13 Jun

5% Fixed Mortgage Rates on the Horizon

General

Posted by: Adam Sale

Fixed Mortgage Rates Continue to Climb

Fixed interest rates keep climbing and they are not showing any signs of slowing down. The bond yield determines the movement of fixed mortgage rates and as you can see from the image below the yield is increasing.

As of last week, we broke through the 3% level and are now charging towards bond yields of 3.60%.

If the bond yield maintains this level throughout the week we will see a sharp increase in mortgage rates by Friday and into next week.

Expect rates to move into the low 5% range across all fixed mortgage products.

The best rates on the market are being offered through credit unions. Credit Unions tend to be slower in increasing their interest rates when compared to the big banks.

Big Banks – TD, Scotia:

  • Insured: 4.84%
  • 3-yr:       4.64% – 4.69%
  • 4-yr:       4.74% – 4.84%
  • 5-yr:       4.84% – 4.99%
  • Variable: Prime – (0.20% – 0.40%)

Credit Unions – Coast Capital & Prospera:

  • Insured: 4.23% – 4.64%
  • 3-yr: 4.33% – 4.59%
  • 4-yr: 4.43% – 4.74%
  • 5-yr: 4.48% – 4.84%
  • Variable: Prime – (0.36% – 0.50%)

Are you thinking about purchasing or renewing your mortgage before October 11, 2022?

You can secure today’s low interest rate for the next 120-days. For more information let’s connect!

 

19 May

Mortgage Strategies for a High-Rate Environment

General

Posted by: Adam Sale

Mortgage Strategies for a High-Rate Environment

Mortgage rates have risen sharply across all mortgage products and lenders. Identifying the correct strategy and opportunity between lenders will get you a fair mortgage rate without paying additional interest.

Banks Vs Credit Unions – Over the last 4 months of heavy rate increases I’ve noticed the Big Banks are increasing their mortgage rates much quicker than credit unions.

As of May 19, the big banks are advertising their insured 5-year fixed rates around 4.39%-4.45% while Credit Unions are still offering their 5-year fixed insured mortgage rates at 3.68% – 4.04%.  

Short-Term Strategy – Depending on the borrower’s risk tolerance, there are great fixed mortgage rates in the 1-year & 2-year terms when compared to 5-year terms. These shorter terms give the borrower the benefit of a lower fixed payment, but compels them to come to market and renew their mortgage much sooner.

For borrowers believing interest rates wont go much higher than what they are currently at, or they believe rates will smooth out by the time they need to renew, then these short-term mortgages are an excellent priced option.

Credit Unions are pricing the insured 1-year & 2-year fixed at 2.98% & 3.30%

Variable Rates – Over the last 4-months we’ve seen the discount on Variable rate mortgages decrease from Prime -1% to about Prime -0.70%, and as low as Prime -0.35%.

The Prime rate is currently at 3.20% and is expected to increase throughout this year and next year. If the borrower likes the idea of being able to exit their mortgage with minimal penalties this could be a suitable option for them.

Personal Opinion – If I were purchasing a property and expecting to live in it for the next 3-5 years I would strongly consider a credit union first and then look at either a 2-year or 3-year fixed term. In the past, rate cycles generally lasted 24 to 36 months.

Do you have a mortgage question? Let’s connect!

16 May

How to Spot the Opportunity in Vancouver’s Real Estate – May 2022

Latest News

Posted by: Adam Sale

How to Spot the Opportunity in Vancouver’s Changing Real Estate Market – May 2022

The real estate market is changing, in this video I’ll explain how the average buyer will miss the bottom of the market because they will be focused on the wrong data. I also share some tips on how your buyers can capitalize on this period of uncertainty.

Summary:

8 Apr

What are Government Bonds? How do Bonds affect Mortgage Rates?

General

Posted by: Adam Sale

What are Government Bonds?

Government bonds are essentially I.O.U’s issued by the government to fund their public programs. These I.O.U’s provide a great option for investors with excess cash looking for a safe place to park their money to generate a return on their investment (rate-of-return). Because bonds are backed by the Canadian government and the government has never defaulted on their debt, these bonds are considered to be risk-free.

  • A bond is sold in various durations, from 1-year up to 30-years.
  • The rate-of-return a bond provides is called the bond’s yield.
  • The bond’s yield is determined by two components: the bond’s price, and the bond’s coupon rate.

The bond’s price is the amount an investor will pay for the bond, and the coupon rate is the amount of interest the bond will pay the investor annually. When you account for the bond’s price and the coupon rate, we have the rate-of-return the bond provides, also known as the bond’s yield.

When inflation is higher than the bond’s yield, a smart investor will not purchase the bond because they understand their money’s purchasing power is decreasing with this investment.

