Mortgage rates are going to get WORSE in 2022? Fact or fiction?

A phone call so concerning, so troubling. Just mind blowingly concerning that this is happening. I received an email from Jeff Ingram the other day. Jeff Ingram is with Canadian Mortgage Experts, and Jeff had received a phone call from one of the Big Five banks trying to persuade him to do something with his mortgage that likely wasn't even close to being in his best interest. This phone call was so concerning, and concerning enough that Jeff did an email blast to absolutely everybody he knew to make sure he shouted from the rooftops about what exactly happened and why consumers or anybody that needs a home and has a mortgage needs to be ultra cautious about getting a phone call like this. If you are a homeowner and you have a mortgage, this is definitely a post you want to watch, because if you get a phone call like this, you want to be prepared and you want to know how to react. If that all sounds good, let's get into it. What's good, everybody? 

Okay, so what happened? What was this phone call all about that Jeff received and why was it so concerning? Well, it's certainly not my story to tell, and it's better told by Jeff, the person who had actually happened to. So I reached out to Jeff and we did a Zoom interview about what the phone call was comprised of, what was said, why it is so problematic, and for what people like you watching need to watch out for if your phone starts ringing with one of these phone calls as well. 

Without dragging this out, let's get into my phone interview with Jeff Ingram from Canadian Mortgage Experts.

So, Jeff, thanks for joining me. What happened? What was the phone call that you received?

Yes, I received a phone call last week from one of the local Scotiabank branches. They were calling to check in on one of our mortgages that we have and she was calling because she knew that we had a variable rate mortgage on this one and she said that your rates at 4.25% right now. Have you considered locking in? And I, of course, told her absolutely not right now.

Well, funny enough, because what do you do for work? If I just joined this video midway through, what's your job? What do you do?

Yeah, I'm a mortgage broker, and we have a pretty big team here located in Cloverdale. I've been doing this for 14 years. My dad's been doing it with me for he's been doing it for over 40 years and we got a team of 8 behind us and we probably do 230 to 250 transactions a year. So we have a pretty good pulse on what's going on here.

Yeah, well, definitely. And so she told you that she thought it was important that you locked in and what was your response back to her?

Yeah, so like I said, she obviously had no idea who she was calling or what I did for a living but she proceeded to encourage me that locking in is the right choice by telling me that rates are expected to rise another 2% to 3% points before the end of the year and you know that they're going to keep increasing for the next 2 to 3 years after that, which of course is we don't see that being factual at all right now.

Well, when you had mentioned in your video she had talked about bond yields or you had referenced bond yields and so fill me in on that.

Yeah, so I started asking her some questions. I asked her, hey, what I want to know is when are your fixed rates going to come down? Because the bond yields have actually dropped about 85 basis points since their peak in June. So I wanted to know when fixed rates are coming down and that was a big reason why there was no chance I was locking in at that time. And she just straight up said, well, those don't affect mortgage rates at all, which of course is very far from true.

For those of you and Jeff, you're the expert here, but correct me if I'm wrong, mortgages and bonds are both investments for people. And one of the reasons why bonds and mortgages are related is bonds are usually government backed. There's like 100% guarantee of a repayment, whereas mortgages are obviously a lot riskier, so they charge a higher premium. So this is one of the reasons where investors are looking to put their money into things that they are looking at either what's a safer bet right now, are bond safer or mortgage is safer. Am I on the right track there? 

Yeah, you're on the right track. And mortgages are actually bought and sold on the bond market, essentially. So when you take out a fixed rate mortgage, you're guaranteeing the lender a certain amount of interest over a certain period of time and so then therefore they're able to turn around and offer a bond based on that mortgage pricing and offer a certain guaranteed return as well. And so that's why essentially when mortgage rates are really low, you're also not getting a very high return on your bond investment. Now with mortgage rates increasing, you're actually getting a higher rate of return or a higher yield on your bond investment. That's kind of the 30,000 foot view of that.

