I pre-apologize for the coming alarm bells in this newsletter but sadly we need to talk about the elephant in the room. Tis the season to discuss the seriousness of consumer debt which has hit all time high of 176% debt-to-income. The third quarter numbers are high and unfortunately Equifax has also reported that delinquency rates are on the rise on the unsecured debt up 10% – this doesn’t include mortgages however, consumer spending is up and is tempting to go further down the rabbit hole during Christmas/Boxing sales season.  
Here are two unfortunately alarming statistics:  

If you or anyone you know has let on that they are getting behind or having a bit of trouble they really must action immediately (by way of Mortgage Refinance ideally to avoid sale) so they don’t get behind on their mortgage. A missed credit card is not the end of the world. A missed mortgage payment is though and needs to be treated that way. Let’s also discuss the potential of lower rates as some consumers are still paying in the high 3% close to 4% mortgage rates that were around a couple years ago. Happy to help out, this is nothing to be embarrassed about or avoided. Life happens and debt pay down must again be a focus as we enter what looks like a slowing economic market heading in the new year. More details below….. 

Part Two

It’s lengthy – but important as we chat 2020 market for housing and interest rates. There are opposing forces at work as globally we are seeing major slowdowns happening again in major cities real estate markets but here in the major Canadian market cities – Vancouver/Toronto – we are seeing prices back on the rise and inventory levels shrinking. Many media channels are using language like “surging markets” “slowdown seems to be over”. All nice news of course, and I have seen this since around June this year. We’re very fortunate to be in an isolated in BC and let’s be honest – savings rates if I’m to put my money in the bank are TERRIBLE. Real estate, now back on the upswing, is still providing great returns for the average Vancouverite/Lower Mainlander. But…. 
There are key indicators coming out of the US that are causing my cautious tale of 2020 only because of looming words like “US recession coming next year”. The US trade wars results are reporting to drop GDP by 0.8% this year and up to 1.4% next. The rippling cause and effect is a further slow down in their housing sector and harder emphasis on their fading job growth statistics. They are calling for a flat/declining in some cities housing market even with a lack of inventory. Globally, 29 countries have gone into negative interest rates if you factor in subtracting their average inflation rate. Alberta and Saskatchewan, accordingly to a number of lenders we work with, is “a mess” right now with the abundance of new construction properties on the market sitting empty and unable to sell. There has been a surging investor flight to gold, probably the single biggest indication that caution is in the wind.  
So. While we are optimistic here in GVR & Fraser Valley, and are expecting a strong market in 2020, just, please be cautious, do not stretch. Not even over stretch. Like I mean don’t stretch at all. Pay debts down as fast as humanly possible in 2020 – try as hard as you can to save money and make wise decisions with taxes/corporate structures/write offs etc – it’s not the year for big risks. We are at unprecedented levels of Government/Corporate/Personal debt levels and the scary thing is because we’ve been at these levels for years now many people/institutions are starting to pop (referencing above delinquency rates) It’s like debt from government, corporate and personal has been normalized. If and when we see another recession happen in the coming year or two (12-13 years after 2008, typically recessions are every decade or so) there will be carnage. 

Rates are expected to remain flat through the year and if Bank of Canada needs to step in and lower rates, they have created the room to do so with their three increases from a year ago. For now, they are fighting tooth and nail to hold steady.  
Flip side!! We could very well see a strong market in 2020 due to one major. It’s election year in the US and you absolutely know that Trump, as part of his re-election campaign, is going to “save the world” with a trade deal with China. He’s set the stage for a phase 1 deal, and that alone could make markets rally. He is going to do something; you just know his ego can’t avoid it! If that happens, my worries of a recession will dissipate. There will be opportunities to scoop up properties and there are great buys out there right now, especially if you’re ok with a bit of a commute to Vancouver. Save money, pay down mortgages, and get ready to buy up some properties if the opportunity arises. Feel free to forward this to colleagues/friends/family and if you would like to discuss your mortgage(s) and real estate goals directly please reply! We have the capacity for more mortgages under management.  

Happy Holidays, speak to you next year. 

