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TagBill Morneau

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

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’s the official update from our Department of Finance.

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

Mortgage tricks… and treats!

halloween-moneyHappy Halloween! And before the kids knock on your door.. just thought I’d send a quick mortgage trick and trick..

TRICK..  ‘Stress Test’ for mortgage qualifying.  The Finance Minister, Bill Morneau, blindsided Canadian Banks, Financial Experts and consumers when the govt introduced mortgage rules making qualifying even tougher.  The new rules mean consumers must qualify at the posted bank 5 year fixed rate.

TREAT... The reality of the new mortgage rules is that it’s not going to affect that many.  One of Canada’s biggest mortgage lenders told me, confidentially, that over 95% of their portfolio would easily pass the new stress test.  The REAL devil here is the Canadian Press.  Unfortunately, they are making this latest change sound like a death-blow for the real estate market.  Gauging my own clients profiles, I would say that even fewer than 5% would be affected.

If you’ve followed my site, you’ll know I’m a huge Variable rate advocate.  More than 90% of my clients have been in a Variable rate product.  And guess what?  They’ve always been able to qualify using the posted 5 yr fixed rate.

The govt wants to slow the housing market and property value increases.  I agree, we don’t want to see house prices continue unsustainable increases.   Not sure this latest change is the correct move.  Perhaps, this rule could have apply for higher priced homes only..?   Exclude homes less than $600k or $700k? Just a thought..   I’m also unsure the lack consultation or input from industry experts, was a wise move.  More open discussion is needed.  Just my opinion..

Happy Halloween.

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… 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

Higher minimum down payment coming.. relax, it’s just political posturing.

Bill MorneauAs expected, and as I had predicted back on October 21st, the Federal govt made their first major announcement last week.  All new govts want to make a major announcement early… It shows they are doing something….So, here it is.

The new Federal Minister of Finance, Bill Morneau, broke the news on Friday.   A change to the minimum down payment rules.   That’s right, the minimum down payment to buy a house is going up…. well, sort of… Okay, that’s the headline … but now, keep reading for the real facts.   Here’s a link to The Star’s article by Susan Pigg quoting yours truly…. Continue reading “Higher minimum down payment coming.. relax, it’s just political posturing.”

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