Finance Minister Raising Mortgage Rates | Kerr Financial
Financial Planning
Finance minister raising mortgage rates
Category: Financial Planning

Most unusual: Minister Flaherty is trying to raise bank mortgage interest rates!  Usually he would be trying to reduce bank charges to Canadians.  We know why he is threatening the mortgage lenders:  he wants to make it harder for Canadians to buy houses, and thus reduce prices they offer to pay; to reduce housing prices.  He doesn’t want a vicious bubble in real estate!

But banks are making outlandish profits on mortgage lending, and they should be reducing their interest rates.  Money in bank deposits including GIC’s and term deposits cost the bank merely 1% to 2%.  This money can be lent by them in mortgages at 4½ % to 5½ %, resulting in an obscene spread of 3½ % or more. Historically the spread is 1 ½ to 2 %. So while you may think this is small stuff they are really making twice their normal profit!!!

(Worse of course is the 18% to 24% being charged on credit cards compared to cost of deposits interest of 1% to 2%, but that is another story!)

We believe the government should be staying out of the way and letting market supply and demand govern where interest rates for mortgages and for credit card balances should be.

Kerr Financial

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Kerr Financial Group was formed in 1979 for the purpose of assisting individuals to maximize their personal financial resources, alleviate their financial and retirement concerns and simplify the administration of their affairs.

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