1 New Mortgage Rule Change to Watch in 2017

As we head into the fall market and after 1 year since the last mortgage rule changes, OFSI (the governing body in Canada for financial services) are proposing yet another mortgage rule change that may impact your home buying/purchasing limits.  OFSI has proposed changes to the Guideline B-20 Residential Mortgage Underwriting Practices and Procedures (referred to as B-20 – http://www.osfi-bsif.gc.ca/Eng/fi-if/in-ai/Pages/rfmrm.aspx).  The most concerning change would be imposing a 200 basis point qualifying stress test for all uninsured mortgages.

What does this mean for the buyer?  Even a 50% downpayment, would be required to qualify for the mortgage based on a rate 2% higher than the actual mortgage rate you would be obtaining.  So, if the actual rate you were obtaining today were let’s say 2.99%, you would have to qualify for the mortgage based on a rate of 4.99%( 2.99% + 2% for qualifying rule = 4.99%)

This higher qualifying rate would essentially reduce the amount of mortgage that could be obtained  hence reduce the eligible purchase price for a new home.  On average, this would reduce  buying power by approximately 14%.

Here is an example of the reduction in buying power:

-Clients are selling home and buying a new one -Household Income: $120,000 per year -Down payment: Up to $180,000 (they want to put at least 20% down)  $120K Annual Income/20% down

 Today:    2.99%, 30 year amortization.     Max Purchase Price $900K     Down payment $180K     Max mortgage $720K

 Proposed:    4.99%, 30 year amortization     Max Purchase Price $800k     Down Payment $180K     Max Mortgage $620K

While this is still in the proposal stage, we anticipate this coming into effect mid to end of October 2017.  The good news is, buyers can prepare for these changes ahead of time. The most effective way is by obtaining a pre-approval now that secures the rate for up to 120 days. Although It is not certain that lenders would be able to honor the approval based on how OSFI rolls out the proposed changes, it is still one of the best ways to be proactive.  Let us review your options now and create an optimum mortgage plan. Contact us today for your free home financing advice.

                                            

By Referral Mortgage Consultants*

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Dave  604 897 2741 Jordi 604 615 1312
www.AbbotsfordsMortgageBroker.com

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*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp.

Rate Increases & New Mortgage Stress Test

Early on Wednesday, July 12th 2017, the Bank Of Canada increased the over night rate to 3/4% (0.75%). This is the first time in 7 years we have seen this type of an increase. Call me if you have questions regarding how this directly affects you personally at 604 897 2741 Dave Browne.

The increase is 0.25% BPS but this is potentially a sign of more increases to come. Historically speaking, the drop from 4.50% by BoC rates began 9 years ago. Due to compounding economic turmoil’s over the last 9 years such as the fall in oil prices last year, rates have remained at historical low rates hovering near 0.50%.

Well I guess the low rate Party’s starting to wind down.

The chart below shows in 2007 the Bank Of Canada Rate was 4.50%. Today, even with the increase, we sit at 0.75%.

Here is some of the statement accompanying the rate decision. Ultimately the central bank said the Canadian economy has been robust, fuelled by household spending.

“As a result, a significant amount of economic slack has been absorbed,” the bank said, adding that the remaining slack is expected to be gone around the end of this year, which is earlier than the bank anticipated in its April  Monetary Policy Report.

The move means consumers will likely pay more for borrowing such as variable-rate mortgages and lines of credit.

In the wake of the rate hike, the Canadian dollar shot up. The loonie was trading up 0.64 of a cent at 78.03 cents US late Wednesday morning. “

 

Question & Answer time

Will this effect mortgage rates?

-Mortgage lenders will likely follow suit and increase their prime lending rate to match the BoC’s move.  This will effect variable rate mortgages and HELOCS.

Will variable mortgage rates go up?

Short answer is Yes.

Will rates keep going up?

The Canadian economy has had better than expected growth in 2017, which has been driven by household spending. If the economy continues to report growth as it has in the past 12 months, both fixed and variable rates are likely to rise at a gradual pace.   What is the long term outlook?

Long term outlook is for higher rates if the economy is working good. This is due to a worldwide monetary tightening policy. That being said, we will not be seeing dramatic rate increases overnight. Rates are currently still at historic lows.

As for the introduction of a second mandatory stress test rule in the last 8 months, what does this mean to you? According to what we have read the B20 rule simply matches the rate test that is already in effect for High Ratio Mortgage borrowers.

Last October those high ratio buyers with only 5%, 10% or 15% down payment saw a drop in their ability to buy a home by 20%. If you were preapproved for a $400,000 purchase, that approval dropped to $320,000 over night.

This will now happen across the board to those of us that have more than 20% down payment. Regardless of your strength of income, assets and net worth. We are working through some alternative options that will lessen this impact but this will impact the real estate market. These may only be temporary changes until the real estate market cools in Canada’s biggest markets but it is fair to say this will impact buyers and sellers ability to qualify for mortgages without co-signors or additional down payment monies.

