Mortgage rates sink lower as Investors’ Group pushes variable rate below 2%

Just when you thought mortgage rates couldn’t get any lower, they have.

Investors’ Group is offering a 36-month closed, variable-rate mortgage at 1.99 per cent, well below the current standard of around three per cent.

The mortgage is also well below the 2.99 per cent level that drew sharp criticism from former finance minister Jim Flaherty when BMO first tried it, because he was worried it would trigger a damaging housing bubble.

Joe Oliver, who took over from Flaherty, has said he has no plans to intervene in the setting of mortgage rates, calling it a “private” decision by lenders.

Royal Bank made waves in January when it lowered its rates on several fixed-rate mortgages by 10 basis points, bringing its five-year closed rate to 3.69 per cent. It now sits at 4.94 per cent, while the variable five-year rate is at three per cent.

RBC said at the time the rates were lowered to match competitor pricing, and several other big banks followed suit.

Prime rate - no change (yet again)!

The Bank of Canada did what we expected them to do (AGAIN!)… they did NOT change their Overnight Rate which means variable rates or lines of credit will not change and are still at fab low rates as much as 2.35%.  Fixed term rates have also dropped below the 2.84% mark which is amazing – back to where we were this time last year. 

Buying with less than 20% down payment? You will pay more for your insurance now.

Canada Mortgage and Housing Corporation (CMHC) announced an increase to their default insurance rates recently. Anyone purchasing their home with less than a 20% down payment is required to have their mortgage insured against default. 

The premium charged for owner occupied 1 – 4 unit mortgage will increase by approximately 15%, on average, for all loan-to-value ranges.

Loan-to-Value Ratio	Standard Premium (Current)	Standard Premium (Effective May 1st, 2014)
Up to and including 65%	0.50%	0.60%
Up to and including 75%	0.65%	0.75%
Up to and including 80%	1.00%	1.25%
Up to and including 85%	1.75%	1.80%
Up to and including 90%	2.00%	2.40%
Up to and including 95%	2.75%	3.15%
90.01% to 95% – Non-Traditional Down Payment	2.90%	3.35%

What this means is that on a $450,000 mortgage, the fee CMHC charges up front and often tacked onto the mortgage, would rise from $12,375 to $14,175 which will increase in your monthly mortgage payment.

CMHC controls about 70% of the mortgage default insurance market in Canada with private players Genworth Canada and Canada Guaranty holding the rest.

Genworth announced it too would raise premiums across the board by an average of 15%. Its increases will take effect May 1 too.
The good news is that this doesn't come into effect until May 1, 2014. As long as you arrange your mortgage prior to May 1, 2014 (closing date can be after May 1, 2014) you won’t be subject to this increase. 

Prime rate - no change expected till 2015

As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

At 10:00 am EST, Wednesday March 5th, 2014 the Bank of Canada again continued to maintain their overnight rate.   What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%.  This is fabulous news but don’t forget to make the most of the low payments you still have, as the rate will increase in the future.  If you haven’t done so already, give me a call and we can chat about helping you get set up with a great GIC, Tax Free Savings Account, or Retirement Savings Plan as your payments continue to remain low.   

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision today:

“Inflation in Canada has moved further belowPrime rate the 2% target, owing largely to significant excess supply in the economy and heightened competition in the retail sector.  Global growth is expected to strengthen over the next two years with the US leading this acceleration, aided by diminishing fiscal drag, accommodative monetary policy and stronger household balance sheets. The improving U.S. outlook is affecting global bond, equity, and currency markets. Growth in other regions is evolving largely as projected.  In Canada, growth improved in the second half of 2013. However, there have been few signs of the anticipated rebalancing towards exports and business investment. Stronger U.S. demand, as well as the recent depreciation of the Canadian dollar, should help to boost exports and, in turn, business confidence and investment”.

Based on this news, the Bank still does not expect to increase their rate in the foreseeable future with any change most likely to occur late 2014 or even not until 2015!   Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.

Fixed rates dropped just slightly since the last announcement to around 3.19% to 3.39% for a five year fixed term.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is April 16th, 2014 at which time I’ll be in touch again.

No change in prime rate... yet again

As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate. 

At 10:00 am EST, Wednesday January 22nd, 2014 the Bank of Canada again continued to maintain their overnight rate.   What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%.  This is fabulous news but don’t forget to make the most of the low payments you still have, as the rate will increase in the future.  