For the past few weeks since Bank of Canada’s recent rate increase our office has been inundated with questions surrounding where rates are expected to be headed. A large portion of our book is Variable rate mortgages because of their proven savings advantages over the past decade, no doubt left wondering what they should do especially in the face of another interest rate increase expected January 2019 pending release of Q3 & Q4 economic data.

The numbers out of October are showing unemployment has improved year of year down to 5.8% vs 6.2% in October 2017 which is great but while we have a healthy labour market we see big stalls in wage growth which is down 1.9% from 3.9% earlier this year. Retail sales are declining, and housing starts across Canada are down close to 8%. This number is especially disheartening because a huge contributor to affordable housing is an increase is housing supply that we just aren’t seeing. The CPI inflation has dropped to 2.2% from a higher 2.8% in August. Exports and Imports are also down. The only industry showing what look like large record gains is the auto industry, which seems concerning given their true “value” to consumers.

I say all of this to show, based on economic numbers, that Canada is not quite yet out of the woods economically. I’ve continued to hear people and news media pound the panic button about where rates are headed, some citing 6 increases in the short term. I just don’t see it. While we may see moderate increases in to 2019 many economists are of the mindset that BOC is punting up rates in case they need to bring them right back down as a reaction to a slower market. We/They (BOC) do not want to see themselves in a position where we are going in to negative interest rates. A few years ago I posted about a potential downturn in 2019/2020 after rates started to increase a little bit. I’m not calling back on my crystal ball just yet but I caution anyone to lock in to an automatically higher 5 Year Fixed when such amazing discounts are available like Prime – 1.05% on Variable. These rate discounts made it possible for some of my past clients to enjoy paying their mortgages as low as 1.85% a few years ago when government had to react to a stalling economy. Keep hammering down the mortgage is my motto.

I’m personally hanging tight in my Variable however I have many clients, including close friends, who do not enjoy surfing rates and have sought the security of a 5 Year of even 7 Year Fixed which are the same price with a couple lenders now. If you are a person who has found it more compelling to crave security let’s chat about your personal file. Anyone else too of course : ) Always happy to chat further about each individuals needs. Next Bank of Canada Announcement is December 5th when you can expect our final sign off for the year. Speak to you soon!

David Ford
Sparo Mortgage Partners
For Nests & Nest Eggs

We find ourselves in a similar economic and rate environment to 2016 where we saw 5 Year Fixed rates at the lowest hit 2.24%. We had under 4 weeks to react and submit files at this price point so if reading this entices you to consider a low Fixed rate then please reach out right away to have your file built and submission ready. My last newsletter in May we were at 3.20% on a 5 Year Fixed. We now have some as low as 2.64% and still ‘no end in sight’. 
I’m presently in a 3.20% Variable rate and have the 2.49% Fixed and lower as a target where I’ll be looking to lock in. My team and I are presently running analysis on our clients mortgages to see what impact a 2.49% rate would have on their mortgages. For me, switching from 3.20% to 2.49% but keeping the same payment would save 27 months of payments. A HUGE savings. 
Many clients have already approached us to: 

We are excited about the possibility of deleting years off people’s mortgages due to this current environment. Especially when we saw rates clip near 4% just 8 months ago. 
Eg. $550,000 mortgage (our average) on a 25 year Amortization and having a 3.20% interest rate is a payment of $2665/month 
That same payment and mortgage size but on a 2.49% rate is 22 Years 7 Months amortization. 29 Months difference! 
$2665 x 29 months = $77,285 savings! 
You can see our motivation to get these analysis completed and reach out 🙂 
Please reach out to me directly at 604-329-9971 or david@sparomortgage.ca to have an analysis completed at the top of the list. For now we are still parking in Variable but it looks like a fall switch may be happening

