Why Rates Are Rising While Prime is Falling | North Vancouver Mortgage Broker

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A new approach to Residential Mortgage Financing…

 

With close to 20 years of experience with Canada’s oldest chartered bank, and over 2500 residential mortgages funded, Nishka has the experience to help you through any situation.
Nishka’s team has a consultative approach to figuring out your mortgage needs.  From the initial meeting all the way through to signing with the lawyer, you will have the comfort and peace of mind knowing that your financing needs have been developed to meet your specific financial situation.
Come find out why clients call Nishka their Mortgage Advisor and experience the difference of having Personalized Mortgage Solutions That Work For You.

 

What Best Describes Your Mortgage Need?

We want to access the equity in our home

Do we renovate? Do we buy a vacation home?  Do we package up our debt and add it to our mortgage? Using your home equity doesn’t have to be expensive.    From re-organizing debts to parents helping their children buy homes, draw upon Nishka’s collective experience from dealing with every possible financing scenario over the past 15 years.

 

“Nishka has been our mortgage advisor for many years. While we have always valued her experience, excellent customer service, and advice in providing financing solutions, it wasn’t until we started our major renovation that we got to see how extensive her knowledge really is. Not only did Nishka recommend over 10 trades people to us, she also came to our home and shared some of her personal experiences, offering ideas from several of her projects on her past homes. She also drew upon the collective experiences that her clients have been through, some of which are property developers.

Working with someone who is “battle tested” has given my wife and I a huge level of comfort as we take the leap into this massive undertaking!”

– Leonard and Liana Cox – North Vancouver

 

We are real estate investors

As a real estate investor you want a mortgage advisor with experience.  In addition to structuring mortgage financing deals for over 15 years, Nishka is also an active real estate investor herself.  Having bought and sold close to 10 properties in the past 10 years, Nishka understands how real estate in the Vancouver area is an integral part of building wealth.  With over 50 lenders at her disposal, Nishka can find the funds to “do the deal” and structure it in a tax efficient manner.

 

“We used Nishka’s services on two occasions. Excellent service from start to end. She answered all our questions immediately. It was a pleasure to deal with someone so efficient and professional. She made a confusing process seem easy.”

– Robert and Kasia

 

We are selling our home and buying another one

How exciting!  After driving around town, visiting a million open houses over countless Saturday’s, you are ready to make an offer.   Or maybe it’s just the opposite! The house that you have always found an excuse to drive by now has a For Sale sign!  Suddenly the traffic on the street seems much more than usual; you know you are going to have to go into a multiple offer situation to get this one!

This is where Nishka shines!  In either situation you need a mortgage advisor who can act fast to get you an approval with the right lender so you can remove that “subject to financing clause” ASAP!

Buying a house and securing financing is a very stressful experience, however, through working with Nishka, the process was surprisingly easy.  She was extremely helpful in explaining all the details to us.  She has years of experience and knowledge in the industry and was creative in helping us achieve our goals.  I would, without a doubt utilize her services again in the future and would recommend her to anyone looking into mortgage financing as she is one of the best at what she does!”

– John from New Westminster

“Nishka helped me realize my dream of moving into a house.  She was with me every step of my journey from condo to house and was always available to answer any questions and offer support. Thank you Nishka!”

– Angela

 

Our mortgage is coming up for maturity

You want to explore your options.  Perhaps you are tired of making appointments during “Banker’s Hours” or you would like some advice on what type of mortgage best fits with the current rate environment.  With access to over 50 lenders Nishka has the ability to find the right mortgage, with the right lender that best fits your needs.  Today’s mortgage financing landscape is very different than when you initially set up your mortgage.  Let Nishka guide you through the new government legislation and product options.

 

“Nishka listened to our financial needs and knew exactly how we should proceed to achieve our lifestyle goals. Thank you Nishka – you are amazing in every way!”
Tracy and Declan Sacre – North Vancovuer

 

We are buying our first home

How exciting!  Buying your first home is something you will remember for a life time!   Let me tell you why First Time Buyers love dealing with Nishka!