By Referral Mortgage Consultants*

“Click, Call, Chat – Award Winning Brokers”

Dave  604 897 2741 Jordi 604 615 1312 www.AbbotsfordsMortgageBroker.com

www.ChilliwackMortgageBroker.com

 www.BRMC.ca

 www.PeaceOfficeMortgageBroker.com

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http://www.linkedin.com/company/2410358

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http://www.youtube.com/user/BRMCmortgages

We’re active on Facebook, Twitter, LinkedIn & YouTube. We really appreciate reviews! Good or Bad please let the world hear your voice! Connect with us for ongoing industry news items, contests & prizes.

*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp. 

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Prepare for interest rate increases in 45 days due to CMHC increased premiums.

It’s Sunday and I just finished the chore of cleaning the bathrooms. I’m heading next to the elliptical machine to burn some shame before I line up a couple Field House beers this afternoon and watch golf 🙂

I’m blogging this morning after a busy start to our mortgage business in 2017. The first 4 weeks were more active then I expected, and I was optimistic coming into the year that our mortgage brokers were in for a busy Spring to begin with.

So before I go and listen to some embarrassing high energy Pop Music radio station on my phone I thought first I’d share some interest rate info I received at our broker meeting this past week. The big wigs at the different banks have now had time to read through and understand all the rule changes we have endured recently. They have determined that the next set of rule changes set to be implemented in the middle of March are no doubt going to lead banks to increased fixed interest rates as a result of more new expenses being passed along to our borrowers.

We got this exact same type of information late last year regarding increased expenses and saw our 5 year fixed mortgage rates increase from an average low of 2.39% to 2.44% in October to an average low of 2.69% to 2.74% the next month – That all happened very quickly essentially and I regret not helping more people lock in their mortgage rates last November. Well I’m not going to let that happen again so this time I’m announcing this change ahead of time and I will be calling as many people as I can in February before the March 17th deadline.

Now these rate increases are not written in stone yet but getting a rate hold is free so call now and avoid paying 3.09% to 3.19% or more on 5 year fixed mortgages rates.

 

By Referral Mortgage Consultants*

“Click, Call, Chat – Award Winning Brokers”

Dave  604 897 2741 Jordi 604 615 1312 www.AbbotsfordsMortgageBroker.com

www.ChilliwackMortgageBroker.com

 www.BRMC.ca

 www.PeaceOfficeMortgageBroker.com

Connect with us on!  BRMC Facebook

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http://www.linkedin.com/company/2410358

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http://www.youtube.com/user/BRMCmortgages

We’re active on Facebook, Twitter, LinkedIn & YouTube. We really appreciate reviews! Good or Bad please let the world hear your voice! Connect with us for ongoing industry news items, contests & prizes.

*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages.

 

 

 

CHANGES FOR BC’s FIRST TIME HOME BUYERS

This is what we know so far, we don’t know everything yet. 🙂

We are not sure which banks are supporting this but we do know the repayment after the 5 years interest free period will be at P+.50%. Current prime rate would equate to 3.20% interest after the 5 years.

We are assuming by borrowing your down payment from the BC Governments proposed plan that comes into effect mid January, that we will be charged slightly higher CMHC fees.(Current Flex Down CMHC Fee is 3.85% Vs. Regular Down Payment is 3.60% with only 5% down payment).

The program ends March 1st 2020. The down payment loan is Interest free up to $37,500.00 as long as you can match or exceeds this amount with your own money.

You can put as little as 2.5% down now to buy a home and the other 2.5% will get matched by this loan program.

  • Amortized over 25 years
  • Borrower must qualify under 4.64% still
  • Combined household income must be under 150K
  • You must have saved a down payment amount at least equal to the loan amount for which they are applying from government.
  • You have been a Canadian citizen or permanent resident for at least five years.
  • Have lived in B.C. for at least one year prior to the sale.
  • Be a first-time buyer who has not owned an interest in any residential property anywhere in the world at any time.
  • The home must have a purchase price of less than $750,000.
  • The buyer must already be able to qualify for an insured high-ratio first mortgage for at least 80 per cent of the purchase price.
  • The most ideal scenario to reduce cost is to get 5% from the Gov’t and put 14% down payment from your own resources!

Sorces:

http://vancouversun.com/news/local-news/b-c-government-offers-down-payment-loans-to-first-time-homebuyers

By Referral Mortgage Consultants*

“Click, Call, Chat – Award Winning Brokers”

Dave  604 897 2741 Jordi 604 615 1312
www.AbbotsfordsMortgageBroker.com

www.ChilliwackMortgageBroker.com

www.BRMC.ca

www.PeaceOfficeMortgageBroker.com

Connect with us on!
BRMC Facebook

BRMC Google review Chilliwack Office

BRMC Google review Abbotsford Office

BRMC Google review Mission Office

http://www.linkedin.com/company/2410358

https://twitter.com/brmcmortgages

http://www.youtube.com/user/BRMCmortgages

We’re active on Facebook, Twitter, LinkedIn & YouTube. We really appreciate reviews! Good or Bad please let the world hear your voice! Connect with us for ongoing industry news items, contests & prizes.

*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp.