Weekly Digest

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July 7th, 2023

BMO To Enter The Mortgage Broker Channel

Starting January 1st, 2024, mortgage brokers will once again have access to Bank of Montreal. This now marks 3 of the big 5 banks to enter our space. 40% of all new mortgages are arranged through brokers and this will represent an important new lender in our channel.

Static Payment Variable Rate Mortgages

Regulatory entities are looking for a solution to the ever growing problem of amortizations working backwards. The lenders who do not adjust mortgage payments in an increasing rate environment are under hot water, as the problem continues to grow with no end in site. The growing concern for these variable rate client’s is during the renewal process. With amortizations reaching over 80 years in many cases, a solution will be needed at maturity. Unless we see rates decline, client’s will be in for a massive payment shock once these mortgages are up for renewal.

An “ARM”, or adjustable rate mortgage forces a payment change to keep amortizations in line. While payments do rise, the amortization continues to decline. These borrowers have had reduced cash flow; However, their amortizations have remained unaffected.

For “VRM”, or variable rate mortgages, as rates increase, less of the payment goes towards principal, and more to interest. This has caused some 30 year amortizations to work backwards into 80+ years of remaining amortization. Upon renewal, clients will need to bring the amortization back down to its normalized levels.

10 year; 2 year – Spread Data

Historically, a near perfect indicator of a recession is the U.S 10 year to 2 yr spread. Currently, it is the most negative it has been since 1981…

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 5.94%

• 3 year fixed, 30 yr amortization – 6.16%

• 5 year variable, 30 yr amortization – Prime – 0.60% = 6.35%

• 5 year fixed, 25 yr amortization – 5.84%

• 3 year fixed, 25 yr amortization – 6.06%

• 5 year variable, 25 yr amortization – Prime – 0.70% = 6.25%

INSURED

• 5 year fixed, 25 yr amortization – 5.19%

• 4 year fixed, 25 yr amortization – 5.29%

• 3 year fixed, 25 yr amortization – 5.74%

• 5 year variable, 25 yr amortization – Prime – .90% = 6.05%

Fast Facts

• 17.18 – That was the average global temperature in Celsius on Tuesday. This is the hottest day since at least 1979, according to U.S. data.

• $13.8 billion USD – That’s how much Americans spent on food, alcohol, and fireworks for the July 4th holiday in 2022.