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BANK RATES & FIXED RATES DURING COVID-19

Central banks around the world have slashed their benchmark interest rates to pretty much zero in an attempt to stimulate the economy by making it as easy as possible to borrow, spend and invest.

 

However, in Canada’s mortgage market: rates aren’t going down by as much as they should be. In some cases, they’re actually rising.

 

Mortgage rates tend to move up and down based on a number of factors, but one of the main ones is the costs borne by the lenders themselves.

 

People tend to think that when someone walks into a bank to ask for a home loan, if they are approved, the bank just takes the cash out of some safe at the back, hands it over to the borrower and charges them interest over time to make a profit.

 

Except, banks don’t keep that much money just lying around either — they typically borrow it themselves and make money on the spread between how much they’re charged for it and how much they turn around and charge the borrower for it.

 

Fear driving rate cuts:

The cost of financing a variable rate loan is strongly influenced by the Bank of Canada’s benchmark rate, because banks tend to set their own prime lending rates based on whatever the central bank’s rate is.

The bank has cut that rate by 150 basis points — 1.5 percentage points — in the past month to try to make it as easy and cheap as possible for people to borrow, spend and invest to stimulate the economy that has been waylaid by COVID-19.

 

A few short weeks ago, it wasn’t hard to find a variable rate mortgage for something around prime minus one — a full percentage point below whatever a bank’s prime lending rate was at the time.

 

Since then, however, Prime lending rates have gone down more or less with the Bank of Canada’s moves, but those discount rates for mortgages have disappeared.

 

The reason they’re doing that is the same as why stock markets plunged, and governments rushed to implement lockdowns on millions of people: fear.

 

Bond yields are the biggest factor that goes into setting rates for fixed-rate mortgages, and they have plunged to almost their lowest levels on record in recent weeks.

 

Banks building in higher risk:

When the economic outlook was clearer, banks were happy to cut rates as low as possible to try to consume market share. But now, they’re saying, “We better earn a bit more of a spread on this money because these things might default at a higher rate than we’re used to.”

 

The impact isn’t dramatic. A few weeks ago, the best mortgage rates were something in the range of between two and 2.5 per cent. Today, they’re between 2.5 and three per cent because they are demanding a higher risk premium than what they typically do.

 

Lastly, the overwhelming majority of first-time buyers prefer fixed-rate loans because they like the security of knowing that their monthly payment is guaranteed to not increase. The banks know this, and it might soon have a heavy cost for borrowers.

 

COVID-19 recession on horizon:

The current situation can’t last forever. Economists are already predicting that the COVID-19 recession is likely to be incredibly sharp, but it’s anyone’s guess how long it will go on for. The best sign that things are getting back to normal will be when the big banks start to act in a way that seems inconsistent.

 

Banks are raising their rates right now because they feel just as uncertain about the future as Canadians do. Once that cloud lifts, they’ll want to start lowering rates again and they won’t build in that uncertainty premium like they are now.

 

As confidence returns, you’ll see rates fall.

For all of your mortgage questions, broker Kevin Decker can be reached after at 250 619 2262 and broker Jason Barudin can be reached at 250 668 2203.

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

 

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

 

MORTGAGES & COVID-19

The COVID-19, or coronavirus crisis has left many homeowners in Canada without a job or with reduced hours and wondering how to pay their mortgage. Homeowners facing financial stress may be eligible for a mortgage payment deferral up to 6 months to help ease the financial burden. The COVID-19 Mortgage Payment Deferral program will be ongoing. You can apply at any time during this outbreak.

 

Mortgage payment deferrals can help you during times of financial hardship — like unemployment or reduced employment due to the Coronavirus (COVID-19) outbreak.

 

-The deferral is an agreement between you and your lender. Contact your lender directly as soon as possible!-

 

The agreement indicates that you and your lender have agreed to pause or suspend your mortgage payments for a certain amount of time. It’s also known as a mortgage payment deferral agreement or mortgage forbearance agreement and it’s a temporary measure.

After the agreement ends, your mortgage payments return to normal and the missed payments — including principal and accumulated interest – repaid.

 

A mortgage deferral helps you when you’re struggling to make your payments by allowing you to skip your mortgage payment for a specified amount of time.

 

The mortgage deferral agreement does not cancel, erase or eliminate the amount owed on your mortgage. At the end of the agreement, you will have to resume payment according to your regular payment schedule.

 

However, the interest that hasn’t been paid during the deferral period continues to be added to the outstanding principal of your mortgage. This can affect the total amount you owe in accordance with the original payment schedule.

 

Yes, you’ll need to repay the amounts of the skipped payments including both principal and interest. Details of the repayment will vary according to the specific lender and situation.

 

The interest on your mortgage that hasn’t been paid during the deferral period continues to be added to the outstanding principal of your mortgage. When your payments start again, your mortgage payment might be based off the total amount you then owe to pay off your mortgage in accordance with the original payment schedule.

 

It is very important to know that mortgage payment deferrals focus solely on your mortgage. It won’t affect other payments regularly withdrawn, like property taxes and life/disability insurance.

