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What's happened in the last week
*I did not write this
We are in unprecedented times with respect to quick financial market changes, government announcements, cancelled travel plans, and additional Covid-19 fears.
I wanted to keep you informed with some quick mortgage points from this week(end)s news, (especially point 4 below):
1) The government of Canada announced that all current consultation regarding the mortgage stress test is “on hold”. Therefore, the expected changes, which were to occur on April 6th, will not be happening. The mortgage stress test rate will remain at 5.19% (for now).
2) The government of Canada made an emergency rate announcement, dropping the Bank of Canada rate by another .50%, making for a total drop of 1% in the last 8 days. The banks have dropped their Prime rate, however, some banks and lenders have already announced that they’re increasing both fixed and variable mortgage rates. This is due to liquidity and market risks.
3) Variable Rate Discounts are Disappearing: Similar to the last financial crisis, discounts on variable rate mortgage are headed the wrong way. Scotiabank was the first bank to announce their new variable rate mortgages will be at Prime, or higher. That’s an effective discount reduction off of Prime of about .70%. Even though Banks dropped Prime by .50% as expected, NEW variable rate mortgages now become more expensive than they were yesterday.
4) Springtime is usually the busiest time of year for lenders, especially a spring with near record low interest rates. And now, many lenders and lawyers are telling staff to work from home due to Covid-19. This will substantially affect the Spring market, though it is impossible to know specifics at this time.
To be safe, we are recommending that our clients make sure to start their mortgage shopping well ahead of time, allow 30 days minimum to close their mortgage or purchase., and even more time than that if you’re refinancing or transferring your mortgage.
Please contact us if you have questions about how these changes will impact you and your family.
Why Are Some Mortgage Rates Rising?
*I did not write this
Fears over the COVID-19 pandemic and plummeting oil prices have caused mortgage rates to plummet to multi-year lows over the past couple of weeks. However, now some lenders are actually starting to raise rates.
Fixed rates on certain terms have been creeping back up, while some of the big banks have been quietly cutting their discounts on prime rate (which affects floating rates). Scotiabank, for example, raised its published 5-year closed variable rate 60 percentage points on Saturday, from 3.45% to 4.05%.
So, what's going on? Fear has saturated the market to the extent that lenders are now concerned about liquidity and rising defaults...
Read the full article here.
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