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision today: 

“Inflation in Canada has moved further below the 2% target, owing largely to significant excess supply in the economy and heightened competition in the retail sector. Global growth is expected to strengthen over the next two years with the US leading this acceleration, aided by diminishing fiscal drag, accommodative monetary policy and stronger household balance sheets. The improving U.S. outlook is affecting global bond, equity, and currency markets. Growth in other regions is evolving largely as projected. In Canada, growth improved in the second half of 2013. However, there have been few signs of the anticipated rebalancing towards exports and business investment. Stronger U.S. demand, as well as the recent depreciation of the Canadian dollar, should help to boost exports and, in turn, business confidence and investment”. 

Based on this news, the Bank still does not expect to increase their rate in the foreseeable future with any change most likely to occur late 2014 or even not until 2015!   Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.  

The next announcement on any change to the prime rate is March 5th, 2014 at which time I’ll be in touch again.

No change in prime rate, yet again

As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

At 10:00 am EST, Wednesday December 4th, 2013, the Bank of Canada again did what we expected them to do … they continued to maintain their overnight rate.   What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%.  This is fabulous news but don’t forget to make the most of the low payments you still have, as the rate will increase in the future.  If you haven’t done so already, give me a call and we can chat about helping you get set up with a great GIC, Tax Free Savings Account, or Retirement Savings Plan as your payments continue to remain low.    The holiday season is upon us which often means our personal spending on gifts and celebrations will potentially blow our budgets as we spend more than we maybe should… let me help you get back on track with a review of your financial situation which might be a savings plan, purchasing an income property or debt consolidation to pay off high interest loans or credit cards.  If you would like to chat about some budgeting and saving strategies – let me know as I would be happy to assist.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“The global economy is expanding at a modest rate, as the Bank expected. Although growth in several emerging markets has continued to ease, growth in the United States during the third quarter of 2013 was stronger than forecast. Even if some of this pickup was due to temporary factors, the data are consistent with the Bank’s view of gathering momentum in the U.S. economy.  In Canada, the housing sector has been stronger than expected but is consistent with updated demographic data and a pulling forward of home purchases in light of favourable financing conditions. The Bank continues to expect a soft landing in the housing market. Non-commodity exports continue to disappoint and the price of oil produced in Canada has eased further. Business investment spending is up from previous low levels, but is still recovering more slowly than anticipated. On balance, the Bank sees no reason to adjust its expectation of a gradual return to full production capacity around the end of 2015”.

Based on this news and continued slower level of economic activity in Canada, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur late 2014 or even not until 2015!   Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.

Fixed rates did go up but then have gone down a bit since at around 3.49 to 3.69% for a five year fixed term.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is January 22^nd, 2014 at which time I’ll be in touch again.

More Mortgage Legislation Changes Impacting Home Buyers (to be in effect by December 31, 2013)

When purchasing a property, the key areas that impact whether you qualify for a mortgage at all and for how much, are based on your income, credit and debts including your new mortgage payments and available down payment. 

In July 2012 there were some significant mortgage legislation changes that impacted qualifying for a mortgage including using a higher interest rate to qualify depending on the term you select, more income verification and down payment for the self-employed as well as lowering the amortization to 25 years.  All these changes impacted mostly those that have less than 20% down payment and therefore require default insurance (CMHC, Genworth or Canada Guaranty).

Unfortunately, there is more to come that has already taken effect with some lenders now, and others by December 31st, 2013.  All these changes are intended to curb consumer debt accumulation over and above income levels and to reinforce the importance of ensuring that borrowers do not over extend themselves financially with more debt than they can handle.

Overall, these changes are a good thing to ensure consumers don’t overspend and become “house rich and cash poor”; meaning being a home owner but living pay cheque to pay cheque with so much debt (including credit cards, loans, lines of credit etc.) that there is no extra cash for savings to build a financial cushion should there be an income loss in the future.

The downside is that these changes are impacting the ability for many to qualify to purchase a home, especially impacting first time home buyers who are struggling to find an affordable property that they qualify for close to where they live and work.

