May not realize full impact of B-20 changes till Spring.

The pessimism that has been ruling the markets since the U.S. election may ease a little today.  President Obama is set to meet with the leader of the Republicans in an effort to avoid the fiscal cliff.  Bond yields are virtually unchanged, up just 1 basis point (bp).

We’ve been enjoying flat mortgage rates for a number of weeks now, with a downward trend in bond rates.  We’ve come down 15 bps over the last month so that being said, there’s little reason for mortgage rates to move up any time soon.  There’s been a bit of a cushion built into today’s rates as the cost to the lenders has come down, yet mortgage rates have not moved with them.

The market is still adjusting to the recent  B-20 underwriting changes that took effect the end of October.  As we go into what is generally a seasonal slowdown, it’s hard to really tell the impact it will have more immediately.  Come the spring, that may be the true test of this latest round of changes.

One can only hope that all this government meddling hasn’t caused more problems for the Canadian housing market.  I can appreciate the intent of trying to provide a soft landing and reduce the household debt issues that have been raised, but needing to step into the market four times in as many years seems a bit excessive, doesn’t it?

BEST RATES: 1yr 2.69% – 3yr 2.65% – 5yr 2.94% – 5yr Variable 2.65%

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, reach out to him if you have any questions about these changes and how they affect you. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you log-in to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!

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Best Mortgage Rates in Canada Sept 19th

1 yr – 2.74%  3 Yr – 2.64%  5 Yr – 2.89%  VRM – 2.65%

There have been a couple of highlights for the Canadian housing market in the past week: the U.S. Federal Reserve announcement that it is committed to low interest rates until 2015 and the latest global housing outlook that puts this country in better shape than most.

Anyone looking for a new mortgage or a needing to renew will likely be happy by the American central bank’s interest rate pledge. The commitment to low rates makes it harder, but not impossible, for the Bank of Canada to move on its desire to increase rates.

However, that desire got a boost from Canada’s economic think-tank, the C.D. Howe Institute. It says the central bank needs to change the way it calculates inflation to take into account rising house prices. The institute says the current calculation keeps inflation lower than it really is and puts the Bank of Canada at risk of keeping rates too low for too long.

Of course, if you’re watching your investments, these low rates aren’t going to speed up your retirement plans any.

As for the global housing outlook, it shows Canadian prices continue to rise, albeit more slowly than a year ago. But around the world, countries showing price declines outnumbered gainers by more than two to one.

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you login to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!

 


Best Mortgage Rates Sept 13th, 2012 & Some HELOC Changes.

1 Yr – 2.74 – 3 Yr – 2.64 – 5 Yr – 2.89 – VRM 2.65%

The new guidelines (B-20) announced by the Office of the Superintendent of Financial Institutions (OSFI) kick in at the end of October and many lenders are changing policies now in anticipation of this.  Not ideal, especially for those that decide they would like a home equity line of credit (HELOC), or want to buy a home with 100 percent financing.

That doesn’t mean that you can’t get a HELOC, but the new guidelines limit the maximum amount that you can take out of your home.  Under current rules, you were able to take up to 80% of the value of the home as a HELOC.  The new guidelines cap this at 65%.  The intention is to reduce the ATM effect that was occurring with many homeowners, and contributing to the record household debt levels.  We can still refinance to 80% as a traditional mortgage – phew!

The next notable change is that the government now requires a borrower to have a 5% down payment.  No longer can the client use 100% financing in the form of a 5% cash back offer to finance their purchase.  Some people have great credit, but life happens and they just can’t save enough money for that 5% down and still pay all the household bills.  This represents a very small part of the market and for some reason the government thought it would be a good idea to target these borrowers.

So for the majority of Canadians that go to their bank to arrange their mortgage, these options are no longer available.

But, if you deal with a mortgage broker, or a credit union, you will still have access to these products.  Since OSFI governs federally regulated institutions (i.e. banks), most lenders fall under this purview.  But, credit unions are provincially regulated so they can dodge this bullet and continue to offer HELOCs to 80% loan-to-value, as well as 100% financing.

