Wednesday, March 31, 2010

Below is a summary of the inpending changes to mortgage qualifying and how it will affect you. If you have any questions please feel free to call me @ 403 620 0164.

The Government of Canada - announced a series of regulatory changes to support the
long-term stability of Canada’s housing market. The Government has now provided the
following details in relation to these changes.
Effective April 19, 2010, Qualifying Interest Rates guidelines will change as follows:
1) Fixed Rate Mortgages with terms less than 5 years and all Variable Interest Rate Mortgages
will have to qualify based on the greater of the 5 Year Bank of Canada Benchmark Rate**, or
the contractual rate.
2) Fixed Rate Mortgages of terms 5 years or greater will qualify based on the contractual rate.
**The Bank of Canada Benchmark Rate is defined as the Chartered Bank – Conventional
Mortgage 5-year Mortgage rate, published by the Bank of Canada each Monday, and can be
found at
The four key changes associated with this announcement are:
1) Borrowers will need to be able to afford a five-year fixed rate mortgage, even if
they choose a mortgage with a shorter duration.
2) Investors, who want to buy a home that they don't plan to live in, will have to
make a minimum down payment of 20%.
3) Canadian home owners will only be able to Refinance to a maximum of 90% of
their home value, down from 95%.
4) Effective April 9, all Self-employed borrowers with greater than 3 years selfemployment
history and all commissioned borrowers, regardless of tenure, will no
longer be eligible for the stated income program.

Tuesday, March 30, 2010

TORONTO - Two of Canada's biggest banks are increasing some of their residential mortgage rates effective Tuesday in the latest sign that the era of historically low rates could soon come to an end.

The changes affect closed mortgages with terms of three, four and five years at RBC Royal Bank (TSX:RY) and TD Canada Trust (TSX:TD). Rates for mid-term mortgages like these tend to reflect the banks' borrowing costs on bond markets.

The biggest increase announced Monday affects five-year mortgages. Both banks are hiking their posted rate by six-tenths of a per cent to 5.85 per cent from 5.25 per cent.

A homeowner taking on a mortgage of $250,000 at the new rate of 5.85 per cent over a 25-year amortization period would pay $1,577 per month. Prior to Tuesday's hike, that mortgage would have cost $1489 a month, or $88 less.

The Bank of Canada is expected to begin raising lending rates this summer as it moves to fight growing inflationary pressures in the economy. The bank has kept its key overnight rate at a historic low of 0.25 per cent for more than a year to help stimulate the economy.

CIBC (TSX:CM) chief economist Avery Shenfeld said the central bank begins to step on the brake when it sees overheating in the economy, and economic growth in the first quarter has outperformed the central bank's forecast.

CIBC has lifted its own growth outlook for the first quarter of the year to over five per cent, due to strong indicators of recovery.

"The only reason the market is building in expectations for rate hikes is because it's seeing the economy as better able to withstand them," he said.

"Once the Bank of Canada starts pushing up short-term interests rates, and even in anticipation of that, it tends to spill out across the rest of the curve."

Mortgage rates hikes are a trend consumers should expect to continue, Shenfeld added.

He predicts the Bank of Canada will gradually raise key lending rates this summer, resulting in an increase of 0.75 per cent to one per cent by the end of the third quarter.

That would raise the average prime rate at the banks from 2.25 per cent to three per cent, which could tack on three-quarters of a per cent to the rates of homeowners with floating mortgage rates, Shenfeld said.

"Consumers are forewarned that when they look at borrowing today they have to factor in potentially higher costs," he said.

"Consumers have to be aware in taking on debt at historically low interest rates that down the road they will be higher and have to leave room for their ability to pay those higher rates."

When the Bank of Canada lifts rates, part of its intention is to take the fire out of the most interest sensitive segments of the economy, including the housing market, which has seen a particularly strong recovery, Shenfeld said.

The hot housing market is being driven, in part, by an influx of consumers willing to pay a premium for home ownership before interest rates rise.

Shenfeld said the rate increase could help dampen the house price inflation seen over the past several months.

And he added that the outperformance of the economy in the first half of the year will be countered by a slowdown in the second half.

"Not only do we expect weaker growth in the key US export market by then, but Canadian consumers may also be more temperate in the wake of a debt financed binge

Residential Mortgage Rates*
Effective March 29, 2010*

Term 6 Month 1 Year 2 Year 3 Year 4 Year 5 Year 7 Year 10 Year Variable
Rate Prime
Posted Rates* 5.90% 5.60% 6.25% 6.25% 6.25% 6.75% 7.20% 7.55%
Best Rates* 3.50% 2.23% 2.80% 3.20% 3.59% 3.59% 4.70% 5.20% 1.75% 2.25%

Wednesday, March 24, 2010

TORONTO - Recent first-time homebuyers say they felt pressure to enter the market as they contended with jitters about rising home prices and higher mortgage rates.