So what are the new changes coming into effect by December 31^st, 2013 and how will they affect your borrowing and purchasing power?  The changes fall into three categories which are focused on your debt to income ratios and this will determine how much of a mortgage you qualify for;

Debt; The payment that must be considered when calculating how much you qualify for is now a minimum of 3% of the outstanding balance on all unsecured lines of credit and credit cards that you have.  Even if you have a lower minimum monthly payment required by the creditor, this will no longer be used. 

For secured lines of credit that are registered against real estate, a minimum monthly payment that is to be factored into your qualifying is now the outstanding balance calculated over a 25 year amortization using either the benchmark rate (5.34% as of Sept 12^th, 2013) , or the actual interest you are paying.  Even though your secured line of credit might only have a minimum payment of interest only, you now have to qualify using a much higher payment.  Some lenders are taking this one step further and using the “credit limit” instead of the outstanding balance.

How to overcome this challenge; if you pay your entire balance off each month, and can provide confirmation of this, then you will not be impacted by this change.  Work with me on your personal household budget so we can create a plan to pay down your existing debt to a point where you qualify for the mortgage you require

2.    Guarantors; if you can’t qualify for a mortgage on your own, often a guarantor can be added to your application.  The guarantor is not on title but is on the mortgage and typically doesn’t live in the property with you.  The new changes mean that you can no longer use the income of the guarantor to help qualify for the mortgage unless they will be living in the property with you.  You will now be required to prove you can afford the property without using your guarantors income as well.

How to overcome this challenge:  Ensure that you purchase a home and obtain a mortgage that you can actually afford to pay back on your own without any financial contribution from a guarantor.   You may have to adjust your wish list a bit, or purchase a more affordable home to get you onto the property ladder.

3.    Heating Costs; using about $75 to $100 per month to calculate the cost of heat in your qualifying has been the norm till now.  Changes now require that a higher amount than this be used as determined by the lender and will be based on the the purchase price, size of the property and location. 

How to overcome this challenge:  The reality is you are most likely going to be paying more than $100 per month on heat and utilities anyway so ensuring you can afford these bills is a good thing before you buy the home.  When you find a property you want to buy, ask the existing home owners for copies of the utility bills over the last twelve months so you can see what it will actually cost to heat your home thru the entire year.  Of course, your usage might change from the existing home owners but at least you will have an idea.  Again, ensuring you can actually afford to pay the utility bills before you purchase the home is good.

These changes, along with recent rising interest rates, are impacting the amount borrowers qualify for which in turn determines the purchase price of a home. 

So what happens next?  Firstly, don’t panic as these changes may not impact your particular situation at all.  If you are considering either moving and purchasing a bigger home or purchasing your first home, call me for a free consultation to see exactly how these changes may impact your qualifying for a mortgage.  There are many strategies we can discuss together to make your dreams of home ownership an affordable reality.

Be prepared for these changes so you we can create a clear plan and path to home ownership for you.

News from Bank of Canada - No Change To Prime Rate

At 10:00 am EST, Wednesday July 17th, 2013, the Bank of Canada again did what we expected them to do … they continued to maintain their overnight rate and remains at 3.00%.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“Global economic growth remains modest, although the pace of economic activity varies significantly across the major economies. The U.S. economic expansion is proceeding at a moderate pace, with the continued strengthening in private demand being partly offset by the impact of fiscal consolidation. The global economy is still expected to pick up in 2014 and 2015.

In Canada, economic growth is expected to be choppy in the near term, owing to unusual temporary factors, although the overall outlook is little changed from the Bank’s early projections.  Despite ongoing competitiveness challenges, exports are projected to gather momentum, which should boost confidence and lead to increasingly solid growth in business investment. The economy will also be supported by continued growth in consumer spending, while further modest declines in residential investment are expected.”

Based on this news and the somewhat stagnant and muted outlook for inflation, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur not until maybe early  2014!   Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.

Fixed rates have gone up as the bond market has rallied over the last few weeks, at around 3.39% to 3.59% for a five year fixed term.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is September 4th, 2013 at which time I’ll be in touch again.

Bad News for Investors. CMHC Changed Guidelines Calculating Debt Rations and Confirming Income

If you are investing in Real Estate, chances are you have to ensure your mortgages with CMHC from time to time. 

On June 27, CMHC issued new guidelines for calculating debt ratios and confirming income documents. These new guidelines will clarify that, and they become effective on CMHC-insured mortgages on December 31, 2013. (In practice, many lenders already apply them.)

