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Please call me today for your best mortgage solution and advice. Phone: 604.802.8193
Rates, Refinancing and Relief - The Effects of COVID19 - UPDATED March 24th
More Rate Increases
HSBC often leads the market on mortgage pricing and today it upped multiple rates:
3yr fixed (high ratio): 1.88% to 1.99% Still the lowest rate in Canada
5yr fixed (switch/purchase): 2.49% to 2.69%
5yr fixed (refis): 2.59% to 2.79%
5yr variable (switch/purchase): 2.49% to 2.74%
5yr variable (refis): 2.59% to 2.84% (P 0.11%)
Evaporating variable-rate discounts are sadly a sign of the times, even at rate leader HSBC.
Extreme application volumes are leaving some applicants waiting over two weeks for mortgage approvals. Generally speaking, the better the mortgage deal, the more applications the lender gets and the longer borrowers must wait.
Rates and Refinacing
This week has been yet another roller coaster of news, that none of us have fully been able to digest let alone fully understand. The COVID19 crisis has rocked the markets and that flight of capital has caused rates to fall. This caused a flurry of inquiries for most brokers regarding refinances to catch those suddenly lower rates. Unfortunately for the borrower who did not react quickly, just as quickly as rates fell, they popped back up again, in some cases above the levels they were at prior to their drop. This has caused much confusion in conversations with our clients. Didnt the Bank of Canada lower the rate twice? well, yes, they did. However, as the banks have watched the COVID19 situation unfold, they have become nervous of liquidity and risk issues. This has driven them to inflate their margins to potentially allow for losses such as defaults.
The net effect is that if you are looking at a purchase or refinance today, you will likely find both fixed and net variable rates at roughly the same levels as they were back in January or February. The big question is, when will these rate increases end. If the 2008 market drop was any indication, we will likely see either rates staying the course or potentially bumping upwards slightly, again depending on the investors perception of risk in government bonds.
Bottom line is the rates are, and have been at historically low levels for a long time now. With the historical rate for a 5 year, fixed rate mortgage around 6%, the current available rates around 3% are a bargain. My advice in such uncertain times would be to take a fixed rate and know what your costs will be for the next 5 years. The discount on variables has evaporated so at this point, the variable option unlikely would give the savings you may have seen in the past and should the BOC raise rates over the course of the typical 5 year term, you may actually be paying a premium. Food for thought.
Id like to leave you with some information many of us have been wondering about, Payment Relief.
Most banks and mortgage companies have now announced, that during what looks like an uncertain period ahead, should you need a break from your monthly mortgage payments, they are willing to assist. The gist of the offer is that with many lenders, you may miss up to six months of payments to offset a loss of income should you be laid off. The mechanics of this is that the lender will allow you to miss those payments and instead, add the interest portion that you would have otherwise paid into the principle amount of your mortgage. This is not free money. The interest portion will be capitalized into the amount you owe so after the six months of missed payments, you will begin to pay it back with a portion of your normal payment, basically extending the amortization of your mortgage by a little over six months from where it sits today. Dont get me wrong, this is a great deal for a borrower if you really need it. If not, it adds to your interest costs and should be avoided. In other words, dont do it just because you can.
If you need to discuss possible payment relief with your mortgage lender, below is a partial list of major Canadian lenders for your convenience. If youd like to discuss potential refinances, equity take-out or other mortgage related issues, I am always available to assist you as well.
Feel free to reach out directly by phone or text to: 604.802.8193 or email me at email@example.com
Stay safe and stay well.
Robert Mogensen Mortgage Consultant
B2B 1 800 263 8349
Connect First 403-736-4000
Chinook Financial 403-934-3358
First Calgary Financial 403-736-4000
First National 1-888-488-0794
Home Trust 1-855-270-3630
Street Capital 1-866-683-8090
Home sales drop in April as mortgage rates shoot higher
Home sales recorded over Canadian MLS Systems dropped by 12.6% between March and April 2022. The decline placed monthly activity at the lowest level since the summer of 2020.
While the national decline was led by the Greater Toronto Area (GTA) simply because of its size, sales were down in 80% of local markets, with most other large markets posting double-digit month-over-month declines in April. The exceptions were Victoria, Montreal and Halifax-Dartmouth where sales edged up slightly.
The actual (not seasonally adjusted) number of transactions in April 2022 came in 25.7% below the record for that month set last year. That said, as has been the case since last summer, it was still the third-highest April sales figure ever behind 2021 and 2016.
Following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue, said Jill Oudil, Chair of CREA. For buyers, this slowdown could mean more time to consider options in the market. For sellers, it could necessitate a return to more traditional marketing strategies. Of course, there are significant regional differences, so your best bet is to contact your local REALTOR. They have the information, guidance negotiation skills to help you navigate this rapidly-changing market as it evolves, continued Oudil.
CANADA: Home sales declined in March. Beginning of a downward slide?
By Daren King
On a seasonally adjusted basis, home sales decreased 5.4% from February to March, a first monthly decline in three months. Despite this decline, the resale market remained very active on a historical basis, standing above the historically high level of 45K now for 21 consecutive months. Is this the beginning of a downward trend in the Canadian real estate market? In our opinion, the housing market should remain active during the spring due to many people who have secured advantageous interest rates and will want to act before the end of their interest rate guarantee. However, with the recent increase in mortgage interest rates and the worst affordability conditions on record, we expect the residential market to slow down in the second half of the year.
According to CREA, new listings decreased by 5.5% during the month. However, the reduction in sales compensated for the decrease in new properties for sale, so that the number of months of inventory rose from its historical low of 1.6 to 1.8 months in March. Based on the active-listings-to-sales ratio, the housing market continued to be tight in 9 of the 10 provinces, with only Saskatchewan indicating a balanced market. These market conditions should continue to support prices in the coming months.
On a year-over-year basis, home sales fell 16.3% compared to the most active month ever recorded for any period of the year that was March 2021. Nevertheless, it remains the second most active month of March on record.
Housing starts decreased by 4.0K in March to 246.2K, a slide of 1.6% m/m from 250.2K in February and below consensus expectations calling for a 250K print. Although housing starts in March were slightly below consensus expectations, they remained high on a historical basis. The trend in housing permits continues to suggest a higher level of starts at this time. Moreover, with the tight conditions in the resale market, the willingness of various levels of government to build more and the resumption of immigration, housing starts should remain high for some time. That being said, we are entering the building season in Canada with elevated commodity prices and renewed supply chain challenges. Combined with more restrictive monetary policy by the Bank of Canada, we expect housing starts to taper in 2023.
The Teranet-National Bank Composite Notional House Price Index increased 1.7% in February compared to January after seasonal adjustment. On a year-over-year basis, home price increased by 17.7% in February. All 11 markets of the composite index were up in the month. The March Teranet-National Bank HPI will be published on April 20.
Source: National Bank of Canada https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-resale-market.pdf