of 1 billion per month or more.
wait and see
greygoose out....

topsy turvy which way to go ....?

In the past few months we have seen the US subprime debacle spill over to our own mortgage market. Many of the lenders who dabbled in subprime in Canada have pulled in their horns, cutting back on loan to values - increasing interest rates or ceasing lending altogether.
In the meantime the Canadian dollar (doubloom) has exceeded par against the US dollar.
The problem is this will hurt our manufacturing companies in Canada as they find it difficult to compete when our exports are expensive in the eyes of our trading partners - especially the US.
Recently the jobs numbers showed a major increase in new jobs which has once again raised the spectre of 'Inflation'...duh.... no kidding
just check your pocket book after you pay auto expenses - hydro - food costs etc -
Rumour has it the bank of canada may increase rates to slow the loonie and the economy hopefully - this anticipation is welcomed by the lending institutions as they are raising interest rates in advance of any move - from 5.79% to 5.99% as of tomorrow.
Keep watching - see if they raise again when the bank of Canada moves......

the world is unfolding as it should

It would appear interest rates have stabilized for the moment - the bank of canada would love to increase rates and slow our economy -but that would cause the loonie to rise and destroy our manufacturing sector...catch 22
i suspect the bank will hold rates steady and let the US drop rates - hoping we can then keep the loonie under control
time will tell