These standards will apply to all insured 1-4 unit residential mortgages, regardless of the loan-to-value ratio. Uninsured (conventional) mortgages are allowed different policies, but most lenders will use the same rules for all their approvals.

Here are some of CMHC's newly minted insured mortgage “clarifications”:

• For variable income: Lenders must use “an amount not exceeding the average income of the past two years.” Variable refers to things like bonuses, tips, seasonal employment and investment income.
• For rental income:  If a borrower owns other non-owner occupied rental properties, the principal, interest, property taxes and heat (P.I.T.H.) on those properties must either be:
• deducted from gross rent revenue to establish net rental income; or
• included in ‘other debt obligations’ when the Total Debt Service (TDS) ratio is being calculated.
• For guarantor income:  A guarantor’s income must not be used in GDS/TDS ratios “unless the guarantor…occupies the home and is the spouse or common-law partner of the borrower.”
• Unsecured credit lines & credit cards: For these debts, “No less than 3% of the outstanding balance” must be included in monthly debt payments. Interest-only payments are no longer considered on credit lines. Furthermore, lenders must assess the borrower’s credit history and borrowing behaviour when determining the amount of revolving credit that should be accounted for in debt ratios.
• Secured lines of credit:  Lenders must factor in “the equivalent” of a payment that's based on “the outstanding balance amortized over 25 years.” That payment must use the contract rate (of the LOC) or the 5-year Benchmark rate (V121764) published by Bank of Canada (if the contract rate is unknown). Again, interest-only payments are no longer allowed for debt ratio calculation purposes.
• Heating costs:  Lenders must now obtain the “actual heating cost records” of a property. When no such history is available, the heat expense used in debt ratio calculations “must be a reasonable estimate taking into consideration factors such as property size, location and/or type of heating system.” That’s why some lenders have now moved to a set heating cost formula, like:
  
         (square footage x $0.75) / 12 months

Compared to past methods (which entailed flat heating costs, like $100/month), the new guidelines can double or triple the heating cost that must be factored into debt ratios on larger properties, and reduce it on smaller ones.

It’s important to repeat that most of these policies are already being followed by most lenders. But there are exceptions.

Those exception-case lenders are commonly viewed as go-to sources when borrowers have tight debt ratios. These new guidelines are designed to minimize those “loopholes.”

All of this has come about, in part, because of Ottawa’s rule changes last July. At that time, the government fixed the maximum Gross Debt Service and Total Debt Service ratios for insured mortgages at 39% and 44% respectively.

Bank Of Canada Announcement

At 10:00 am EST, Wednesday April 17th, 2013, the Bank of Canada again did what we expected them to do… they continued to maintain their overnight rate.    What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%.  This of course is fabulous news but as always, I like to remind you to make the most of the low payments you still have as the rate will increase in the future.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you.
The next announcement on any change to the prime rate is May 29th, 2013 at which time I’ll be in touch again.

Bank of Canada Announcement

As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and, as promised, here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

At 10:00 am EST, Wednesday March 6^th, 2013, the Bank of Canada again did what we expected them to do… they continued to maintain their overnight rate.    What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%.  This of course is fabulous news but as always, I like to remind you to make the most of the low payments you still have as the rate will increase in the future.  If you haven’t done so already, chat with a financial advisor about a Tax Free Savings Account or Retirement Savings Plan as your payments continue to remain low?  Especially if you have started your 2012 tax returns and you think you will get a refund or credit back, it might be a good time for us to chat about whether to pay down your mortgage to get closer to that Mortgage Burning Party date or invest the funds elsewhere.  If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“Global financial conditions remain stimulative, despite recent volatility. In the US, the economic expansion is continuing at a gradual pace and private sector demand is gaining momentum. The recession in Europe continues and growth in China has improved.  Canada’s economy grew by 0.6 per cent at annual rates in the fourth quarter of 2012.  The Bank expects growth in Canada to pick up through 2013, supported by modest growth in household spending combined with a recovery in exports and solid business investment.  Weaker core inflation and lower mortgage interest costs, were only partially offset by higher gasoline prices.  Low core inflation reflects muted price pressures across a wide range of goods and services, consistent with material excess capacity in the economy”

Based on this news and the continued slack in the Canadian economy and the muted outlook for inflation, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur possibly as late as Fall 2013 to early 2014!   Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.