Compass™, a program available exclusively from Nishka,  allows you to harness her 20 years of experience as an Accredited Mortgage Professional.  First Time Buyers that have been through the Compass™ process, on average buy a home 50% sooner and at a 50% to 70% greater purchase price than those First Time Buyers that haven’t gone through the process. With Compass™ you will get the road map and the directions you need to get you moving into your very first home!

My wife and I were facing the exciting, but also somewhat horrifying task of purchasing our first apartment.  As first time buyers, we really didn’t know a whole lot of the ins and outs of a home purchase and about all the different types of mortgages and lenders.  Nishka made this whole process easy and as stress free as it could possibly have been.  We were referred to her by a coworker and from day one she was absolutely wonderful.  She is calm, patient, informative, extremely professional, and very easy to get ahold of if you have questions or concerns.  We would highly recommend Nishka to anyone looking for a mortgage.

– Mike and Sherri

Nishka has been an amazing resource for our first home purchase. She was professional and thorough throughout the process and secured a great rate for us quickly and efficiently. Thanks Nishka!
Ian and Elisabeth

“As first time home buyers, we didn’t know much about the mortgage process. Nishka made everything simple, was always there to answer questions, and catered to our personal needs in finding the right mortgage for us!”

Jon and Cassia

“So grateful to have Nishka help us make our dream a reality!!

I can’t speak highly enough to explain how much Nishka has helped us through the process of buying our first home. She not only helped us secure a great mortgage product with one of the best rates, but in my mind she also went way outside her job description to make the entire process comfortable for us by having such a wealth of knowledge in all areas of the home buying process. I walked into her office just to explore what it would take to get ourselves into a position where we could buy our own home and with an amazing suggestion on how we could invest in RRSP’s to maximize our tax refund and then utilize our first time home buyers program we actually turned just and idea into me sitting here now in our beautiful home writing about the experience all within 6 months. There were a lot of unknowns and really big sometimes scary decisions to be made along the way when buying our house and what I loved about working with Nishka is that she was always available to return my calls. When we were hunting for houses I think I had to call her 3 times in a row to ask different questions and not once did she ever make me feel as though I was being a bother and she always had a way of leaving me feel very comfortable and confident in what I was doing. Nishka went way above my expectations and I am so grateful to have met such a great person and I will definitely be continuing our journey with her when our mortgage term comes time for renewal. If anyone is considering buying a home or is looking to find a great mortgage I highly recommend you see Nishka to discuss your options she has made our dream come true and I really know she would be helpful to anyone who is going through the process.”

– Sarah & Jay
Very happy new homeowners!!!

“Nishka was instrumental in getting me into my dream home! She consulted actively with me throughout the entire process and was able to break down all of the steps so that I felt confident throughout. Nishka worked tirelessly, which ended up getting me into an even lower interest rate, and even kept me generally updated on trends and economic indicators. I wholeheartedly recommend her, especially for first-time buyers such as myself.”
– Sarah 

As first time home-buyers, my husband and I were referred to Nishka to help us secure a mortgage. Nishka was incredibly patient, meeting with us in person to answer all of our questions and coach us through the process. She also made sure to keep in touch regularly throughout our experience so we were aware of where things were at and what was required of us. Even when faced with unique challenges, Nishka went above and beyond in gathering additional information and providing guidance to us on how to navigate our situation. Overall, the knowledge she shared with us and her drive to get us set up with the best mortgage possible reduced our stress and made the entire process easy and straightforward. We would recommend Nishka to other first time home-buyers in a heart beat!  

-Amy and Shaun

Points of Interest!

A Mortgage Finance Blog filled with insights on real estate!

Why Rates Are Rising While Prime is Falling

Warning! This is a long post!

It was requested by quite a few people who read our Facebook Post talking about fixed rates increasing. I’ve tried my best to simplify a highly technical subject/situation into something relevant AND interesting. For those of you with finance backgrounds – I know, I know … there are some gaps. For the rest, I hope you enjoy it. This was actually one of the toughest pieces I’ve had to write!

