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Adjustments to the Mortgage Stress Test

Adjustments to the "Stress Test" don't go far enough

Adjustments to the Mortgage Stress Test

In case you missed it, Finance Minister Bill Morneau announced this week that adjustments to the “Stress Test” are coming on April 6th. While the government says the change will make the stress test qualifying rate more responsive to market conditions, what does that really look like?

On the bright side, this new qualifying rate will probably be lower by around 0.30%.  This will increase the amount of a house one can buy by around 5%.  

Example… $500k increases to $525k.  

On the dark side, this isn’t really making a whole lot of difference. I don’t want to sound pessimistic, but I’d like to point out the shortcomings of his announcement. It’s purely political. They said they would do something and I guess, technically they did. But it really has no significant impact. 

Continue reading “Adjustments to the "Stress Test" don't go far enough”
Rental properties as a secure long-term investment

Real estate may not be sexy, but…

Rental properties as a secure long-term investment

Rental properties are a secure long-term investment. Note the emphasis on “long-term”.

Check out any seven-year period over the past 50 years (anyone who has read this news site knows that I always recommend buying and holding for at least seven years). Property values have almost always risen.

Sure, the last five or 10 years have seen fantastic appreciation in almost every part of Canada. But, let’s leave capital appreciation out of the equation for now.

Why aren’t we talking about rental income? Or, how about the equity growth through your mortgage being paid down each year?

RENTAL INCOME IS UP, UP, UP!

Part of what makes rental properties attractive is that rent rises with inflation (or even higher, in many cases, as we have seen in urban markets like Toronto and Vancouver). This is how you create your own pension or retirement income! Continue reading “Real estate may not be sexy, but…”

Important week for mortgage rates

Important week for mortgage rates could cost or save you thousands.

Important week for mortgage rates

Mortgage rates fell by about 1% since January of this year. That rate drop has created a surge in real estate sales across Canada, with September and October seeing a greater than average number of real estate transactions.  We also saw consumers taking advantage of these low rates by refinancing their mortgages early.

The Five-Year Government of Canada bond yields have been going up and down like a yo-yo over the last three months, with a low point being 1.13% and a high of 1.58% just this past week. This uncertainty/volatility forced financial institutions to raise their interest rate by about .2% to .3%.  Having said that, interest rates are still very low. In my discussions with the major lenders, they are all telling me that it’s busier than usual for home purchases and refinance purposes. Continue reading “Important week for mortgage rates could cost or save you thousands.”

Why didn't the Bank of Canada Gov cut rates last week

Why didn’t the Bank of Canada Gov cut rates last week?

Why didn't the Bank of Canada Gov cut rates last week

WAS THIS A BIG MISTAKE?

Last week, Stephen Poloz, the Bank of Canada Governor, kept the Prime Rate as is during the 6th of their eight scheduled meetings for 2019.  The Current Target rate is 1.75%.  (Bank Prime rate is derived from this rate.  Today’s Bank Prime rate is 3.95%.  Over 99% of time, when the Target Rate is cut, the Banks will reduce the Bank Prime Rate by an equal amount).

This was a very calculated decision that has politics written all over it.  While the rest of the world banks have been cutting rates to combat a looming recession due to growing global trade wars and slowing global economies, our Government did nothing.  Apparently, the Canadian economy is ‘resilient’.  The next Bank of Canada meeting is set for October 30, 2019.  Oh, and there’s a Federal election on Oct 21, 2019.  Yeah, this has politics written all over it.

WHAT YOU SHOULD KNOW ABOUT MORTGAGE RATES TODAY.  Continue reading “Why didn’t the Bank of Canada Gov cut rates last week?”

Mortgage Rates are still trending Lower… Yes, in August!

Its Christmas! Home Sweet Home. Home Improvement And Time. Enjoy

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?!

Continue reading “Mortgage Rates are still trending Lower… Yes, in August!”

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