How can an obscure budget change raise mortgage rates?
Hey you! It’s Friday so you probably aren’t sleeping on your desk as we have playoff hockey and a sunny weekend ahead of us – so let’s use your energy to kill some more time at work so we can get to the weekend quicker!
Abbotsford, Chilliwack & Mission mortgage’s consumers going forward need to pay attention to our BRMC facebook market report to watch the interest rate trends monthly. If you were thinking about refinancing your Abbotsford mortgage to renovate your home, or buy a new rental property with a Mission Mortgage, or even renew your current Chilliwack mortgage be aware.
Here’s the bullet points you need to know if you don’t want to read the whole article I attached in a link below at the bottom:
- The term “asset backed commercial paper” (ABCP) was one of the main reasons the financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis happened – this ABCP made for some great documentaries on Netflix such as Capitalism: A love storey. The acronym “ABCP” doesn’t come to mind when people go mortgage shopping. But if you get a new mortgage in Canada the next few years, it could very well affect your interest rate.
- We can argue that higher mortgage rates in the Fraser Valley aren’t a big sacrifice if it means keeping the Canadian housing market sound and stable. The question is whether the remote risks being targeted by Ottawa in the new budget truly justify yet another new cost to mortgage consumers.
- These ABCP mortgages are not a huge worry because only $6-billion of insured mortgages are funded using ABCP. That’s a drop in the bucket given that roughly $200-billion in mortgages close every year. But the market could feel the effects down the road if only Big Banks can continue to lend. Smaller, less expensive mortgage companies need ABCP.
- What the new rules really do is force lenders to sell their mortgages in the specific method dictated by Ottawa, as opposed to potentially lower cost private securitization. That’s a problem because, for technical reasons, many low-risk mortgages simply don’t qualify for standard CMHC-backed securitization programs. The net effect is that shutting off all private securitization options raises costs and makes millions of insured borrowers pay more.
- Conspiracy theorists suggest that Ottawa wants to strengthen banks’ competitive position relative to their non-federally regulated competitors who offer lower rates and drive prices down for consumers
- Having access to ABCP lets smaller lenders reduce their overall funding costs. That helps them offer better mortgage rates to you and me.
In conclusion read the article like I did and see what you take out of it – Thinking about a mortgage call us!
More importantly for today – GO CANUCKS GO!! Game 2, it’s time for some more LOOOOUUUUUU!!!
Jordi and Dave Browne Insurance Team
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*By Referral Mortgage Consultants – doing business as BRMC is a co-brokerage between Verico Preferred Financing Inc and Centum By referral Mortgage Corp. Jordi & Dave Browne are also a licensed Life Insurance Broker with CBS/ Hub International.