 

Your lender — your bank or your mortgage professional — can tell you if you are eligible for a mortgage payment deferral. Also, with the COVID-19 outbreak, CMHC is allowing lenders to offer deferred payments for insured mortgages.

 

All mortgage insurers offer a number of tools to lenders that can help you when you’re in financial difficulty and are struggling to meet your mortgage obligations.

Any borrower facing financial difficulty should contact their lender — your bank or mortgage professional — to learn what options are available.

 

The payment deferral is for people who will struggle to make their next mortgage payment. If you are in a position to make your payments, you should.

 

If — at any point in this crisis — you think you won’t be able to make your regular mortgage payment, it’s important for you to take quick action. Contact your bank or mortgage professional immediately before you miss a payment.

 

For all of your mortgage questions, broker Kevin Decker can be reached after at 250 619 2262 and broker Jason Barudin can be reached at 250 668 2203.

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

 

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

UPCOMING STRESS TEST CHANGE – MORTGAGE PROFESSIONALS CANADA

Today, Minister of Finance, Bill Morneau, announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages, also known as the “stress test.” These changes will come into effect on April 6, 2020. The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent (2%) buffer.

Additionally today, the Office of the Superintendent of Financial Institutions (OSFI) announced that it is considering implementing the same benchmark rate of the weekly median five-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent (2%) buffer for uninsured mortgages, which will align minimum qualification limits for the insured and uninsured mortgage market.

Mortgage Professionals Canada or MPC has been recommending uncoupling the stress test rates from the Bank of Canada posted 5 year fixed rate since its introduction to the insured 5 year terms in 2016. Setting the floating rate on the insured contract rate will make the test more dynamic and responsive to market and bond rates. We thank the government for acknowledging this issue and making these changes. We do, however, still consider a two percent (2%) buffer to be an onerous test level given the economic realities globally.

MPC’s 5th Parliament Hill day takes place tomorrow in Ottawa, with over 50 meetings scheduled with MPs, Senators, and senior policy officials. Our member volunteers will thank the government for making this first, much-needed adjustment to mortgage qualification in Canada, and continue to ask for additional support measures for those most impacted by the introduction of these tests; aspiring middle-class Canadians and would-be first-time buyers. Included in our asks will be the reintroduction of an insurable 30-year amortization for first-time buyers, and increases in the income maximum multipliers under the newly introduced First Time Home Buyers Incentive Plan.

Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo
We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

Mortgage Professionals Canada
2005 Sheppard Ave. E, Suite 401, Toronto, ON, M2J5B4
1-888-442-4625 | mortgageproscan.ca

Monoline lenders or Bank mortgages?

What is better? Monoline lenders or Bank mortgages?

Every time one of the main Canadian banks changes their mortgage rates, it makes news. For example, when RBC dropped its five-year fixed-term mortgage rate by 0.15 percentage points (or 15 basis points) to 3.74 per cent every main news outlet in Canada picked it up. However, the big banks do not always offer the lowest mortgage rates in the market and those are the ones you want to find.

Canadian banks have a 90-per-cent strong hold on the Canadian mortgage market and we’ve been slow to start paying attention to the alternative — frequently cheaper — options out there. There’s a whole industry of smaller, more competitive mortgage lenders and brokers who never make headlines. They are often just as established, they’re completely just as dependable, and they’re often times more affordable. So why do we stay with the big banks? Complacency and lack of knowledge are big reasons.

Brokers and smaller lenders often drop their rates first. Here’s how mortgage rates work: lenders (whether large banks or small lenders) lend money to home buyers in the form of mortgages. Even big banks have to borrow money at times to ensure they can lend money out to meet requirements, and they always borrow at a lower rate than they lend it out at. That’s how they make a profit.

Beginning this past autumn, the rates that lenders were borrowing at began to drop. In November 2018, a five-year government of Canada bond was costing lenders 2.5 per cent in interest — it’s now costing them around 1.75 per cent. That reflects the cost of lending in the bond market, which helps influence fixed-rate mortgages. The big banks are only recently starting to pass these savings onto Canadian consumers. Smaller lenders and brokers began lowering their mortgage rates ahead of the big banks in January. Yet, you didn’t hear about those rate changes, because small lenders don’t make the news. Brokers and smaller lenders had lower rates to begin with.

Finally, when you decide to get a mortgage, don’t simply walk into a bank and take the first mortgage rate you are offered. Shop around and compare — use a broker to help you find the best rates out there. We all compare flights and hotels when we’re taking a trip. We should start doing the same for financial products. After all, the money you can save on a vacation pales in comparison to what you can save on a mortgage.

Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo
We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

WHY YOU SHOULD BUY A HOUSE IN THE WINTER

Spring & Summer are the ideal seasons for house hunting. It is a more pleasant time of year and sellers know their properties look better when not covered in snow. Yet there are some very logical for going shopping for a house and moving in the winter too!

Here are some advantages of house hunting in the winter…

Fewer Buyers to Compete With

The most obvious plus of buying and moving in winter is exactly because real estate wisdom says to shop Spring & Summer. As a result of this popular piece of real estate advice, there will be fewer buyers in competition during the colder months. So for the investor looking to find a good deal in the housing market, the winter can be prime time.