It’s April 5th, 2020 and as I write this post the Bank of Canada prime rate and government bonds yields are descending at a dizzying pace, and with each rate cut mortgage holders are getting more and more excited thinking, finally, there is a silver lining in all this COVID mess!

The natural next step? Call your mortgage broker, because it must be a great time to refinance! So when my team receives that call and has to educate clients about the interest rate reality that awaits them; the shock that lingers in the silence from the other end of the phone – is almost palatable.

“How could fixed rate mortgages be increasing when prime is dropping?! And why are the banks taking away the variable rate mortgage discount with every cut from the Bank of Canada?!” – they ask! It must be those greedy corporate bankers that you defended in your last rate update – right?! Though that would seem to be a logical answer the real reason is that in a time of crisis, fear takes hold, and fear and money do not mix well.

But before we dive into an explanation of the disconnect in interest rates, we’ll need to cover a little mortgage 101 ( for those of you with kids, apparently you aren’t the only one being homeschooled today )

  • Banks Sell Your Mortgage After Funding:
    • Contrary to popular belief banks don’t keep your mortgage on their books, they package them up and sell them to pension fund managers, institutional investors and whoever is looking for a steady income stream.
  • Banks have to go out into the credit markets and buy the money before they lend it to you:
    • This has a cost attached to it, and in a normal market, it’s minimal.
  • Banks fund their Variable rate mortgages with short term instruments:
    • Banks fund variable rate mortgages with cash flow from bank accounts, GICs and by selling banker’s acceptances’/commercial paper in the treasury markets. ( Think T-bills – without the government guarantee)
  • In a rational market, 5 year Government of Canada bonds and fixed mortgage interest rates are positively correlated. The usual pattern is that bonds lead the decline, and fixed mortgage interest rates usually follow about a week to two weeks afterwards. The delay depends on the time of year and competitive forces at play.

So now that we’ve got that covered it’s time to cover investing 101.

  • Markets will ALWAYS overreact to perceived future events AND THEN wait in safe assets until confirmation of those assumptions are either realized or dismissed.
  • Credit markets ( bonds, T-bills, commercial paper ) is almost double the size of the stock market in asset value

So now that you are armed with the basics of mortgage and investing here is the play, by play of the month of March and the impact that it had on credit markets, where the banks usually reign King.

Stage 1: The Calm Before the Storm – 1st Week of March

At the beginning of March, the stock market was continuing with the selloff that had begun in the last week of February. At this point, both the stock market and the bond market are following a classic pattern of investors taking profits by selling stocks and waiting it out in bonds. As investors move from stocks to bonds, the bond yields drop and the stage is set for mortgage interest rates to follow. The credit markets are functioning normally.

Stage 2: The Bank of Canada Cuts Rates by 50 bps. The virus spreads and Italy becomes a news item – 2nd Week of March

As news of the virus spreading through Italy escalates, so does the stock market sell off, which causes the rally in bonds to sharply increase. As a result, bond yields ( the net interest rate of a bond ) drop to historic lows. The BOC decreases the rate with an aggressive 50bps rate cut in anticipation of a slowing economy. The cost of funding a mortgage has filtered down to the segment of the credit market where banks operate and the banks dramatically lower fixed rate mortgages given they now have access to cheap money. At this point, the credit markets are still functioning normally, everyone is cautiously calm and drawing comparisons to SARs and other viruses – we’ve got this….and then Friday the 13th comes…

Stage 3: The Federal Reserve drops prime by 50bps – 3rd Week of March

In an unprecedented move, the Federal Reserve drops rates on a Friday afternoon and three days later the Bank of Canada follows. It sends a clear signal to the world – we are in trouble. The phrase “social distancing” takes shape, and with it comes the realization that the modern economy as we know it is about to go grind to a halt like North Shore Traffic on a long weekend when both bridges are closed. In this moment, every CEO, CFO and senior executive who has been through 2008/2009 financial crisis, can see what’s coming next. If history repeats itself, they know that credit markets are going to dry up, and nobody is going to want to lend money to one another and that banks are going to need money for their own operations.