For a bond to be competitive in a high inflation market, the bond yield needs to exceed the rate of inflation. To achieve this, the bond’s price needs to decrease, or the bond’s coupon rate needs to increase, or both.

How do Government Bonds affect Mortgage Rates?

Over the last 6-months (November 2022 – April 2022) we’ve noticed inflation exceeding Bank of Canada’s average target inflation rate of 2%. The bond market is reacting accordingly and bond prices are dropping which is causing bond yields to increase. Since fixed mortgage rates are positively correlated with bond yields, any increase to bond yields means an increase to fixed mortgage rates.

Links to Current Bond Yields

30 Mar

Vancouver Market Outlook for 2022

Latest News

Posted by: Adam Sale

I believe we are at the beginning of a shift in the Vancouver housing market. I’d like to provide you with an update with what we’re noticing in the Mortgage market and how this will likely affect Vancouver housing market.

  • Since September 2021 Canada’s 5-yr bond yields have increased from 1.59% to 2.28%. This has increased the 5-yr fixed mortgage from Septembers lows of 2.09% to 3.89%! (Yes, the banks are making a killing right now on the spread). In the last month alone we’ve seen the 5-yr fixed increase by 0.75%.
  • The rates are finally at a level now where our stress-test rules will effect how much someone qualifies for. The stress-test rule dictates the borrower must qualify for a mortgage at either 5.25%, or the Mortgage Rate + 2%, whichever is greater. Qualifying someone at 5.89% will decrease their purchasing power, and this will likely trickle down into the house prices.

Personal Opinion: As people’s pre-approvals expire in April-May they will need to re-qualify using a higher stress-test rate, and will end up qualifying for less than expected. This will likely soften housing prices in Vancouver.

  • I believe we will see the greatest affects in prices over 1-million, since the changes the interest rates have the most affect on the larger loan sizes, and because these homes require a down-payment of at least 20%.
  • I anticipate the condo market (under-1 million) will remain strong due to excessive housing demand, but it is likely we will begin seeing properties selling at their asking price with a  full list of subjects. 
  • RBC put this out a couple of weeks ago: https://thoughtleadership.rbc.com/a-turning-point-more-sellers-enter-canadas-housing-market-in-february/
  • Signing up for a 5-year fixed mortgage is a risk, we are seeing some of the highest interest rates in over 15 years! Is this just a short-term spike or are these excessive rates here to stay? Since markets tend to operate in waves, I am leaning towards these rates will be here for the next 18-24 months, similar to how long our ultra low-rates lasted for.  The 2-yr and 3-yr fixed rates are priced significantly lower than the 5-yr fixed. 
28 Mar

How to Keep Your Purchasing Power!

General

Posted by: Adam Sale

How I help my clients keep their purchasing power even during increasing stress-test requirements!

If you know anybody doing a pre-approval and is looking to qualify for the largest amount possible, please have them speak with me to avoid qualifying at the increasing stress-test requirements.

Fixed mortgage rates have exploded over the last month and now the DREADED stress-test is rearing its ugly head and is once again decreasing borrowers’ purchasing capabilities.

Quick Recap: the stress-test requires a borrower to qualify for a mortgage using the benchmark rate of 5.25% or the mortgage rate + 2%, whichever is greater.

5-year fixed mortgage rates have increased by 0.75% in the last 2-months and range from 3.49% to 3.79%. If a borrower wants a 5-year fixed mortgage they must now qualify at a 5.49% – 5.79%.

A few ways for your clients to avoid decreasing their purchasing power is to get pre-approved for:

  1. A variable rate mortgage
  2. A shorter-term mortgage (3-years or less)
  3. Use a credit union that is not required to comply with the federal stress-test guidelines.

This is just one of the ways I help my clients navigate the mortgage process!

8 Dec

Bank of Canada holds benchmark interest rates steady in final decision of 2021

General

Posted by: Adam Sale

Bank of Canada holds benchmark interest rates steady in final decision of 2021

The Bank of Canada made its eighth and final (scheduled) interest rate decision of the year and for the eighth time, left its overnight benchmark unchanged at 0.25%.

Outlook: Stimulus continues

The Bank continues to expect CPI inflation to remain elevated in the first half of 2022 and ease back towards 2% in the second half of next year.

The Bank’s Governing Council noted that in view of ongoing excess capacity, the economy continues to require “considerable monetary policy support.” Accordingly, it remains committed to holding its policy interest rate at the effective lower bound until economic slack is absorbed so that the Bank’s 2% inflation target is sustainably achieved.

In the Bank’s October projection, the inflation target would be sustainably achieved “sometime” in the middle quarters of 2022. It did not provide further updates to this timing. Consequently, the market is left to speculate about when rates will rise.

The Bank did note, however, that it will continue to provide the “appropriate degree of monetary policy stimulus” to support the recovery and achieve its inflation target.

