First Time Homebuyers

Rates rise for the 3rd time in a month

RBC led the way again today, announcing another rate increase of 0.15% across the board. This is the 3rd rate increase in a month and now totals over one full percentage point on many terms.

Expect all other lenders to follow in the next few days. If you are in the market to buy, renew, or refinance it is now more important to book a rate more than ever. A month ago, many qualified clients were able to get a 5 year fixed rate term around the 3.69% mark. Today, it is around 4.50% and with this latest increase it will be even higher once all the changes take place.

These rate increases, along with the recent mortgage rule changes, is quickly eroding the amounts that borrowers are able to get.

Is this effecting you? Changing your mind about buying?

Comments and feedback are welcome.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

First Time Homebuyers

Rates On The Rise Again!

The Royal Bank announced that effective tomorrow they are raising all rates by 0.25%. As an example their posted 5 year fixed rate would rise to 6.10%. This increase is on top of ones that took effect last week that were up to 60 bps.

So far no other major lenders have matched these increases but I expect them to follow suit shortly.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

First Time Homebuyers

Big rate increase announced

The Royal Bank of Canada led the way today and increased their posted mortgage rates on their 3, 4 and 5 year fixed rate terms. On the 5 year fixed rate term they increased it by a whopping 60 bps, going from 5.25% to 5.85%.

3 and 4 year terms were increased by 20 and 40 bps respectively.

These increases had been anticipated for quite some time now as the yields on the bonds had increased significantly over the past while biting into the profitability of their mortgages.

TD Bank later in the day matched these increases. We can expect the other lenders to follow suit shortly.

First Time Homebuyers

Great Variable Rate Mortgage Strategy

Despite the low fixed rate mortgages available there are still many people asking for variable rate products. Most of the time they ask what the best rate for a variable is. In majority of the cases this would be a variable rate closed mortgage. However, I have been suggesting they take the variable rate OPEN even though it comes with a slightly higher rate. Why? Well, in this video I explain the strategy and the reasoning behind it. This ultimately may get you a better deal and save you money.

UPDATED March 15, 2010: Since the recording of the video on March 3, 2010, variable rate closed mortgages are now as low as Prime less 0.50%.

First Time Homebuyers

BC Budget Homeowner Changes

The British Columbia introduced the new Provincial budget on March 2, 2010 and it included some minor changes/benefits for homeowners. They are as follows:

1. Rural BC (outside Lower Mainland, Fraser Valley, and Capital Regional Districts) residents get an extra $200 off in addition to the normal homeowners grant for their property taxes.

2. Families with children under the age of 18 can now defer their property taxes.

There are some requirements for the tax deferal and you can view them here.

What are your thoughts? Particularly on the tax deferment plan?

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

First Time Homebuyers

Posted 5 Year Rate Confirmed As New Qualifying Rate

It has now been confirmed that the new qualifying rate, effective April 19, 2010, for all CMHC insured mortgages will be as follows:

  The greater of the chartered bank’s posted 5 year term rate or the contract rate.

This will apply to all variable rate mortgages and for fixed rate terms under 5 years.

We were all waiting to find out what the new qualifying rate would be ever since the Federal Finance Department announced changes back on February 16, 2010.

As of today the qualifying rate would be 5.39%.

This is a significant setback to borrowers and to many non-bank lenders. For all borrowers this will mean that they will be qualifying for much less money post April 19 compared to now. To many non-bank lenders, who have been qualifying many of their applicants on discounted 3-year fixed rates currently for variable rate products, this will level the playing field with their bank competitors. It may have an impact on their bottom line as this current policy had given them edge in attracting would be borrowers who needed just a bit more money.

As an illustration on the impact, below is the amount a borrower can get using three different scenarios. In all of them I am using an income of $60,000 per annum, a 25 year amortization, the assumption of no other debts, a 32% GDSR and a figure of $2500 per annum for property tax and heat.

1. One non-bank lender today is using 3.65% as a qualifying rate for their variable rate mortgages. $274,000
2. Using today’s 5 year fixed discounted rate from many lenders of 3.79%. $270,000
3. After April 19, 2010 assuming the qualifying rate is today’s bank posted 5 year rate of 5.39%. $230,000

A client in this example would be able to borrow $40,000 LESS going with a variable rate product after April 19, 2010 compared to today.

Although this has only been announced by CMHC, I anticipate other insurers (Genworth, AIG) to follow this government set mandate as well.

If current mortgage volumes are any indication, we will see a continued surge in clients attempting to finalize their mortgages prior to the new rules implementation.

As always your comments and feedback are welcome.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

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