Fixed rates haven’t changed at all since the last announcement, at around 2.99% to 3.19% for a five year fixed term.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is April 17th, 2013 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are still so low right now and the Spring market will be soon upon us and it is a great time for first time home buyers to start considering their options.  It is a perfect time to work with me to not only hold rates for up to four months while they go house hunting but also work on their action plan to make dreams of homeownership a reality!  If you know of someone that is looking for advice on their mortgage options, with no obligation, would you mind passing my contact information on to them – this is very much appreciated.

The clock may be ticking on bank-offered cashback

The announcement comes as federally regulated lenders begin to announce that they will stop offering cashback mortgage product in compliance with new OSFI guidelines. 

Many banks have been slowly winding down their cashback offerings, although the first of the official deadline starts October 31.

This week, Scotiabank was the latest to announce it will drop its Free Down Payment program 
on September 15.

Credit unions have not yet received any directive on the matter from DICO, but the general consensus is that the provincial regulating body will follow its federal counterpart eventually.

No changes to prime rate!

The Bank of Canada has left interest rates at 1% due to the continuing worldwide slowing of economies.

According to the Bank, “the economic expansion in the United States continues at a gradual pace, Europe is in recession and its crisis, while contained, remains acute.” The Bank of Canada also stated “In China and other major emerging economies, growth is decelerating somewhat more quickly than expected from previously-rapid rates.”

 No change is expected in the near future.

HELOC Maximums Reduced to 65% LTV

Home Equity Line of Credit (HELOC) can be a very powerful tool financing your investments. It gives you access to the equity in your properties without actually selling it. Rates are very appealing, in some cases as good as mortgage.

At the moment you can finance up to 85% of your property value through HELOC and use the money to invest other projects. Benefits of HELOC include:

·         Unlike mortgage HELOC is flexible – you can use money when you need it and put it back when you don’t, no penalties or administrative fees.

·         Better yet you can use it for anything you want, like new TV, but hopefully a new investment property.

·         No principal needs to be paid on HELOC, only interest.

However this great vehicle will soon be less accessible. Office of the Superintendent of Financial Institutions Canada (OSFI) obligates federally regulated lenders to limit loan to value ratio to only 65%. Other lenders (such as credit unions) are unusually soon to follow same path.  New rules have to be applied by the end of lender’s fiscal years. That makes the official implementation deadline October 31, 2012 in most cases. But don't count on lenders waiting until then.

OSFI says that existing HELOC holders will be grandfathered. So if you need a 66%-85% LTV HELOC from a bank, get approved now.

Other key points:

• Borrowers who modify their HELOC after the rule changes take effect will potentially be subject to the new 65% LTV limit. So make sure you have your HELOC set up exactly the way you want it.
• Borrowers who obtain readvanceable mortgages under the new guidelines can still get them at 80% LTV, but 15% of that will need to be amortizing (i.e., various lenders will still offer you a 65% LTV secured line of credit plus a 15% LTV mortgage, for 80% total)
• If, under the new regime, you have a readvanceable mortgage with two parts:

  1)  a secured line of credit portion, and

  2)  an additional amortizing mortgage portion

…then the mortgage portion will not bereadvanceable if the line of credit portion is greater than or equal to 65% of your home value. (Note: Different lenders may have different policies when it comes to readvancing under the new rules.)

Let us know if you have any questions on how HELOCs or new rules work!

What effect will new changes CMHC rules have?

There are a lot of talks this week on the radio, TV and around water coolers about changes to CMHC insurance rules. But is it really that dramatic? Let’s take a look at how this can affect your real estate business.

First change is reduction of amortization from 30 years to 25 years on mortgages with less than 20% down.  This change has probably the most effect on the market.  On a $400 000 house this means about $200 in extra payments every month. Also to qualify you will need about $6 000-$6 500 more income.  Because for most of people it is hard to increase their income allover sudden it is more likely that they will start looking in the lower price range. The change means that you can afford about $22 000 less on the house price.