The Bank of Montreal says as many as one-third of respondents in a homebuyers survey believe their expectation that housing prices would increase, and interest rates would soar, left an impression on their decision to make a purchase in the short term.

"There's definitely a sense of urgency among home buyers," said Lynne Kilpatrick, senior vice-president of personal banking at BMO.

"While we encourage Canadians to pursue their home ownership dreams we recognize it's easy to get caught up in the emotions of the purchase and this can lead to stretching one's budget too thin."

The results come as Royal Bank released its own homeownership survey on Wednesday which showed that a majority of Canadians expect to see higher mortgage rates over the next year.

RBC's annual homeownership survey said 64 per cent of Canadians expect high rates, with about the same number of mortgage holders concerned about higher rates.

Economists expect the Bank of Canada to raise interest rates by between half a percentage point and a full point over several months beginning this summer to fight inflationary pressures in the economy.

With many Canadians taking on larger and larger mortgage debt in expensive markets across the country, higher rates could create financial problems for some homeowners.

In the Royal Bank survey, three-quarters, or 73 per cent of homeowners, feel strongly that homebuyers need to think ahead to ensure they will still be able to make their mortgage payment if rates rise.

The bank says six-in-10 mortgage holders say they have taken advantage of current low interest rates to pay more principal on their loans.

Eighteen per cent of homeowners say they've made a lump sum payment on their mortgage and 16 per cent have doubled their payment to reduce their principal.

While 84 per cent of mortgage holders believe they are doing an excellent or good job of paying down their mortgage, 49 per cent say their mortgage is larger than they thought it would be at this stage in their life.

Marcia Moffat, RBC's head of home equity financing, says the best advice for homeowners is to review their mortgage holdings with a financial adviser to position themselves for any changes.

BMO's senior economist Sal Guatieri added that a cooler housing market is "just around the corner."

Yet "with rising interest rates expected, and the introduction of the Harmonized Sales Tax in Ontario and B.C., prudence may be a good choice for many new entrants in the housing market."

Wednesday, March 17, 2010

lower Fixed Rates Available

Wow! What an interesting few weeks. The 5 yr bond yield shot up almost overnight last week, yet the fixed rates remained steady. Are the banks hedging bets against a higher bond yield or are the banks really sitting on huge cash reserves?

The past two days we have seen a slight drop in the 5 year bond yield. That said, we do in fact know that the banks are eager to lend and as a result, they are becoming more aggressive with their interest rate pricing. The spread, the difference between the fixed rate and the corresponding bond yield, is at an all-time never seen before low of 1.14%; WOW! This is great news for consumers.

Here are a few of today's great rates.

3.79% 5 yr 120 day rate hold
3.69% 5 yr 30 day quick close

Prime - .50% 30 day quick close
Prime - .40% 120 day rate hold

Zero down financing is still available!

Tuesday, March 09, 2010

The April 19th change is that you will have to have a 10% downpayment instead of the 5% that is required right now. If you are wanting to buy a home and only have limited funds for your downpayment, you must get in before April 19th.

Government Imposes More Change...

CMHC has circulated a letter to the mortgage community and in it are the new changes which are to take effect April 19, 2010. However, there is a more recent change that is to take effect April 9,2010. This change is to do with those who are self-employed and it's not pretty.

Effective April 9, 2010 the Government has imposed new changes to how the self-employed are qualified. In CMHC's words:

CMHC is also announcing po licy changes to the CMHC Self-Employed Product Without traditional Third Party Validation of Income. Effective April 9, 20 10, self-employed borrowers with more than 3 years in the same business and commissioned-income borrowers will be required to confirm their income and will not be eligible for the Self-Employed Product Without Traditional Third Party Validation of Income. This product is intended for a small portion of borrowers who find it very difficult to document income - inparticular, recently self-employed borrowers. For the majority of self-employed borrowers, income validation is readily available through financial statements, contracts, T4s and other third party income validations. The changes will ensure that self-employed borrowers with third party income validation will benefit from a lower premium. Furthermore, the maximum loan-to-value ratio available under the CMHC Self-Employed Product Without Traditional Third Party Validati on of Income will be reduced from 95%to 90%for purchase transactions and from 90%to 85%for refinance.

This change is significant and will undoubtedly have a profound effect on our industry moving forward. Share these developments with your contacts and always, we welcome your calls.

Monday, March 08, 2010

The ceiling done with the wainscotting. The lights are causing a lot of shadows, but you can still see how it looks. I love it! Maybe I'll try taking some pictures in the daytime when the lights are off.