At this point the banks are nervous, but they are covered. They still have access to the cheap money that they secured in the 2nd week of March, but they know it’s going to run out fast.

By the end of the week, the speed at which money flows from bonds to government short term investments ( T-Bills and any federal or provincial bond that has is maturing in the next 90 days) increases at an exponential rate. The banks get a lifeline from the government allowing them to ease up their capital requirements ( ie access their rainy day fund ) and the government also offers to buy back some of the bank’s AAA credit rated mortgages. However, that lifeline comes at a tremendous cost … they have to allow customers to skip up to 6 months of mortgage payments. At this point the credit crunch becomes real.

Stage 4: The interest rate paradox – 4th Week of March

In the final week of March, the reality starts to set in and the credit markets are scared. Any debt that is not backed by the government is perceived too risky to hold. Money leaves everything not backed by the government and flows to government secured debts. As a result, the interest rate on government debt falls to generational lows. News outlets around the world talk about how “low” government bonds are. Meanwhile the cost of funding short term corporate debt, the “well” that banks run to on a daily basis, triples during this week. Payroll deposits to bank accounts dramatically slow and GICs start being redeemed – two key sources of funding for the banks. Compounding the issue is the 6 month mortgage deferral program has to be funded by the banks’ own money, which causes even further strain on the bank’s operating costs/cash flow. Banks are not the only one caught in this cash flow crunch, business are liquidating their short term investments and keeping the cash on hand to fund operations and keep employees on staff.

At this point, the laws of supply and demand step in and the cost of funding non-government backed debt shoots up and with it the cost of funding a mortgage. Et Voilà – confusion about mortgage rates ensues!

I know what you are thinking, and here are the answers to the tough questions:

  • Will the fixed mortgage rates continue to increase?
    • Possibly, but not by much. Rates are being impacted by fear so once we start hearing some good news and the fear subsides, rates will improve. This is the one time I will go against my “Bad News for the Economy is Good News for your mortgage” rule of thumb – in this case, the opposite is true.
  • Are the banks ok?
    • Yes! Since 2012 the various finance ministers have put measures on the banks to build up their “rainy day fund” and shifted a lot of the credit risk on to the investor markets.
  • Will the housing market crash?
    • A slow down is possible, however from November 2019 to March 2020 the number of people getting pre-approved has been at an all time high. Who are these people? The first wave of the Millenials – the largest demographic in North America since the boomers! Once the things return to normal, they will resume their desire to own their own home.

I hope that provides you with some clarity/peace of mind with what is going on. Though these are unusual times, there are opportunities coming. The Bank of Canada is going to keep its foot pinned to the gas pedal and keep rates low as long as it possibly can. What this means is that the housing market is about to get boost like never seen before.

Stay safe, and stay tuned for more updates!

Who is Nishka

Since 1995 Nishka has been providing financing solutions for  North Vancouver, Vancouver and the Tri-City areas. In that time she has come to understand one simple thing; owning real estate  is a key ingredient to creating wealth. “I’ve had the opportunity to meet and interview some very successful people. The common thread between them was that they all actively used real estate to build their net worth.” With this in mind, Nishka is an active advocate in helping clients on their journey in either starting or building on their real estate portfolio. It’s not all about building wealth though. ” Living in Vancouver is a lifestyle choice. We choose a community that we feel our family will be able to connect with. Having lived in North Vancouver for close to 20 years; I am able to  provide insight into the various communities and their idiosyncrasies.” When we asked Nishka what does she love about her role as a Mortgage Advisor: ” Helping people. It’s as simple as that. When I meet people they are often at the cross roads of some pretty big decisions. Providing insight from my collective experience and guiding them through the process to the solution is challenging and also exciting.”

Testimonials: What Clients Say About Nishka

“My wife and I were facing the exciting, but also somewhat horrifying task of purchasing our first apartment.  As first time buyers, we really didn’t know a whole lot of the ins and outs of a home purchase and about all the different types of mortgages and lenders.  Nishka made this whole process easy and as stress free as it could possibly have been.  We were referred to her by a coworker and from day one she was absolutely wonderful.  She is calm, patient, informative, extremely professional, and very easy to get ahold of if you have questions or concerns.  We would highly recommend Nishka to anyone looking for a mortgage.”