I’ll address rates right out of the gate because I’ve had dozens of inquiries lately with the sharp drop in Fixed rates since December 2018. I’d like to make mention my Variable rate mortgage is at 3.20% now and Fixed rates have dropped below my rate too. 
Above is a link to the Canada Savings Bonds that have matured since 1999 
As you can see 2015/2016 were low points at around 1.00 – this was the time when we saw 5 year Fixed rates around 2.49% – some as low as 2.24% 
We see the bonds rose in 2017 (marginally) and during that period we saw 5 Year Fixed rates rise to 4.00% at their peak last year around Oct/November and then have steadily dropped to presently around 3.00%. This year lenders have been offering brokers a bonus to lock people in to Fixed rates. Banks are making a BIG push for Fixed rates as I’m sure you’ve all received calls or pushes through your banker/tellers. BUT as you can see 0.80 are the yields. So, one really can expect, based on these yields, to see rates drop to the same level they were a couple years ago. Possibly lower. 
We’re not in a rush, and past clients are on our list of reach out to as soon as we see Fixed rates hovering around 2.49% or at least have an indication they may rise. Currently zero indication whatsoever that rates will rise, and Bank of Canada is saying they will not be touching Prime (Variable) until in to 2020 / until we see an economic turn around. Banks/Lenders have been bonusing compensation for Fixed rates all year – a clear indication there is room for them to discount further. 
Park in Variable for the time being because you can always lock in to a Fixed anytime, no penalty or fuss, not the other way around.

Major Market news is coming out of the trade war developments between USA & China. 

China is in a weak position for negotiations and as such are at risk of a full-blown recession which will cause devaluation of their currency. Capital flight is expected to increase in the coming months with signals that the Yuan will depreciate due to this looming recession. 

The above chart shows the jump in imports when capital flight was at it’s peak in 2015/2016 when mainland companies were using inflated invoices to take money out of the country. It would be naïve to believe our government has implemented rules strict enough to pose a threat to wealthy buyers overseas parking money in Canadian real estate (Commercially or Residentially) 
In speaking to our West Vancouver/Vancouver real estate partners we are learning market activity in the past 3 weeks has had a dramatic increase. The combination of low interest rates and a sudden spike back up in property values could result in an exceptionally busy market again. We’ve started seeing multiple offers on many product types (condo/townhouse/detached) in many different cities. 
Just wait until the media takes hold of some of these stats. 
Goooood night! I’ll try get some sleep now while I can. 
Any questions about your specific mortgage, what to do with your equity in picking up rental properties (another big question from past clients lately) or measures to take advantage of lower rates consolidating debts please let us know! Happy to help

The past few months we have seen nearly all economic indicators point to certainly a hold but possibly more of a potential drop in Bank of Canada’s Prime rate vs continual increases media was screaming at us “that we could expect”. If I had a loonie for every time I heard the “guarantee of 6 rate hikes in 2019” I’d be able to purchase a detached in Vancouver. It’s just not going to happen based on the current numbers which have really slowed. We’ve now seen major banks shrink their discount on Variable to as low as Prime – 0.20% which signals to me it’s more likely we will see Bank of Canada DROP rates if this continues. As mortgage holders, we want this, as business people – we don’t. Slowing/faltering/stagnant economies are not fun for anyone. If you are still receiving calls from your lender to “lock in or else” please refer them to me, I’d be happy to have a little powwow about their reasoning – and you should ask too! If it’s a comfort thing to lock in rates, that’s cool, I get that. But no need for so much haste as I experienced in the summer. We still have some excellent Variable rates as low as 2.95%.

The main story heading in to the NY is according to BDO Canada 1 in 4 Canadians are feeling crushed by their debt. There has been a whole decade of people who have experienced low interest rates so even a 1% move upward that we’ve seen has had an impact in borrowing and debt pay down. It seems to also be a cultural norm to not carry a “just in case” fund in savings set aside or be carrying debt on a line of credit or credit card. We need to change this mentality else face some hard times should we experience a slow down, job loss, or emergency. Sparo Mortgage/I am very happy to help with a solution should anyone need to refinance for a reset but then also would ideally make an introduction to an amazing Financial Advisor to keep on the right track moving forward. Let’s make 2019 the year of savings! (including the reversal of debt)

A great tool I’ve used for goal setting in the past is something used internally by Lululemon staff for keeping simple/visualizing goals for the year. They do 1/5/10 year which I find to be a bit far out given how much can change in just a few years so I stick to 1/3 & 5 year goals.
A link can be found here – https://www.pinterest.ca/pin/1900024821129489/

Have a very healthy and wealthy 2019. Speak to you soon.


