A couple years ago, the federal government brought in some tighter mortgage qualifying rules. The ‘stress test’ was just one of several changes, but it’s definitely the most well known.
The feds wanted to slow the housing market. They also wanted to ensure that borrowers could afford the much anticipated mortgage rate hikes. Rates have to go up some time, right?! When?!
Well, let’s fast forward to 2019! The real estate market has cooled off with fewer transactions in both 2018 and 2019. The government’s wish was granted. Fewer people could pass the stress test. But those imminent rate hikes never happened.
Today, you must qualify with an interest rate that is DOUBLE your actual contract rate. Yes, DOUBLE!
Another popular phrase? Housing Bubble…
The real estate market has to crash, right?! Well, it seems like the expected rate increases and housing bubble just haven’t materialized. In fact, interest rates have come down by around 1% since January 2019. Real estate prices are up across Canada (BC is making a comeback… Alberta is still down slightly).
Wow! So, what happened? Why did interest rates go down instead of up? The quick answer: Global economies are not stable! Global trade wars have heated up. Investor confidence in the market is low. Recession fears are alive. We have an inverted yield curve. Put this all together and you have a perfect environment for interest rates to drop. And that’s precisely what has happened.
TAKE ADVANTAGE OF IMPROVED AFFORDABILTY!
TODAY, YOU CAN GET MORTGAGE RATES BELOW 3%. This is making homebuying much more affordable than it was just a year ago, which is great news for anyone looking to buy their first home, or perhaps upgrade to a bigger home.
I’ve been reading far too much negative press about how buying a home is bad. This just isn’t true. We should applaud and celebrate anyone wanting to own their home versus renting it. And borrowing when rates are low is always a good thing.
BEWARE OF ADS QUOTING RATES THAT SEEM TOO GOOD! YES, YOU CAN HAVE A RATE OF 2.29%… well, sort of…
You’ve heard the old saying, if it sounds too good to be true if usually is. I’ve been getting a steady stream of calls from borrowers asking if I’m able to get them certain low rates or even match them. Yes, technically I can get this rate. But qualifying is so difficult and you have to fit into a box that’s so small that, in reality, very few people can secure these rates. And even if you could, then there’s the issue of these products having restrictions on exiting the mortgage, inflated penalty calculations and limited prepayment privileges.
Don’t settle for any product that will limit your ability to exit or prepay… and stay away from inflated prepayment penalty mortgages. Any perceived rate savings will get eaten up and cost you way more than a slightly lower rate.
Speak with an experienced Mortgage Broker who can help you determine which products are truly the best for you.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; firstname.lastname@example.org
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.