If you or someone you know is considering any of these borrowing options, then I’d encourage them to talk to their mortgage specialist soon before the major lenders have all changed their policies to comply with B-20.  But if the need arises after October 31st, rest assured, we can still explore options.  You just need to consult your local mortgage broker.

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you login to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!

 

 


Best Mortgage Rates for August 24th, 2012

1 Yr – 2.49% – 3 Yr – 2.64% – 5 Yr – 2.89% – VRM – 2.65%

Canada Mortgage and Housing Corporation is adding its voice to those announcing a slowdown in Canada’s housing market.

Their third quarter market review projects “measured” growth through the rest of this year and into next. CMHC sees a slowdown in housing starts and in price growth and points to “balanced” housing markets in most Canadian centres.

The CMHC forecast supports what already appears to be happening across the country. The Canadian Real Estate Association says its July figures indicate a balanced market.

Prices dropped a modest 2% from a year ago while sales remained virtually flat compared to June and new listings decreased a moderate 3.3% from June.

Still market watchers remain divided over the impact on the economy. Some point to the broader impact the housing industry has on employment and consumer spending. They say job losses from a slowdown in construction and the fact that falling home prices will have Canadians feeling less wealthy could be a serious drag on the economy. Several others see a 10% to 15% dip in home prices over the next two to three years as a modest contraction, especially compared to the vigorous and price growth experienced over the past decade.

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you login to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!


Best Mortgage Rates for August 16th 2012

   1 Yr – 2.49% – 3 Yr – 2.64% – 5 Yr – 2.89% – VRM – 2.65%

Wow!  This week has proved even quieter than the last.  No major economic news was announced, but we do have inflation numbers coming on Friday.  With Mark Carney already threatening the need to remove financial stimulus, he wants the market to believe that if this comes in higher than expected that we could see rate increases happen earlier than most are projecting.

I don’t think most economists are really giving this idea any serious attention as the economic fundamentals are too stacked against the option to increase rates.  Mark Carney has been crying wolf for too long and there are no obvious reasons to increase rates.  The economy isn’t at full capacity, we still have high unemployment, the dollar is playing with parity and they aren’t any further ahead in Europe.  Until these economic headwinds start changing direction, there really is no room for the Bank of Canada to make any rate changes.  Hence the mortgage announcement we got on June 21st.  I wouldn’t bet variable rates, but I think we should be here for a while still.

That being said, bond yields are still up, and we have some increases in rates, but there are still some great rates to be had out there:

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you login to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!


Best Mortgage Rates August 8 2012: Bye bye sub 3%?

It’s a quiet week for economic news, coming off a long weekend.  The unemployment report is out on Friday, but that’s the only real noteworthy item this week.

Best Mortgage Rates Canada 5yr fixed 10yr fixed variableWhat will be making more headlines will be the increase in bond yields we’ve seen the last week or so, as much as 25 basis points (bps).  At these levels lenders are starting to increase their rates and we’ve already had a few send us notice.  This could mark the end of the sub-3% five year rates.  We still have a few but unless yields reverse, more lenders will increase.

If you were sitting on the fence about whether or not to jump in now, this could be your wake-up call before all the rates bump.

Best to contact your mortgage professional and talk to them about getting pre-approved so they can lock in these rates for 120 days.

BEST RATES

1 Yr – 2.39

3 Yr – 2.64

5 Yr – 2.89

VRM – 2.65

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you login to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!


Doom or Boom? Best Mortgage Rates for August 3

This week we received conflicting reports about the so-called “condo bubble” in Toronto. One report from RBC seems confident that we are not in a bubble. The pace of construction is keeping pace with the creation of new homes in Toronto. Since land is becoming scarce in Toronto, builders are being forced to build up, and not out anymore. That being said, they do foresee a cooling, with a 2-7% drop in condo prices brought on by recent government changes.