ECONOMIC OUTLOOK: NAFTA & Bank of Canada’s Next Announcement

The Bank of Canada has another rate decision this week Wednesday to discuss the current economic outlook as well as make any announcements regarding their Prime lending rate. My most constant conversation with clients is always: “What’s happening with interest rates?”

I have been gauging my advice off the recent (or lack of) NAFTA discussions. We’ve all watched as protectionist policy President Donald Trump has made decisions for the betterment, in his mind, of the US and complete disregard for any past agreements with other countries. Mexico having an election this past July and voting in a new President has been good timing for their country as the motivated Obrador works to strengthen a very heated US/Mexico relationship. Unfortunately, it looks like Prime Minister Trudeau has been left out of the new conversations and Trump has repeatedly voiced he would gladly shred NAFTA because it has been a bad deal for the US. The common-sense voice in my head tells me that Trump is going to make as many side deals with Mexico as possible on trade and leave Canada to pick up the scraps. Mexico has much more room to gain by making trade deals here and there that would oust Canada’s current trade relationships with the US, of which we Canadians have been so heavily reliant. If I’m getting in the mind of “deal making” Trump – I’m thinking I can barter a hell of a lot more with Mexico, maximizing profits from trade obtaining as much as possible on sale and then move over to Canada with the leftovers.

I’m yet to see our current Canadian government, or even one’s past, expand trade relations out to the rest of the world to shop our steel, lumber and oil & gas. As of 2017 76.7% of our exports were shipped to the US and 99.1% of our crude oil is exported to the US. The TransCanada pipeline COULD have been a step in the right direction to fix this problem, opening our oil & gas exports to Asia or Europe but this stalled and sideways project now only amplifies (if I’m Trump) that we have no other options but to take what we can get. Why the Liberal’s decided to spend $4.5B buying this project and in to a failing industry is beyond me. I see Canada suffering short-term and long-term, but the government needs to get on with it and start exporting or shift focus entirely to the new age of energy.

Seeing above makes me very nervous for the Canadian economy and as a result would be shocked if Wednesday’s rate announcement was another move upward. In my opinion, if the above isn’t fixed we would sooner see Bank of Canada decrease Prime rates affecting Variable mortgages as they did in the oil & gas crises a few summers ago. Variable rate mortgages are still as low as 2.70% and range up to 3.45% depending on if the mortgage is insured, not insured, or a rental property. 5 Year Fixed rate mortgages start at 3.44% and climb up to 4.14% on the highest side. There are huge savings advantages in choosing Variable and accelerating your mortgage, this has been our constant strategy over the past decade and it’s worked out very well for our client base.

I have the pleasure… sometimes… of working with two Brits, one of which worked right smack downtown London for nearly 5 years. She is constantly surprised at the real estate prices here in Vancouver and how affordable it is. Yes. I just wrote that she views Vancouver as affordable, proof backed up by her buying a Vancouver condo 3 months after her hire date landing from overseas.

Discussing the same topic with a business partner last week I was genuinely shocked to hear the largest real estate price per sqft transaction for a condo just took place in Hong Kong. 10,000 square feet was sold for the equivalent of $24,000CAD/sqft – no I’m not adding zeros for effect, that does mean they purchased that real estate for $240,000,000. Some of the highest valued condo real estate in Vancouver is selling for about $3500/sqft. Much of Vancouver, Yaletown, West End, Kits, many condos are selling for under $2000/sqft, a good amount are still selling for closer to $1000/sqft. New York & London have also seen condos sell for over $200Million, granted much larger sqft.

Our small-town mentality regarding Vancouver real estate is laughable at times but I’ll share a not so funny story. A potential new client is looking to re-enter the market. They are between 40-50 years old and sold their detached house in the past 10 years ago thinking the sky was going to fall and real estate prices were going to plummet. How many others sold real estate thinking the same? Now, because of more stringent qualifying rules and housing that has doubled (which could have been their equity position), we’re going to be lucky to get them in to an old townhouse or a new condo in the Valley.

