I know you're busy, and staying on top of mortgage rates is not always the first thing on your mind. Over the last year, there have been so many changes in taxes, mortgages and real-estate with the Trudeau Liberal Government, the industry has undergone a dynamic shift. That's where I come in with Real Talk - a place where we can connect with no fluff, about what really matters when comes to your mortgage needs. I want to start some conversations, and be REAL with you. With my hand in the Mortgage world for over 12 years, I have to say there is never a chance to just “get comfortable”. Change is inevitable, however, this much change to rules, regulations and rates in a short time was very unexpected.
In 2016 we saw some pretty significant changes to policies, rules and overall attitudes in regards to Mortgage Financing. It is more important than ever to be working with a Mortgage Broker when you are looking at ANY form of financing. Trying to stay on top of these constant changes is a full-time job, trust me it’s mine!
Just as a recap, here are the changes Canadians saw in 2016:
All default insured mortgages now need to qualify at the benchmark rate rather than the contract rate: Currently, this means qualifying at 4.64% rather than 2.69% which is the rate you would actually get. For someone who makes $60,000/year, this is the difference in $50,000 of buying power. At 2.69% you would qualify for $285,000 and at 4.64% you qualify for $232,000.
Low Ratio Insurance restrictions:
What this means to you is that the cost to do things like refinancing has just become a little more expensive. We are seeing conventional rates increase steadily as investors take on more risk to do these deals. Previous to these rule changes, even if you had 20% equity in your home, lenders would still take out an insurance policy on the money they lent to you. This made the investment for potential investors much safer and therefore they would offer lower rates on this money. Now that the insurance for these mortgages is NO LONGER available, these investments are much higher in risk. With higher risk, comes a higher interest rate. Thus the increase in conventional rates.
Mortgage Insurance Premium Increases:
As of March 17, 2017, all insured mortgage rate premiums are going up, leaving you less equity in your home. It is really important to talk to your mortgage broker about the advantages of your down payment strategy.
Mortgage rate increases:
We have seen rates go from as low as 2.35% on a 5 year fixed rate all the way up to 2.89% in just 2 months. With notices of rate changes happening daily, you really need to have someone on your side to navigate and plan for whatever you have upcoming.
We’ve seen such dynamic shifts in the past few years when it comes to mortgages and the Real Estate market. It is hard to decipher exactly how this impacts you and your family unless you talk to a professional. There will be lots of you with mortgage up for renewal in the next year too, these rules will have an impact on you as well. I would be happy to book a consultation with you and share even more knowledge and advice.