Newsletter October 2020
I have not contacted you for the last 4 months but so many things happened during this period. Please check last financial news.
- Unprecedented low mortgage rates, what to do in this situation?
- Can we be 100% sure that the fixed rate on mortgages will continue to decline in the future?
- 2.15% savings account, new special offer.
- Insurance coverage in cases of COVID–19 Illness.
- Our guests and those going abroad can now be covered in case of getting COVID-19.
Now in a little more details:
1. Unprecedented low mortgage rates, what to do in this situation?
Due to Coronavirus, Central Bank of Canada has done an unseen before three-time overnight lending rate reduction in just one-month time from 1.75% to 0.25% (3 times of 0.5%). The prime rate of the banks was also reduced by 1.5% (currently 2.45%) and the variable rate today is under 2%.
“Financial Post” of September 9th posted an article “Bank of Canada to reassure the markets. Stable Rates”, which says that Central Bank of the country plans to maintain overnight lending rate at 0.25% for at least next 2 years.
If there is a need for a shorter term mortgage, variable rate maybe a better option as there is no planned increase to interest rates and the penalties will be low in comparison to fixed rate, especially with large banks.
Fixed rate today has decreased so much that it is below the variable rate or same.
In September, we received a call from our client that has obtained a mortgage with us last year with a fixed rate of 2.69%. During our conversation and analysing switching to a lower rate we discovered that the penalties will be approximately $2,000, but the benefits for the remaining 4 years would be amount to over $6,000 – why not take an obviously beneficial step and save $4,000?
This means that even with a current mortgage of less than 3% something can be done that will benefit under new conditions. How to figure out whether it is beneficial or not? We can assist you with answering that question.
Call us, we will do all the necessary calculations and will respond to you in writing.
2. Can we be 100% sure that the fixed rate on mortgages will continue to decline in the future?
Very often we receive calls about obtaining a better rate on mortgage at the time of renewal, but most of the time, the calls come in 1.5–2 months prior to the end of mortgage term, sometimes just 2-3 weeks prior to renewal date.
I hope we all understand that we simply can not offer such low rates that do not exist. Nobody can predict how the fixed rate will move in the next few months.
So here is the question – how to obtain the best rate on a mortgage at the end of the current contract? Maximum period of time to secure a low rate and hold to the end of current contract is 4 months.
Let’s see why people do not call to renew their mortgage 4 months in advance and let’s point out what can be done to obtain financial benefit. Money is not the most important thing in life but it is harder to live without it…
- Many simply do not remember the renewal date of their mortgage.
- Person is hoping that the rates will continue to decrease.
- Some are awaiting to hear from their bank, but what will they offer?
- Already renewed mortgage as the bank offered to renew 6 months before end of term (early renewal) with a better rate.
3. 2.15% savings account, new special offer.
Interest rates on savings accounts today vary between 0.05% and 0.3%.
At the same time, some banks are offering very interesting rates of return for a few months for all new clients (promotional rates). Existing accounts with these banks, unfortunately, do not receive such benefits.
Manulife Bank also offers an opportunity to open a new savings account and receive a promotional rate of 2.15% for the next 4 months from the date of opening of the account. You can apply using the following link:
Of course at the end of that period the rate will be reduced to 0.15%, but I am certain we will be able to find other interesting offers in the future, towards the end of this promotion. There is no minimum deposit to opening the account but there is a maximum amount that will receive the promotional rate of $250,000 and there can only be one such account per person.
The most important part here is that there are no costs and all necessary transactions, including further transfer to another bank, will be free.
4. Insurance coverage in cases of COVID–19.
One of the insurance companies has added COVID-19 to its list of illnesses included in the Critical Illness Insurance.
$5,000 would be paid out to those who obtain Critical Illness Insurance contract until the end of January 2021 and unfortunately may test positive for the infection over the period of 6 months after the contract has been issued.
Even if just a single person obtains such coverage, all members of the family (children under the age 18 and spouses living at the same address) will be covered in case of contracting Coronavirus and can receive $5,000, if they are hospitalized for a minimum of 48 hours.
The most important part here is that this Critical Illness Insurance contract does not cost a lot, as it only covers 6 illnesses Cancer, Heart Attack, Stroke, Coronary By Pass plus 2 other illnesses.
But in reality, these are the most common illnesses.
Check the cost for a non-smoker:
35 year old male: $10k insurance coverage costs only $9.65 per month, $25k = $14.10, $50k = $26.21
45 year old male: $10k insurance coverage costs only $13.52 per month, $25k = $22.38, $50k = $36.75
55 year old male: $10k insurance coverage costs only $21.52 per month, $25k = $37.85, $50k = $66.50
Maximum coverage is $50,000 and there are various options in this contract including even return of premiums upon the end or breaking the contract. This can be processed for anybody ages 18 to 60. Call our office and find out what the premiums would be for your age. Lena will be able to assist you.
5. Our guests and those going abroad can now be covered in case of getting COVID-19.
Life continues and insurance companies are adopting to the new situation. We can already obtain insurance that will cover Coronavirus infection on travels abroad. This would also be covered for your visitors if they happen to get this virus. Call us and we will help you process the most appropriate contract for your situation.
We wish you financial wellbeing and good health!!!
Financial Advisor, CFP, CLU, EPC
Mortgage Broker, AMP
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