Vancouver is, and has been for a while, on the same playing field for most sought-after places to live as Hong Kong, New York, San Francisco, London, Dubai. Yet prices in Vancouver are not even close to those cities. They are literally a 10th. I illustrate this to show two things. A. The sizeable amount of wealth in the world, vast and so far beyond most people’s comprehensions. For a humorous 7 minutes watch this video of the Christie’s auction of Da Vinci’s “Jesus Christ” and B. Hang on to your real estate, all of it if you can, acquire more than a principle residence if you can and pay down your mortgage via renters or your income. While many people sit on the sidelines anticipating some form of handout or market shift we need to be encouraged and motivated to take responsibility for our own future nests and nest eggs as we should expect little to no help from anyone other than ourselves or outside economic issues.

The change in weather typically produces a significant increase in real estate activity. It happens every year, year after year and this year looks to be the same. I keep driving by new sign after sign in lawns or developments, or signs promoting land assemblies and other properties for sale. We’re here to assist in providing tailored solutions for motivated clients at our Specialist Mortgage Advisory. 99% of the time our services are compensated by lender directly, so our goal is to keep you coming back for future advice and strategies (and bring your friends, family and co workers too please!)

For an update on your current real estate plan or new plan please email our office to info@iwanttoown.ca and myself, Sam or Emma will reach out to discuss.

Speak to you soon

David Ford

It’s been a while since I’ve written a newsletter – too long I know because I now have too much to talk about! LOL.

The new mortgage rules have had an impact and a large one in fact, working in files day to day I keep catching myself presuming client’s affordability based on previous rules and this latest round really does drop overall affordability. Now this must be taken with the flip side in that MOST of my clients can still accomplish what they want to accomplish, many people were playing “within the rules” anyway so it makes it really that clients cannot overstretch themselves and have a full braking system in place. The new rules really just level the playing field and make it so new buyers can enter the market the same as people who have already owned and are sitting on equity wondering what to do with it. Our firms “find a way” attitude and access to many lenders and programs makes me thank the sweet Lord I’m a mortgage broker. If I was working for a bank I’d be …… Not as grateful 😊

The rules are not as great for our very ambitious clients who want as many properties as possible but these are good rules in general and we have work-arounds. I feel like I’m almost as busy as an accounting firm this time of year with all the calls we’ve been fielding from our big self-employed database wondering what they should file because they have money in their companies and what they should take – if you’re self employed and wondering whether to pay personal tax or keep in the Corp please reach out to discuss. Lending is now even more “in the box” and it comes down to what you file or earn in income. Credit is same same, down payment same same, so really it’s coming down to how much money do you earn on paper. You either pay the government in taxes once/year or you pay out the nose every month in your interest rate on your mortgage. Long and short – declare all income or pay higher rates. We must be reminded that owning real estate is a privilege and not a right. You must pay to play I believe the saying goes.

Interest rates have risen to between 3.29% and 3.84% on a 5 year fixed depending on lender, loan to value, owner occupied/tenant occupied and amortization. It’s Pandora’s box out there trying to sort which rate clients qualify for. The new rules are that you must qualify at contract rate (let’s say 3.79% is available for you) plus 2% – so you end up having to qualify at 5.79% to get your 3.79%
Variable mortgages still qualify at Bank of Canada posted (and have for the past three years) so to get a Variable now clients qualify at 5.14% – Variable rates are between 2.46% and 3.30% again pending lender and situation. Our “out of the box” recommendation remains taking the lower Variable mortgage and paying as though taking the higher fixed rate especially because Variable is now “easier” to qualify for but there’s a 7 year fixed at 3.39% that is all of a sudden attractive if you’re keeping your property long term, planning to turn your property in to a rental, or just getting skittish about rates overall. Email us for a strategy specific to you.
NDP Budget & Projections below

