Bank of Canada rate hike.. it’s really not a big deal.

BREAKING NEWS… BANK OF CANADA RAISES RATE BY 0.25% AND THE SKY HASN’T FALLEN!!

Stephen Poloz, the Bank of Canada Governor, raised the Target rate by 0.25% to 0.75%.   Maybe now the media will move on to other news.

Seriously, aren’t we all kinda tired of hearing how rates are going to skyrocket,…how this is going to make our mortgages unaffordable… how we have record debt levels.. how we are going to default our mortgages, lose our homes and go into a recession…it’s doom and gloom?  This isn’t happening.

SOME FACTS ABOUT THE RATE HIKE Read the rest of this entry »

Mortgage rates going up a little.. for now. What should you do?

Happy 150th Canada!  Mortgage rates are going up.  Hooray!  Ok, yes, I’m being sarcastic.

This isn’t the cheery message you wanna hear if you have a mortgage coming up for renewal soon. But, hold on.  What does this really mean?  It’s a great attention grabber.  And now that you’re reading, let’s cut through the bull!

It’s true.  Wholesale fixed mortgage rates have gone up.. around 0.15%.  Yup, that’s it.  Yet, reading all the media headlines would make you believe mortgage rates went up 1.00% or something like that!!   This just isn’t the case.   And Variable rates haven’t changed as of yet.. Mind you, we could see an increase of 0.25% on July 12.. That’s still putting most Variable rate borrowers at 2.25% and 2.40%.. That’s a ridiculously low rate.

Here’s what’s happening…We’ve seen the media take little snippets of the Bank of Canada Governor, Mr. Stephen Poloz’s comments and turn them into front page headlines.  Great for headlines but short of full disclosure.  Here’s a more complete picture. Read the rest of this entry »

Bank of Canada hints of rates hikes.. bond yields spike up

Bank of Canada Senior Deputy governor, Carolyn Wilkins, made headlines this week when she hinted of pending rate hikes.

The reaction by investors was swift.  Bond yields were up 20bps. Fixed mortgage rates are priced from Gov of Cda bond yields.  Variable mortgage rates are priced from Bank of Canada rate.  And the next Bank of Canada meeting is scheduled for July 12th, the fifth of eight scheduled meetings.  Many are betting we could see a rate hike then.

DON’T PANIC…. RATES ARE STILL RIDICULOUSLY LOW…   The media was quick to find ‘so-called’ experts to quote.  I’ve seen some saying we should all lock in our variable rate mortgages into fixed rate products.  And others say you should brace yourself for payment shock.

Here’s a reality check..   Variable rate mortgage are around 2.20% .. Some are higher, some are lower..    EVERY Canadian must qualify for a Variable rate, using the POSTED 5 year fixed bank rate.  That rate has been at or near 4.64% for several years.

If rates go up, we can expect a slow gradual increase..  around 0.25% at at time.  And here’s the thing..If you can qualify at 4.64%, what makes you think you can’t afford your mortgage at 2.45% or 2.70%??

The sky isn’t falling.   Many Canadians are already paying more than they have to by increasing their regular payments to accelerate the amortization and retire their debt sooner.  In fact, most of my clients are doing this because they can.   Don’t believe everything you hear or read in the media…  We are experiencing record low interest rates and yet, we’re made to feel like it’s a horrible time to have a mortgage..  Anyone else seeing something wrong with this?

By the way, I still like Variable rate mortgages today.

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 steve@mortgagenow.ca

Enjoy the low rates..No rate hike with Bank of Canada

The Bank held their third, of eight, scheduled meetings this week.   As widely predicted, the Bank of Canada announced that it is holding the key rate steady.

While noting that “economic growth has been faster than expected”, the bank said it’s too early to determine if the economy is on a “sustainable growth path”, citing weakness in export growth, business investment and employment.

The Bank’s three measures of core inflation, taken together, continue to point to material excess capacity in the economy. While there have been recent gains in employment, little growth in wages and hours worked continue to reflect economic slack in Canada, in contrast to the United States.

The bank also took into account uncertainties that include the potential impact of U.S. trade policies. The next rate-setting day is May 24.

This announcement means there should be no change to the prime rate. Great news if you have a variable-rate mortgage or line of credit, need a new mortgage, are renewing, or want to save thousands by consolidating debt at the lowest-cost funds. Or perhaps you are thinking of using home equity to invest in a rental property or second home, or cost effectively complete renovations.

Given the uncertain economic outlook, we continue to expect interest rates to stay low in Canada well into 2020, although the new mortgage rules have caused mortgage rates to be very complicated. Quick rate quotes are not very reliable! That’s why it’s so beneficial to work with an experienced mortgage broker who has access to a wide range of lenders and knows the right questions to ask to assess your situation and provide the best mortgage for your needs. Save yourself time and stress; don’t just ask what the rate is, have a conversation instead.