Does that mean prices will go down? Maybe, maybe not.  In the last few years we had sellers’ market with more buyers than houses for sale. This resulted in multiple offers and bidding wars. Now fewer buyers can afford an average home and it is natural to expect fewer offers, longer time on the market and less houses sold over asking price. But will the prices go down or not will depend on how many people were buying “on the age”. In my personal opinion we will see a temporary slowdown with low or no price increase. Most likely it will last till next spring, when market is traditionally more active. Next year, after people get used to new rules, price increases will go back to normal (whatever is normal these days). Remember this is not a first time amortization was reduced to 25 years. In early 2000s same happened with almost no effect on the prices.

All that assuming there will be no other changes. Though there is no sign at the moment, but fewer buyers on the market means less customers for the banks. It is possible that banks will offer new “specials” to offset higher payments and attract clients. Keep in mind that CMHC is not the only mortgage insurance company; some financial institutions (like credit unions, for example) can have their own rules on what and how needs to be insured. So keep an eye on this.

The other 2 changes (Homes priced over $1 million are no longer eligible for CMHC insurance and MAX refinance has been reduced to 80%) will not have a lot effect on the market. Until average house price gets closer to a million, only minor portion of population is affected, not enough to have major impact. As to refinancing, most of institutions allowed only 80% LTV even before the change.

So is there a way to protect your business even if the market is deeping? Rent-to-own strategy would be one way. The beauty of it is that the sale price is fixed in the beginning (when you buy property) and doesn’t change with the market fluctuations. And if tenant decides not to buy, you always keep your option consideration. We played with numbers ones and for RTO deal to start breaking even (if it’s done right) market needs to go down more than 20%!

The Bank of Canada today announced that it is maintaining prime rate at 1%.

The outlook for global economic growth has weakened in recent weeks. Some of the risks around the European crisis are materializing and risks remain skewed to the downside. This is leading to a sharp deterioration in global financial conditions. While the U.S. economy continues to expand at a modest pace, economic activity in emerging-market economies is slowing a bit faster and a bit more broadly than had been expected. More modest global momentum and heightened financial risk aversion have reduced commodity prices.

Although economic growth in Canada was slightly slower than expected in the first quarter, underlying economic momentum appears largely consistent with expectations. However, the composition of growth is less balanced. In particular, housing activity has been stronger than expected, and households continue to add to their debt burden in an environment of modest income growth. Despite external events, business and household confidence has held up and domestic financial conditions remain very stimulative. The contribution of government spending to growth is expected to be quite modest over the projection horizon, in line with recent federal and provincial budgets. The recovery in net exports is likely to remain weak in light of modest external demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.

The Canadian economy continues to operate with a small degree of excess capacity. Total CPI inflation is expected to fall below 2 per cent in the short term, as a result of lower gasoline prices, while core inflation is expected to remain around 2 per cent.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.

HOW TO SAVE THOUSANDS ON INTEREST ON YOUR MORTGAGE?

By Roberto Sanabria Mortgage Broker with Centum National Mortgage Loans Inc.

Everyone who has a mortgage is aware that the faster we pay down the mortgage, the less interest he/she will pay during the life of the mortgage. Many people may interject that there is no rush to pay down the mortgage since rates are at all time low, in my opinion, this is the best time to pay it down. But, certainly before thinking on paying down the mortgage, you must consider a few things and most of all, get that commitment from your family to follow that strategy. Try to avoid situations where you accrue high debt in credit cards (at 11% or higher interest rate, that compounds monthly) and also "save" a similar amount in the bank or RRSP (at 1% ROI), this calls for a negative type of wealth management, not OPM (Other's People's Money).

Did you know that by just adding extra $700/month (during the course of 1yr) to a mortgage payment of $1900/month (total mortgage amount of $350,000 at 5.15% rate fixed 5yr, which is the average fixed rate in last 10 yrs in Canada) you are cutting interest by $158,353? Mathematically speaking, an investment of $8,400 will reduce your mortgage interest in $158,353 by reducing amortization from 30yr to 17yr (if you keep on doing it same amount each year)...that is huge ROI...

I know you will say "well I do not have the luxury of having extra $700 per month laying around to do the pre payments", but you will be surprised to know it is doable with some planning and discipline at least some amount that your situation will allow, which will go a long way saving you in interest..in the end, the amount was just an example for ilustration purposes. Here is the best thing, to find the extra money is almost effortless, you just need to learn the system and how to leverage the structure I can create for you and your budget.