Yeah. And so they're highly correlated together and they traditionally moved together. And she was suggesting either that maybe wasn't true or she was completely unsure of that.

Yeah, she said that they were not correlated at all, essentially. But the fact is, like I said, the fixed mortgage rates are priced based on the bond yields in the market, so they are 100% correlated. Variable rates are different. They're based off of the prime rate or the overnight rate, but the fixed rates are based off of the bond yields.

Right. And you sent this video out because you obviously had a massive concern because you got this phone call. What was your concern? Why did you send this video out to all of your clientele?

Yeah, well, I was super concerned because if it wasn't me on the other end of the line who, like I said, we see 250 transactions a year and we follow these trends and all that stuff and are fairly well versed in the markets. If that's not me on the other end and you just have your average consumer who doesn't do this every day. It would be very easy for them to succumb to that fear mongering and maybe make the wrong decision and lock in right now when the reality is if these bond deals continue on this trend. Those people are probably going to be able to convert and lock into even lower fixed rates in the near future here. So very alarming and very concerning that that's the message that's being sent. We have lots and lots of Scotiabank clients who I wanted the message to get out to them, just to give them a heads up, like, hey, just be aware of these phone calls. Don't be alarmed by it. Don't let them scare you. And so that was the main reason I wanted to get that message out right away.

Well, yeah, that's phenomenal. I mean, it kind of makes sense that you would think that the bank wants to make more money. I'm curious and maybe you know the answer to this question. Do we know if they get compensated for these bank employees? Do they get compensated based on what type of mortgage product they put you into or get you into?

Yeah, so right now I have heard that certain banks are offering bonuses to their employees for the number of variable rate mortgages that they can convert into fixed rates right now. And so they are offering bonuses based on that. And in terms of the five year fixed product in and of itself, it's one of the most profitable products that the bank sells. So they would want nothing more than to convert more and more of these people into 5 year fixed products, whether it's the right time for that customer or not.

Right, yeah, that's good information. And I think you had mentioned your video as well, that bond yields have actually gone down as of recent since, I think, about mid June, is that correct?

Yeah, I was just looking earlier, they're down almost a full point or a full percentage point since they're high in mid June. So because the banks price their fixed rates based on where the bond yields are, there's definitely room for them to come down a substantial amount. I'm just going based on what the yield that the bank typically wants to receive. So they probably could come down from the low to mid fives, down to the low fours based on where the yields are. So if they continue this trend, that's what we can expect to see.

That's good information as well. Thank you. So this was a great email. I was very impressed with it. I was happy to receive it and got this message. I wanted to bring it out to everybody as well. What was the rallying cry to your clients? What was the reason for sending that? I mean, don't be scared. Don't be fear mongered into signing up for something that is all speculation and maybe you're getting information that's not really completely accurate.

Yeah, exactly. And really and truly, call me first. If you get a call like this or you read something online that sounds scary, call me first and let's talk through it, because there's so much misinformation out there. Whether it's by phone call or on Twitter or whatever it might be, there's just so much misinformation out there that is led by fear. And so I really want my clients to call me first and foremost, and let's have a level headed conversation and figure out what the solution is or what's actually going on here.

Well, Jeff, that's phenomenal. I really appreciate you doing this quick interview and all the best to you in the remainder of the year. Thanks for joining me.

Awesome. Thanks so much for having me.

So there you have it. Pretty concerning that was going around and again, the general message of Jeff that he was trying to send out to everyone that he has on his email list was to make sure that you do not succumb to a high pressure sales tactic like this if your phone starts ringing from your bank. I want to thank you for reading today's posts. Now, Jeff's information is linked below in the description, and while you're looking around down there, you will see a link directly to my calendar. So if you're someone who's thinking of buying a home or selling a home, you can schedule time to speak directly with me and my team, and we'll show you exactly what we can do to help you be way better off in your plans. I'll definitely look forward to seeing you on the next post. Cheers.

Ingram Mortgage Team
(604) 763-4647 |

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