Jun 04

Bank of Canada – No Change, No Surprise

No Change-No Surprise

bank of canada The Bank of Canada is maintaining the “overnight rate” at its current level. It’s no surprise and conventional wisdom sees short term rates will remain unchanged for some time yet in face of weak Global and Canadian economic growth. Right in step with economic weakness is a pull-back in longer term rates.

There has been slight drop in the Canada Bond yields which has been feeding the Spring mortgage market with some aggressive rates. Interestingly, the Banks are reaping headlines with 5 year rates below 3.0%, while Mortgage Brokers are able to offer their clients rates as low as 2.84% (as at June 4, 2014).

Best Rate Not Always The Best Mortgage

PiggyBank Save MoneyAlmost always, when rates are offered at substantial discount to the norm, you should be aware that restrictions and special conditions may apply. That’s where the value of a Mortgage Broker works in your favour.

Not only will a good Mortgage Broker find you the best interest rates in the market, but with knowledge and expertise about available products in the market, he can save you cost over the long term. Mortgage borrowers faced with high penalties, mortgage portability issues, limited pre-payment options, conversion restrictions and lender fees could end up paying a lot more with a “low rate discounted mortgage” than with a flexible mortgage product with a slightly higher rate.

Our advice? Think long term when you make that mortgage decision. Know what you are getting into before you sign.

May 05

CMHC-Mortgage Loan Insurance Changes

CMHC Premiums and Housing CostsFollowing an increase in CMHC Mortgage Loan Insurance Premiums by an average 15% on May 1st, 2014, the corporation announced additional changes to their mortgage insurance program–effective May 31, 2014. The ultimate effect on housing markets remains to be seen.

CMHC Premium Increases

Loan-to-Value Ratio Standard Premium (Current) Standard Premium (Effective May 1st, 2014)
Up to and including 65% 0.50% 0.60%
Up to and including 75% 0.65% 0.75%
Up to and including 80% 1.00% 1.25%
Up to and including 85% 1.75% 1.80%
Up to and including 90% 2.00% 2.40%
Up to and including 95% 2.75% 3.15%
90.01% to 95% – Non-Traditional Down Payment 2.90% 3.35%

CMHC Program Changes effective May 31st

Continue reading

Jan 22

Collateral Versus Standard Charge Mortgages

With some lenders moving towards collateral charge mortgages versus standard charge mortgages, it’s important to understand the diCollateral versus Standard Mortgagesfferences between a collateral and a standard charge mortgage.
The primary difference is that a collateral charge mortgage registers the mortgage for more money than you require at closing. For instance, up to 125% of the value of the home at closing with TD Canada Trust or 100% through many credit unions, instead of the amount you need to close your transaction (as is the case with a standard charge mortgage). Continue reading

Jun 25

Higher Fixed Mortgage Rates

HouseInHandBond yields are continuing to rise globally since the Fed mentioned an imminent exit from its bond purchasing program last week. The US Federal Reserve set off a dramatic spike in US borrowing costs last week after indicating a beginning withdrawal from their quantitative easing program.

This will most likely translate into higher fixed mortgage rates across the board – a continuation of last week’s rate increases. Continue reading

Jun 18

Fixed Rates Increasing

graphIt’s no secret by now that mortgage rates–particularly the 5 year fixed rate terms–have risen in the last week by as much as 20-30 Basis Points (.2% to .3%). While minor in nature compared to historical norms, affordability is being affected.

This rate increase is primarily due to falling bond market prices resulting in increase yields for quality bonds and mortgages. This, together with recent rule changes by government, has had an effect on borrowing ability for most real estate buyers and refinancers. Here are some examples of changes in today’s mortgage market:

  1. Fixed rates increasing (although variable rate mortgages are slightly decreasing)
  2. Lenders are tightening criteria for qualification, e.g. if you have a credit line, you may find that you no longer qualify for as much of a mortgage.
  3. Properties that are not “prime” and readily saleable may present problems for financing.
  4. Lower Credit Scoring and credit blemishes on a borrower’s record may prevent qualifying
  5. Self Employed Borrowers are facing more stringent criteria than before

The obvious conclusion is that these and other policy changes will reduce the number of qualified buyers, thus reducing housing demand across the country and eventually softening house prices–clearly our government’s strategy.

Will these trends continue? I can’t find anyone that knows for sure, but my recommendation remains the same. In this market, with regard to acquisition and maintenance of debt….STAY SAFE!