The government can’t change interest rates so the changes announced on June 21st were designed to take some of the steam out of the Toronto (condo) market, while trying to engineer a soft landing.

The other report released this week came from the doom-and-gloom Capital Economics. They have been predicting for two years now a 25% decline in housing prices. That wasn’t speaking to the GTA or condos specifically, but more to the broad Canadian housing market. As a reader and someone in the industry, I take this report with a grain of salt. My guess is they are trying to grab headlines, as they did last year, with these horror-filled predictions. They point the finger at the Finance Minister’s changes and a growing reluctance for buyers to pay today’s top dollars in light of the global economic uncertainty we are in. While there may be some truth to these reasons, in the short term, it would be near impossible for prices to drop 25% with rates so low. As rates increase, which may not be till 2014 now, then it would be expected to see some pull back in the market.

In terms of the impact that the government changes are having on the market, it’s still too early to tell. I can say that in my office, very few clients were impacted by the change. Pundits may point to the lower numbers being generated this month, but this is also seasonally a very slow month for new deals to be written. I think we’ll need to wait until the fall market to see how much of an impact it really had.

The last bit of news to share is that ING is officially on the chopping block. Our Big Banks seem to be circling as the world’s largest insurer looks to divest itself of some of its holding in light of the bailout package it received. It will be interesting to see who ends up with the $1.7 billion in assets, and how they incorporate the ING clients and business model into their current holdings.

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Please remember to the Spring Realty Insider Club list to receive new blog post notifications, featured properties and insider access to Toronto’s hottest new developments right to your inbox. Find us on Facebook and Twitter too!


Fixed or Variable Mortgage? All the Rates look good!

We’ve had some interesting data recently that has some Canadians wearing smug looks. The most gratifying is the hotly-debated report from Environics which indicates Canadians are richer than Americans. It says the average Canadian household was worth about $363,000 in 2011, compared to almost $320,000 in the U.S., a difference of more than $40,000 – dollars that are pretty much at par. Of course, home prices had a lot to do with it. Canada didn’t see the collapse that the U.S. did and skyrocketing values in Vancouver and Toronto did a lot to jack up the national average.
The big credit monitoring firm, Equifax, says Canadians have slowed the speed at which they are driving themselves into debt. It says the rate of debt-growth dropped to 3.1% from 4.4% on a year-over-year basis. Credit card debt is down 3.8% and Canadians are sticking with their existing debt vehicles and not opening new accounts. Mortgage debt isn’t included.
And one dire sounding report that isn’t as bad as it seems from the Canadian Institute of Chartered Accountants. It suggests 48% of the people surveyed would find it “challenging” to meet their mortgage or debt payments if there was a “significant rate hike”. By “significant”, they appear to mean a 3.5% increase over what they are paying now. Rate increases will surely come but, given the current state of affairs, that sort of bump is highly unlikely. Also, keep in mind that “challenged” is not the same as “unable”.

BEST RATES

1 Yr – 2.39%

3 Yr – 2.64%

5 Yr – 2.89%

VRM – 2.65%

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Please remember to the Spring Realty Insider Club list to receive new blog post notifications, featured properties and insider access to Toronto’s hottest new developments right to your inbox. Find us on Facebook and Twitter too!

 


Best Mortgage Rates in Canada for July 18th, 2012

The Bank of Canada left the overnight rate at 1.00% at its meeting yesterday, as was universally expected. This is great news for anyone with a variable rate mortgage, or any product tied to prime like a line of credit or student loan.

More notable was the Bank’s assessment of the global outlook, which was deemed as having deteriorated relative to April.  The weakening in the global environment was cited as a factor restraining growth in Canada; however, the Bank views the domestic economy as continuing to grow at a moderate pace. These factors resulted in the Bank downgrading its 2012 growth forecast to 2.1% from 2.4%. The Bank forecasted that the economy will grow at a faster 2.3% in 2013 (albeit a tad slower than April’s 2.4% forecast) and 2.5% in 2014 (higher than April’s forecast of 2.2%).

