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 »

Unexpected Trump win on Canadian mortgage rates and market.

US electionThe surprise Donald Trump US election win has caught many off-guard.  The pollsters have been quiet to comment after they all predicted a Clinton win.

Here’s what week 1 looks like, after the Trump win.  The first few days saw some chaos in the stock market.  Stock market went down and so did Govt of Canada bond yields.

However within a day, the stock market began to rise.  The Dow Jones hit all time record highs.  The Toronto market was up also, but not as much as the US.  The Canadian $ took a bit of a beating.  And the Govt of Canada bond yields started to rise.  This last one is important to watch.

Fixed mortgage rates are closely tied to govt of Canada bond yields.  We’ve now seen Bond yields increase by over 0.35%.  that’s a huge increase in such a short period of time.   Banks and Mortgage Lenders have begun to increase fixed mortgage rates.

Investors are betting on Trump stimulating the US economy and taking no foreign prisoners.  That’s caused some jitters in the markets.  I’m watching the markets closely.   This could just be a short term reaction.  Or, it could be an adjustment to the record low mortgage rates.

MY VIEW…   Read the rest of this entry »

Mortgage brief… New Liberal govt mortgage rule changes..and what it means.

Bill Morneauthumbs down Yesterday, Federal Minister of Finance, Bill Morneau, announced tighter lending rules.  The big focus is on the new ‘stress test’. To sum it up, here’s what’s gonna happen and how it will affect you.

First, let me say this..   IT’S NOT THAT BAD… It will affect those with tighter budgets, but not the vast majority of buyers.

NEW RULE:

-As of October 17, everyone must qualify using the Bank posted 5 year fixed rate.  Today, that’s 4.64% (well over the discounted 5 yr, which is averaging around 2.59%..lower with most Brokers).

-borrowing less than 80% of the value of your home allows you to extend your amortization to 30 years…. but not any longer..it now be capped at 25 years.

There were some other changes, but these are the ones that will affect us most.  So here’s some other facts the media may not be telling you:

-You remember I said it wasn’t that bad?  It’s true.  Over 90% of my clients are qualifying already, using the Bank 5 yr posted fixed rates.  I suspect that most homebuyers can qualify just as well on October 17, as they can today.

-I’ll repeat…Most homebuyers can qualify easily with a 25 year amortization, but choose to extend that to a 30 year amortization as a fail safe or preventative measure, just in case their incomes are affected in the future … job loss, family illness, child school fees, other financial crisis.

-The govt wants to stop house prices from rising in Toronto, Vancouver and other major urban hotspots.   But if you are an investor, earning good income, or have a good down payment, this won’t affect you.   Yes, some homebuyers will no longer qualify under traditional lending policies….

-But watch out for the secondary lenders.  Secondary lenders AREN’T offering loan shark rates, contrary to what the media might have you believe.  They will gain market share as traditional lenders can’t help these borrowers.  I’m talking about financial institutions that specialize in that gray market where borrowers don’t quite qualify but can still afford it.  They will pay 4% or 5%  on their mortgage.  (wasn’t that long ago that 4% was a fully discounted AAA rate).

More on this follow..   stay tuned.

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 Brief… Homebuyer of the future.

the futureThis is the homebuyer of the future…

This past June, Mortgage Professionals Canada published their survey results on the Next Generation of Homebuyers.

Take note: Adults under the age of 40 who don’t currently own a home but expect to own in the future, if you are planning on buying, or help a child get into homeownership, these results can be an interesting comparison to your own situation. Here are some of the key findings:

  • 52% are under 30 years old, 48% aged 30 to 39
  • 55% single, 39% married/living with a partner
  • 81% have no children
  • 72% agree that mortgages are good debt, and 76% agree real estate is a good long-term investment. 58% are optimistic about the economy in the next 12 months.
  • The decision to buy is often influenced by key life events – start a family (33%), getting a promotion/raise (30%), getting married (29%), inheritance (8%).
  • Primary downpayment sources are personal savings (73%), gift/loan from a family member (36%), TFSA (33%) and RRSP (29%).
  • Average downpayment savings is $37,000 among imminent buyers.
  • Neighbourhood (61%), safety (58%), and potential for increase in value (50%) are the most important home features. Features that are considered to be worth a premium are nice neighbourhood (33%), short commute (31%) and safety (29%).

Read the rest of this entry »

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