In most markets, winter usually means a lower inventory with fewer houses on the market. While this is often the case, it’s possible to find the right space and with fewer people looking, you’ll have less competition.

Lower Prices

When you have fewer buyers in the market, supply exceeds demand. This usually results in prices being lower than during the hot or peak season.

Motivated Sellers

The low activity in the winter will result in sellers being far more motivated to sell. Real estate agents know that the slow winter months are when sellers are more willing to negotiate, whether it is on selling price, closing costs, closing date or even terms of the sale, including what appliances and items are included in the sale—these are all the very reasons that many real estate agents recommend that their clients delay listing their homes till at least the spring. The winter is not a great time for sellers, in general.

Seller’s Circumstances

Furthermore, there are the circumstances hinted at above when sellers are forced to sell during the winter, maybe a job offer has dictated a winter move, or the seller may have personal issues that are dictating their actions—financial issues, divorce, etc. Again, this may work to the buyer’s advantage as the seller will be very motivated.

Fewer Offers on a Property

Another reason that winter can be such a buyer’s market for real estate is that the fewer number of buyers competing for homes means that the chances of there being multiple offers on a single property are greatly reduced. This again translates to buyers having the upper hand over sellers in the negotiations.

Motivated Realtors

Low activity during the winter months also means you will have the undivided attention of your realtor and they will be working harder for you. These lean months of low sales volume encourage realtors to try just that little bit harder to negotiate a sale.

So brave the cold, pull on a winter coat, and get out there and house hunt. Remember, it is still a great time to invest in real estate.

 

Call our office today at 250 753 2242 with all of your mortgage questions!

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

FIVE WAYS TO HELP THE ENVIRONMENT

 

  1. IMPROVE YOUR HOMES ENERGY EFFICIENCY. You can start small by replacing your regular bulbs in light fixtures for LED bulbs, seal your windows, and/or unplug unused chargers.
  2. BUY LOCAL FROM REPUTABLE FARMS. Know where your food is coming from and how it is being produced. You can check out local farmers markets to get to know the local farmers.
  3. CHOOSE ECO-FRIENDLY PRODUCERS/COMPANIES OR SHOP THRIFT. Try to avoid shopping at “fast fashion outlets” and save money by shopping thrift. I’ve found some amazing high quality finds at the Salvation Army and they have Monday Madness sales where certain colored tags on clothes are only a dollar!
  4. USE RE-USABLE BAGS, CONTAINERS & BOTTLES. Be more vigilant in remembering to grab your re-usable bag from your car when you go shopping and use the same bottle for all of your beverages if you can!
  5. SAVE WATER. With looming water shortages and warnings, it’s best to start early. You can start by cutting showers short, shrink your lawn, and if you’re compelled to wash your car take it to a car wash that recycles the water rather than washing it at home with a hose.

HOPE THIS HELPED YOU BECOME A BIT MORE ENVIRONMENTALLY SAVVY! OF COURSE THESE ARE JUST BABY STEPS IN A MUCH BIGGER PROBLEM BUT IT’S A START IN THE RIGHT DIRECTION TO END CLIMATE CHANGE!

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

THE MORTGAGE MARKET

Last week Mortgage Professionals Canada released its “State of the Mortgage Market Report”. Although it strongly focused on the mortgage stress test it also included many interesting statistics that help show the current state of the mortgage market. We’ve summarized a handful of the findings below…

  • There are 6.03 million homeowners with mortgages (out of a total of 9.8 million homeowners in Canada) and there are 1.6 million Home Equity Line of Credit (HELOC) holders.
  • The percentage of mortgages in Canada with a fixed interest rate is 68% and the percentage of mortgage with variable or adjustable rates is 27% with “hybrid” mortgages making up 5%.
  • The average Amortization Period is 22.2 years.
  • The average lump sum payment made by homeowners was $22,100.00 which was done by 15% of them. An additional 33% of homeowners voluntarily took action to shorten their Amortization Periods.
  • 74%: The average home equity of Canadian homeowners, as a percentage of home value and 4%: The percentage of mortgage-holders with less than 15% home equity.
  • Among recent buyers who bought their home from 2015 to 2018, the percentage with 25% or more equity in their homes as 50%.
  • The percentage of homeowners who took equity out of their home in the past year (up slightly from 9% in 2017) was 10% or 960,000.
  • The average amount of equity that was taken out was $74,000.
  • The average percentage of down payment made by homeowners was 20%.
  • Lastly, 52% of homeowners used personal savings for their down payment and 20% used funds from parents or other family members.

Have questions regarding these numbers and statistics? We would love to answer them for you, speak with one of our loan experts today! Call 250 753 2242!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

 

For more information please go to CanadaMortgageTrends.com (you can read their article here https://www.canadianmortgagetrends.com/2019/01/the-state-of-the-mortgage-market/) which goes into more detail.

Survey details: This report was compiled based on online responses compiled in November 2018 from 2,023 Canadians, including homeowners with mortgages, homeowners without mortgages, renters and those living with family.

 

The Bank of Mom & Dad