Michael Campbell is one of Canada's most respected economists, host of "MoneyTalks" radio show and my Verico mortgage network head economist. This excerpt is from his February report...
Interest Rates - You'd be forgiven for thinking that the government's motto is "if the stress test won't kill 'em, the rise in interest rates will." Three quarter point rises in the last 8 months and the promise is for more to come in both Canada & the US.
The Bank Of Canada continually says they are data driven and overall the data is positive. For the vast majority of analysts the debate isn't whether they will increase rates again but when? The ongoing NAFTA negotiations are still a concern, as is the impact on the real estate market of the new stress test rules but the Bank has made clear they want to push rates higher.
My biggest concern is for mid and longer term rates to move significantly higher over the next three years throughout the world. There is $230 trillion in debt worldwide and at some point that is going to be a big problem and investors are going to ask for a bigger risk premium in order to entice them to buy bonds, especially if the slight pick-up in inflation gains momentum. Those people with floating rate mortgages and other variable rate loans should be paying close attention.
The rest of Michael's report can be found at www.verico.ca/economicupdate_michaelcampbell_feb2018/
As a Mortgage Broker I would definitely suggest watching and considering locking in those variable rate loans and mortgages, sooner than later. If you are sitting on the fence about buying or refinancing a home now is still a pretty good time to do so, Rates are still low & house prices seem to have softened slightly in many of our local markets. What are you waiting for?
Who would ever think the VERY BEST Financial Advice would come from Saturday Night Live more than 10 years ago...Enjoy!
Lets talk about the "New Mortgage Rules" that took affect January 1st, 2018. (make sure you read to the end)
You may have already heard about the "Stress Test" rate our federal government introduced in late 2016 for "Insured Mortgages", or mortgages with less than 20% equity/down payment. This rule required mortgage lenders to qualify ALL borrowers with less than 20% down payment using a much higher (about 2% higher than actual) "stress test" rate. The borrower still gets the lower current rate(s), But using a higher rate to qualify them reduced their borrowing power, the mortgage they could qualify for by almost 20%.
Now the federal government in it's wisdom has deemed it necessary to apply this "stress test" rate to EVERYONE, regardless of their equity/down payment in their home as of January 1st, 2018.
If you follow me on Facebook (and you should...lol) you already know I vehemently disagree with the "stress test", as it seriously restricts & even prevents hard working responsible Canadians from pursuing their dreams of home ownership, but then that same government introduces the $40 billion "National Housing Strategy" to help with affordable housing and strengthen the middle class??
Am I the only one to see a bit of a disconnect between these two programs?
BUT, TO END ON A GOOD NOTE - Our provincially regulated lenders, the Credit Unions that I use (and love) for the majority of my clients financing needs...HAVE DECIDED NOT TO IMPLEMENT THIS NEW January 1st, 2018 RULE, So it's business as usual @ Chris Heidt Tekamar Mortgages Ltd.