16 Mar

Mortgage Industry Update, March 16th


Posted by: Adam Sale

Last week we saw several changes in the mortgage industry that will directly affect our Real Estate industry. Here are some need to knows:


The stress-test changes slated for April 6th are suspended. The posted mortgage rate, published weekly by the Bank of Canada, will remain the qualifying mortgage rate. It is currently 5.19%, but it is expected to fall this week to around  4.95%.

Mortgage Repayment

CMHC is highlighting their Mortgage repayment options for those effected with making their mortgage payments. The best thing a homeowner can do if they fear they won’t be able to make their mortgage payment is get out in front of it as soon as possible and let their lender know. Many lenders have payment deferral options that will actually allow borrowers to skip a payment if they come into financial hardship. For more information on what CMHC suggests please view this website: Dealing With Mortgage Payment Difficulties

Rising Risk-Premiums

Bank’s are rising their risk premiums due to the expectant recession which is causing an increase in fixed mortgage rates and a tightening of the discount off the prime rate on variable-rate mortgage loans. This widening spread between mortgage rates and government yields is typical behaviour during a contracting economy, and took place during the financial crisis in 2008. During the crisis, rates continued to decline even with the widened spread.

Banks of Canada Rate Cut

The Bank of Canada is hopeful that its rate cuts will stabilize the housing market from what might have otherwise been a substantial shutdown. Expect the Bank to cut rates again to near-zero levels, following in the footsteps of the Fed. So far, as of this writing, the Canadian banks have not responded to Friday’s BoC rate cut. The prime rate went down a full 50 bps on March 5 after the Bank cut its key rate by that amount on March 4. But so far, the Big-Six banks have not responded to the 50bps cut three days ago. 


11 Mar

Variable Rate or Fixed Rate?


Posted by: Adam Sale

Fixed Rate or Variable Rate?

We are approaching interesting times. The world economy is slowing down due to heightened tensions with the coronavirus, oil prices, blockades etc etc, the list goes on.

One positive spin on this whole fiasco is cheaper mortgage rates, Yay!

When an economy is contracting like this the government steps in to lower the overnight interest rate to make borrowed money cheaper to ease expenses and “hope” new borrowed money will be put to a productive use.

On March 4th, the Bank of Canada did just that. They decreased the Overnight Interest Rate from 1.75% to 1.25%. This caused retail banks’ Prime Rate to drop from 3.95% to 3.45%.

The decrease in Prime Rate directly effects variable rate mortgages, and people saw their interest rate decrease by half a point overnight.

As it stands, variable rate mortgages are an extremely attractive product. If the economy continues on this contraction trajectory, it is likely we will see more rate cuts in the future, but don’t expect them to happen as quickly as you may think. Keep in mind we’ve been expecting Bank of Canada to decrease the interest rate for almost a full year and they’ve finally responded.

I suspect the Bank of Canada will follow their typical strategy of waiting 3-6 months and seeing how this rate cut effects the economy before adjusting the rate again.

The average variable rate mortgage product is Prime (3.45%) minus 0.75% to 1%; so 2.45-2.70%.

The beauty of a variable mortgage is in its flexibility. These mortgages offer excellent repayment features, and their penalties for breaking a contract are only 3-months interest – which is substantially lower than most lenders IRD penalty for fixed-rate mortgages.

For those homeowners looking for a stable mortgage payment, fixed rate mortgages are still a great buy. They are extremely cheap and getting cheaper daily!

Insured Mortgages are averaging: 2.39%

Insurable Mortgages (owner-occupied): 2.39-2.64%

Conventional Mortgages (over 1 mil, Rental properties, Non-owner occ): 2.64%

5 Mar

Mortgage Rates Keep Getting Cheaper!


Posted by: Adam Sale

Canada cuts interest rate by ½ a point, bond rates keep falling and Mortgages keep getting cheaper!!

It has been a rough couple of weeks in the stock market, but this is great news for the real estate industry. As bond rates keep dropping, we are seeing ridiculously cheap mortgage rates.

Right now rates are coming on-line as low as 2.39!!

This is insanely cheap, and I fully expect the other lenders to follow suit in the upcoming weeks.

How can you benefit from these changes?

Two ways:

  1. When mortgage rates drop significantly its a good time to renew your mortgage, or think about refinancing at a lower-rate (depending on what your current rate is).
  2. Come April 6th, the new stress-test for insured mortgages is going to be based on the current insured mortgage rates. As this mortgage rate drops, new buyers will qualify for a much larger loan.

Based on the hypothetical rate of 2.39%, households that earning $80,000 will qualify for approximately $30,000 more house!

2 Mar

Do You Want the Lowest Interest Rate or the Cheapest Mortgage?


Posted by: Adam Sale

Do you want the Lowest Interest Rate? Or the Cheapest Mortgage?

If you’re searching for the perfect mortgage, the questions you should be asking yourself are:

“Do I want the lowest interest rate? Or do I want the cheapest mortgage?”

Image result for teeter totter rate

You’re probably thinking, doesn’t the lowest interest rate mean I’m getting the cheapest mortgage?

Not necessarily. You see too many people are being sold the wrong mortgage product because they are after the lowest interest rate, and end up paying big fees when they have to break their mortgage contract.

Rather than starting the mortgage search by looking for the cheapest rate, we should begin our search by reviewing our financing plan and asking ourselves:

1) What major life changes might we expect in the near future? (are we getting married, having a baby, relocating for work?)

 2) What do we want to accomplish with our mortgage? (do we want to pay it down quickly and build up equity in our property, are we going to add a line of credit to it later?)

My point is this, start your mortgage search by reviewing your future goals and ensuring the mortgage product aligns with these goals.

I urge you, don’t fall prey to the belief that interest rates are like golf scores, where the lowest score wins. Rather, speak with a mortgage broker to find the best mortgage product suited for you! Happy hunting!

– Adam Sale