Wow. I was nervous as hell going in to Tuesday, but I have to say I’m impressed with the “focus on locals” approach NDP has unveiled. Overall, I am surprised to say I like their plans. Maybe I just don’t understand them fully just yet, but they seem quite common sense (Government using common sense, I know, it’s odd to type…)
Focusing on taxing larger corps for health taxes and deleting MSP for individuals – smart, and a win. Increased child care benefits for young families. Ferry price freezes (to help my Tofino trips!) are a win. Wildfires. Etc – Here’s the best article I’ve seen for a quick summary – CBC 10 things to know
IF the NDP can enforce the 2.0% foreign owner tax it will mean good things for the local economy and the reason why we are seeing more money in ChildCare/Health reductions/Wildfires etc. The 5% increase on foreign purchaser’s tax to 20% from 15% is “nominal” now that the tax has been implemented especially given foreign currency to Canadian. I truly hope these measures allow local BC residents to enter the real estate market as home owners. Let’s see how this plays out in to 2019 amidst ICBC & BC Hydro meltdowns (please bring on the privatized insurance!)
Our projections *with caveats everywhere to not be sued* – The bottom of the market is still expected to increase and likely significantly. We’ve already seen $250,000 condos in many burb areas suddenly increase to $400,000 basically “overnight”. Migration to BC (from Canada or overseas) is resulting in increased housing demand and upward pressure for values on all properties sub $1.5M. A huge amount of our client base continues to find out ways they can keep their current home and still buy more. NOBODY is thinking of selling unless they must so there really is slim pickings out there.
We still have a supply and demand issue and we have a huge amount of job creation happening across many industries. The tech industry alone is expecting another 200,000 new jobs in BC over the coming three years. Those jobs all paying $100,000 or more and possible spouses income as well. Construction – still booming and trades can’t keep up. Auto industry. Fisheries. And possibly, if the Federal Government actually steps in, the LNG pipeline creating thousands of jobs and income to our Province. $46.7Billion dollars is projected in the first 20 years of operation. IF it can get underway. FYI 0.0003% is the BEST case scenario for reductions in global emissions if Kinder Morgan pipeline is cancelled.. Common team… Aside from that BC is kicking ass at the moment, and should things continue the real estate market will continue to follow suit. We just all hope at not as frantic a pace as the last couple years. We’re seeing a few less properties in multiple offers but I mean like… Very few. And Spring market isn’t here yet, I’m referring to right now during SnowMageddon. We’re expecting another hair on fire year in our office and ready to assist should you, friends, family, coworkers or anyone else need help sorting through the mess that is “How do I buy a house in 2018?”

The latest mortgage rule change comes with no surprise, something “rumoured” since the late Spring of this year. Whenever OSFI is “considering” anything, it’s happening. Let’s be very alert not to hit the panic button. All this change does is level the playing field between qualifying for a Variable Rate and qualifying for a Fixed Rate Mortgage. Three years ago, OSFI passed legislation that anyone choosing a 4 Year Fixed Rate or less or Variable Rate Mortgage would have to qualify at their posted rate (hovering around 5%) Starting Jan 1, 2018 ALL mortgages must qualify at that benchmark rate OR the Contract Rate they offer you + 2.00% – Most banks are around 3.49% for a 5 Year Fixed Mortgage so you’d have to qualify at 5.49% to obtain that product. This makes Variable Rate Mortgages more attractive again as the posted rate is 4.89% in comparison. It’s likely we’ll see Fixed Rates come down a bit more but still harder to qualify for those rates presently.

People ask me – IS this the sky about to fall now? No. Not even close. Many people have still been qualifying for Variable Mortgages for the past 3 years after the same rule was implemented. Who does this affect? Current applications in the que requiring qualification at a Contract Rate. If we’ve sent you in for a Refinance or a Purchase based on say the 3.14 or 3.19% 5 Year Fixed we still have available then you’re getting scaled back pretty hard. Like 20% less. If you were qualified for a $500,000 mortgage now your max would be approx. $400,000 and so on. This is not to be taken lightly if your Purchase or Refinance needs to qualify at the lower rate. My phone has been ringing off the hook this week with fence sitters that are now jumping in the direction of acting prior to December 31st. With good reason. It’s going to slow down people using the equity in their home to Refinance or our “Classic” Refinance to Purchase more property (I can’t count the number of those we’ve done over the past three years as our motivated clients have capitalized on rising rental returns and capital appreciation of real estate) – If this is something you want to or need to do, call me today. Will this affect overall prices of average homes? We think No. Maybe it will stop real estate from appreciating at 25% per year and bring it down to a modest 5-10% (modest, HA!)