– Mike and Sherri

“As first time home-buyers, my husband and I were referred to Nishka to help us secure a mortgage. Nishka was incredibly patient, meeting with us in person to answer all of our questions and coach us through the process. She also made sure to keep in touch regularly throughout our experience so we were aware of where things were at and what was required of us. Even when faced with unique challenges, Nishka went above and beyond in gathering additional information and providing guidance to us on how to navigate our situation. Overall, the knowledge she shared with us and her drive to get us set up with the best mortgage possible reduced our stress and made the entire process easy and straightforward. We would recommend Nishka to other first time home-buyers in a heart beat!”

Amy and Shaun

 

“So grateful to have Nishka help us make our dream a reality!!

I can’t speak highly enough to explain how much Nishka has helped us through the process of buying our first home. She not only helped us secure a great mortgage product with one of the best rates, but in my mind she also went way outside her job description to make the entire process comfortable for us by having such a wealth of knowledge in all areas of the home buying process. I walked into her office just to explore what it would take to get ourselves into a position where we could buy our own home and with an amazing suggestion on how we could invest in RRSP’s to maximize our tax refund and then utilize our first time home buyers program we actually turned just and idea into me sitting here now in our beautiful home writing about the experience all within 6 months. There were a lot of unknowns and really big sometimes scary decisions to be made along the way when buying our house and what I loved about working with Nishka is that she was always available to return my calls. When we were hunting for houses I think I had to call her 3 times in a row to ask different questions and not once did she ever make me feel as though I was being a bother and she always had a way of leaving me feel very comfortable and confident in what I was doing. Nishka went way above my expectations and I am so grateful to have met such a great person and I will definitely be continuing our journey with her when our mortgage term comes time for renewal. If anyone is considering buying a home or is looking to find a great mortgage I highly recommend you see Nishka to discuss your options she has made our dream come true and I really know she would be helpful to anyone who is going through the process.”

– Sarah & Jay
Very happy new homeowners!!! 

“Nishka was instrumental in getting me into my dream home! She consulted actively with me throughout the entire process and was able to break down all of the steps so that I felt confident throughout. Nishka worked tirelessly, which ended up getting me into an even lower interest rate, and even kept me generally updated on trends and economic indicators. I wholeheartedly recommend her, especially for first-time buyers such as myself.”

– Sarah

“We used Nishka’s services on two occasions. Excellent service from start to end. She answered all our questions immediately. It was a pleasure to deal with someone so efficient and professional. She made a confusing process seem easy.”

– Robert and Kasia

“Nishka helped me realize my dream of moving into a house.  She was with me every step of my journey from condo to house and was always available to answer any questions and offer support. Thank you Nishka!”

– Angela

“My family and I HIGHLY recommend Nishka Riley. We’ve used her expertise more then once. She, every single time, succeeded where others repeatedly kept failing. She is a Life Saver and Happiness Maker… Thank you Nishka for who you are and for helping others be where they want to be.” 

– Kamal Derkaoui csc

Nishka has been an amazing resource for our first home purchase. She was professional and thorough throughout the process and secured a great rate for us quickly and efficiently. Thanks Nishka!
– Ian and Elisabeth

“Nishka has been a pleasure to work with. She is a warm and sincere person and also has great vision and knowledge.” 

– Juliette Schmerler

“I’ve known Nishka for several years and have found her to consistently be a knowledgeable expert in the field of mortgage financing. I would highly recommend her services to anyone requiring mortgage advice or insight related to financing a real estate transaction, either for personal use or investment purposes.”

– Gord Trembath

The service that Nishka provided was exceptional. Not only did she find me a great mortgage but also gave me some common sense solutions for future investments. I would highly recommend Nishka to my friends and family, and look forward to working with her in the future.

Mark Walker

Quoted in:

December 2011 Issue October 2011 Issue

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