Time to borrow?

With the benchmark rate unchanged – for now – but signs of a coming shift in monetary policy, it pays to think proactively about your property financing plans for 2022.

Please note this article has been condensed for quicker reading from First National Ltd. To view the full article please visit First Nationals Bank of Canada Update

27 Oct

How will Bank of Canada’s recent development affect you? 

Latest News

Posted by: Adam Sale

How will Bank of Canada’s recent development affect you?

The Bank of Canada announced they are no longer printing money to purchase the Government of Canada’s bonds, but what does this mean for the consumer, and where are mortgage rates going in the near term?

Ending the bond buying program is the initial step required before the Bank of Canada increases their target interest rate. The bond buying program provided the Canadian Government with the necessary funds to weather the Covid storm, but it also kept fixed & variable mortgage rates at all-time lows.

Following the Bank of Canada’s announcement today, all the Government of Canada’s bond yields increased significantly, especially the 2-year & 3-year bonds which saw increases of 24% & 17%.

Outlook

In the short-term (1 – 6 months): We will continue to see increases in the fixed interest rates, as well as decreases in the discount on the variable interest rate. The current discount on variable interest rates is Prime minus 1.00%

In the longer-term (6 month – 1-year): The Bank of Canada has accelerated their timeline to increase their target interest rates as early as April 2022. An increase to the target interest rate will directly increase the Banks’ Prime Lending rate, which is the cornerstone of all variable interest rate products (variable mortgages, credit cards & lines of credit). The current prime interest rate is 2.45%, down from pre-pandemic levels of 3.95%.

Prediction – Vancouver’s Real Estate Market: It is unlikely we will see a downturn in prices, but we could see a drop in the rate that these house prices are increasing. Vancouver continues to suffer from lack of housing supply which continues to put upward pressure on housing prices.

Increases to mortgage interest rates will not decrease buyers’ purchasing power because buyers are already qualifying for mortgages at the Stress-Test interest rate of 5.25%.

For more information on this topic, or mortgage inquiries please contact me at adamjsale@gmail.com or by phone at 778-215-4121.

Best,

Adam Sale Mortgages
14 Oct

25 Year Mortgage or 30 Year Mortgage?

Mortgage Tips

Posted by: Adam Sale

Is a 25-year mortgage, or a 30-year mortgage better?

Amortization is the total length of time it takes to pay off a mortgage. The most common mortgage lengths in Canada are 25-years and 30-years.

Deciding which mortgage length to choose will depend on your personal financial goals. A great rule-of-thumb is:

25-year mortgage for owner-occupied properties; 30-year mortgage for rental properties 

Why choose a 30-year mortgage for a rental property?

In Canada, interest being charged on a loan used for investment purposes is tax deductible. A 30-year mortgage on a rental property will create a sizeable tax deduction, and have lower monthly mortgage payments.

For example, a $400k mortgage amortized over 30-years with an interest rate at 2.39% create a tax deduction of approximately $9,000/yr, and the lower monthly mortgage payments will increase the annual cash-flow by roughly $2,340 when compared to a 25-year mortgage option.

For more information on which mortgage option makes sense for you or your clients, please contact me at:

Adam Sale Mortgages
adamjsale@gmail.com
778-215-4121

29 Sep

How to Purchase a 2nd Home with a 5% Down-Payment

General

Posted by: Adam Sale

How to Purchase a 2nd Home with a 5% Down-Payment

Did you know you can purchase a 2nd home or a vacation property with as little as a 5% down-payment?
That’s right, these mortgage products are available to home-owners, renters and first-time home buyers!

Why don’t more people take advantage of this program?

Lack of knowledge on insured mortgage programs. Of the 3 mortgage insurance companies, Sagen is the only company actively promoting their 2nd home mortgage program.
Most people are unaware this program exists, or are misinformed and were told mortgage insurance products are reserved only for first-time home buyers.

Is there a catch with this program?

There is no catch, but adhering to mortgage insurance policies can be stricter than banking policies.

For example, these are Sagen’s policy requirements:
  • Maximum amortization is 25-years
  • Maximum purchase price is $1 Million
  • Minimum down-payment: 5% on first $500k, 10% on $500k – $1 million
  • Income must be able to debt-service both homes (Mortgages, property taxes & heat)
  • Rental income is not allowed in the mortgage calculation

Affordability Strategies

To unlock additional mortgage qualifying room for this program it may be necessary to re-arrange outstanding debt obligations. Two well used strategies are:

  • Refinancing your current mortgage to take advantage of lower rates and/or extend the amortization
  • Consolidating car loans, credit cards or outstanding lines of credit into a single low-interest debt payment.

Want to learn more about this program?

Contact Adam Sale Mortgages @ 778-215-4121 or adamjsale@gmail.com