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 steve@mortgagenow.ca

Coming soon…Higher CMHC premiums March 17, 2017

CMHCThis is not a recording.  CMHC is increasing their premiums for the 3rd time in 4 years.  Here’s what it will look like.

Loan-to-Value Ratio Standard Premium (Current) Standard Premium (Effective March 17, 2017)
Up to and including 65% 0.60% 0.60%
Up to and including 75% 0.75% 1.70%
Up to and including 80% 1.25% 2.40%
Up to and including 85% 1.80% 2.80%
Up to and including 90% 2.40% 3.10%
Up to and including 95% 3.60% 4.00%
90.01% to 95% – Non-Traditional Down Payment 3.85% 4.50%

 

Wondering why they need to increase the premiums?  It’s not about trying to discourage homebuyers.  It’s to “preserve the returns on capital”, according to Steven Mennill, SVP CMHC.  Yup, the Crown corporation wants to focus on profit.  (show me the money).  At least they’re being honest about it. The overall amount of mortgages insured by CMHC has dropped in the past 4 years.  Down from $576billion to around $512billion.   So, it’s about maintaining profits while their book of business is shrinking.

Having said that, CMHC has lowered, increased and lowered their insurance premiums before.  We can expect them to change and adjust again.

In case you are wondering why the overall volume is going down when house prices are going up, it’s because the Fed govt has changed the mortgage rules so that it becomes more difficult to qualify for a mortgage.  Therefore, the amount of mortgages CMHC can insure is going down.

Now for some good news..

The overall cost to your mortgage is minimal.  Oh yeah, one more thing…without CMHC, we would all be digging deeper into our pockets to come up with 20% or 25% down, like the old days.   And while some may think that is how it should be, those days are long gone.  First time homebuyers don’t have $100k, or $200k sitting around to buy a home.   They need help.. And what’s wrong with helping our youth that are ambitious enough to want to own a home?

CMHC is a necessary evil.

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 steve@mortgagenow.ca

Mortgage rate outlook 2017.. Expect Fixed mortgage rates to go up…Expect Variable rate pricing to drop.

trudeau-trumpFixed mortgage rates have increased by about 0.40% in the last 6 weeks.   Today’s 5 year fixed rates are at around 2.89% and will could continue to go up in 2017.   There are political and fundamental reasons why rates have gone up. (oh, by the way..  it’s not panic time.. who ever said that 5 yr fixed rates were the best product to choose anyways? more on this later.)

FUNDAMENTAL REASONS

Govt of Cda bond yields have gone up around 0.55% since October (fixed rates are priced from govt of Cda bond yields).  It’s more expensive for Lenders to fund mortgages due to stricter government regulation and higher Capital holding requirements.  These increased costs are being passed down to the consumer.

Okay, this is the “how” the rates are higher.. but what’s prompted these fundamentals?  Why are rates higher?

POLITICAL REASONS.. IT’S ALL POLITICS Read the rest of this entry »

Mortgage Brief.. Mortgages rules explained… and why didn’t the govt consult experts?

Bill Morneautrudeau

They say we don’t read emails or articles anymore.. we just skim through them.   But some things can’t be understood with a quick glance.  The new mortgage rules will impact EVERYONE!

If you want to understand how they impact you, continue reading… If you don’t care or want to be oblivious, take the blue pill and move on.

I’ve put together a list of the mortgage rules so that you can understand what they mean and how they will impact you.   Hey, let’s give The Federal govt some credit… they’ve been transparent about a few things, right?:

  • They want house prices to drop.
  • They don’t want anyone to have a mortgage if their home is worth more than $1,000,000.
  • They don’t want you to ever refinance your mortgage.  You should only require a mortgage when you buy a house.
  • They don’t want you to buy a house and rent it out.  You should only buy a rental property if it has 2 or more units.
  • Mortgages should not be amortized for longer than 25 years.
  • They want rates to go way up.

Here we go.. Forget the data and stats being reported today.  Those stats don’t matter!  We want to see the stats after March 30th, 2017.

Remember the mortgage rule changes of October 17th?  How about the ones on November 30th?  Get ready, we won’t see the full effect of these changes until after March 30th 2017.

That’s when the last of the mortgage approvals will have closed, that were done under the old rules. And all the new mortgage closings beyond this date, will have had to been qualified with the new rules.  This is when we’ll begin to see the impact of these rules… And we’ll begin to see just how many Canadians will be have been impacted.

If you think I’m wrong, read the rule changes below and tell me what other conclusions you can come up with. Read the rest of this entry »

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