What's Happening with Rates?
  
Heading into 2023, rates are remarkably higher than anyone would have predicted at the outset of 2022. Fixed rates are now lower than variable rates and borrowers are flocking to short term fixed rates to try to shorten the amount of time spent in higher than necessary mortgage fixed rates.
Variable rates, once the darlings of the mortgage world have fallen out of favour for anyone looking for more stability. In most cases, I would recommend a five-year variable rate over locking into a five-year fixed rate. Rates will come down eventually and the penalty to get out of a five-year fixed rate early makes switching untenable.
For purchases over $1M and all refinances, five-year rates are currently about 6.05% for variables and 5.24% to 5.89% for fixed rates. For purchases under $1M with less than 20% down, the five-year variable rate is Prime minus .90% (5.55%) and five-year fixed rates are 4.99% to 5.19%. For rental properties, expect a premium on the rate no matter the purchase price, lowest rate options are approximately Prime minus .40% or 5.39% for five-year fixed rates. Expect higher rental rates for borrowers with large rental portfolios that need to squeeze out as much borrowing power as possible.
Alternative lender rates are north of 6% with fees of 1-2%. Private lenders rates are 7-9% or more for 1st mortgages, and 2nd mortgages are in the 9-12% range. Expect fees of 4%+.
If your renewal is coming up, ask me if you qualify for the 3-year fixed rate mortgage at 4.99% or the five-year variable rate at prime minus .90%. All costs to switch are covered.
Raptors Game Action
The kids are getting old enough now that they are actively campaigning on who gets to go tot the Raptors games.
We had a great time cheering and trying to get on the jumbotron, and of course we crushed a large bag of popcorn. Hardly any was left for her brother.
We left a bit early since Dad needs to get to bed early.
Housing Affordability Continued to Deteriorate in the Second Half of 2022
Despite declining home prices, higher interest rates continued to erode housing affordability in the third quarter.
National Bank of Canada’s Housing Affordability Monitor deteriorated for its seventh consecutive quarter, making this the longest run of worsening affordability since the 11-quarter streak from 1986 to 1989.
“The magnitude of the deterioration, however, is much more pronounced this time (25.5 percentage points vs. 20.2 percentage points in the 1980s,” the report’s authors wrote. “As a result, the mortgage on a representative home in Canada now takes 67.3% of income to service, the most since 1981.”
In the higher-priced markets of Greater Vancouver and Toronto, mortgage servicing costs now require 102% and 93%, respectively, of the median household income.
While declining home prices are mitigating the erosion in affordability, the 75-bps worth of Bank of Canada rate hikes delivered in the quarter sent the benchmark mortgage rate to its highest level since 2010.
“To give an idea of the scale, all else being equal, a 75-bps increase represents an extra $300 (or an 8.1% increase) on the monthly mortgage payment for a representative home in Canada,” the report reads.
Read the full article from Canadian Mortgage Trends: Housing Affordability Continued to Deteriorate
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