The tone indicated that there may be need to reduce stimulus in order for the Bank of Canada to maintain the 2% target rate for inflation, but most economists don’t expect that to happen till 2013. More great news for variable rate mortgages, and anyone with debt tied to prime.  Yields are trending down so there may be some room for some short term decreases to fixed rates.  Sit tight and we’ll see!

Much of this is due to the slowing economic growth in Canada, the U.S. and China, and the unrelenting economic problems in Europe.  These helped to handcuff our central bank.  It has been looking to raise rates in an effort to slowdown the growth of household debt in Canada. But the Bank of Canada did get some relief with Ottawa’s imposition of new lending rules for high-ratio mortgages and new mortgage qualification limits.  The regulatory moves amount to a de facto interest rate increase in the housing sector and, anecdotally at least, appear to be having the desired, cooling effect.

BEST RATES
1 Yr – 2.39%

3 Yr. – 2.69%

5 Yr. – 2.94%

VRM – 2.79%

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Please remember to the Spring Realty Insider Club list to receive new blog post notifications, featured properties and insider access to Toronto’s hottest new developments right to your inbox. Find us on Facebook and Twitter too!


Best Mortgage Rates in Toronto for July 5th, 2012

The big news this week is the upcoming mortgage changes that will be coming next Monday.  Many lenders have been announcing their policy changes this week and many of those are now operating under the new rules.  Which is really unfortunate for last minute buyers that need the extra 5 years in order to qualify for their first purchase.

To summarize, here is the list of changes to CMHC insured mortgages that the government announced last month:

  • The maximum amortization period would be reduced to 25 years from 30 years.
  • For refinancing, the maximum amount of equity a homeowner could take out has been adjusted to 80 percent from 85 percent.
  • High ratio, or mortgages with less than 20% down, which are government backed will only be available to homes with a purchase price of less than $1 million dollars.
  • Finally, the maximum gross debt service ratio will be 39% and the maximum total debt service ratio at 44 percent.

Certainly, the reduced amortization will have the biggest impact to the housing market as many first-time buyers in the major metropolitan areas need the extended amortization in order to afford their first, big real estate purchase.

The reduced loan-to-value for refinances helps to eliminate the ATM effect that these historically low rates have created.  It makes it that much harder to refinance those higher rate debts onto your mortgage which could have improved cash flow and reduced the amount of interest that was being charged.  One could think that the purpose of this change would be to change people’s thinking BEFORE making large, big-ticket items without real need.  But, isn’t that kind of thinking counter-productive to the soft-landing that the government is trying to engineer?

Requiring 20% down for higher-end homes is really more about optics as very few purchases in the market would fall into this need.  In all my years in mortgages, I can only think of one deal, done recently, where this would have come into play.  I don’t expect to see much fallout as a result of this change.

Lastly, the reduced debt servicing ratios are really more common sense.  Under the old rules, where the gross debt servicing ratio (GDS) and total debt servicing ratio (TDS) could be 44% if the borrower had a credit score over 680, it left no room for additional debt servicing.  Meaning, if a city dweller decided that they wanted to buy a car and required some kind of financing, the payments would then put a huge cramp in their lifestyle, making things potentially unaffordable.  For this reason, I think this is a positive change as it helps to protect borrowers from themselves.

Looking back, most of these changes really put us closer to where we were a few years ago before policies started to relax and the US meltdown happened.  We’re back to 25 year mortgages, and the debt servicing is still more lenient than it was back in the days when we used 32% and 40% for GDS and TDS, respectively.  We were able to buy homes then, and we’ll still be able to buy home now.  Perhaps a little less house, but people will still be able to buy.

1 yr 2.64

3 yr 2.69

5 yr 2.99

Vrm 2.60

Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Please remember to the Spring Realty Insider Club list to receive new blog post notifications, featured properties and insider access to Toronto’s hottest new developments right to your inbox. Find us on Facebook and Twitter too!