In BIG news – Amazon HQ2 could be moving HQ to Vancouver. This is MASSIVE. Other tech companies have been expanding and hiring here and in the Okanagan rapidly. Amazon alone will be bringing 50,000 jobs (and families, and business, and growth, and and….) to our picturesque city. Major business growth in the tech and medical sectors are why believe we will see a continued rise in real estate prices. We still think any property sub $2,000,000 in Vancouver and $1,500,000 in the burbs will remain a very hot commodity. I can’t remember who I was chatting with that “never thought they’d see a $1,000,000 1 Bedroom condo in San Fran” and guess what, it’s happened. $2000/sqft downtown Vancouver is something we’ll see in our lifetime, for sure. (I’ve got a good 70 more years to go pending scientific advancements, lol)

Rate outlook:

OK so if I’m the Bank and I see that the Bank of Canada just raised Variable rates by 0.50% in consecutive decisions ummm yea I’m going to raise Fixed Rates arbitrarily!! Panic stricken people all over the country have undoubtedly been herded in to the Fixed Rate corrals. The bond yields have not risen enough to warrant the increase from 2.69% 5-year Fixed Money two ish months ago to 3.49% 5-year Fixed on average right now. One thing I always like to point out this time of year is that Banks fiscal year end is Oct 31st. Every year for the past four years as we’ve had banner real estate growth Banks will chuck up their rates really high because they’ve already smashed their targets and hit bonuses. They start discounting rates again in the early Spring to meet the real estate market and compete for the mortgage biz. Mortgages for banks are typically their loss leader products necessary to obtain much more profitable 19% credit cards and banking fees.

Bank of Canada’s next announcement is next Wednesday. Again, if I’m putting my psychology hat on, I’m thinking they purposefully raised Variable Rates twice in July and September to avoid raising in October, they wanted two raises in 2017. Reason being is consumer confidence would be hammered heading in to Christmas season and the Government still needs people to spend spend spend. We’re not anticipating another increase to Variable until the New Year after this latest round of OSFI Mortgage Rule Belt Tightening plays out.

I still like my Variable Rate Mortgage. It’s lower than a Fixed Rate and gives me a lot of flexibility. Technically it’s now easier to qualify to obtain a Variable. For those who NEED to qualify at a Contract Fixed Rate in to 2018 my firm has excellent relationships with Credit Unions who do not fall under OSFI rules. They will still be able to use the old criteria. We’ve been strengthening our relationships with many CU’s all year for this reason and because a few have some awesome products to boot!

For more information or specific questions please reach out direct via email or phone above.

Speak to you soon

Data had been recently released from Statistics Canada’s showing second quarter numbers. Canada’s GDP grew by 4.5 per cent in the second quarter. This impressive growth rate nearly tripled the previous quarters’. The result of a strong growing economy almost always comes with an increase in interest rates. This time is no exception. Unlike July, this time there was very little notice of the rate hike. The closest thing to a warning came in yesterday when a couple banks announced fixed rates were rising this week. It seems as though they must have had received the heads up before hand and could now take advantage of panicky people who quickly lock-in their Variable Rate Mortgages to a Fixed Rate when a bank rep calls them this week with the news.

If we keep on the same trajectory the BOC is expected to raise their rates by two more 0.25% increments by 2019. In general this is good news for the Canadian economy as a whole as it shows we have weathered the oil & gas crisis from two years ago and are taking measures to expand beyond real estate and construction as it’s main driving force.

Rising interest rates is usually a move to deter spending and borrowing among Canadians. The result will bring an end to the equity ATM that many Canadian’s have used in the past few years, as property values have soared and spending habits have loosened. Non-mortgage consumer debt rose 3.3% year over year in the second quarter of 2017 with an average of $24,026 per person here in British Columbia. It’s not a whole heck of a lot when that includes credit cards, lines of credit, vehicle loans and student loans. However, a rise in that financial section is never good. Canadians will likely and certainly SHOULD buckle down and take advantage of the incredibly low mortgage rates to accelerate their payments and delete as much debt as possible. We still recommend obtaining as low a variable rate as possible and accelerating that payment as though taking a fixed.

Now for the future mortgage rule changes if you’re still reading….. OSFI has rumored more rule changes will be coming down the pipe “at some point”. Historically whenever they rumor a change, the changes will be implemented. Three years ago the qualifying rate to obtain Variable or any Fixed Rate under 5 years changed to Bank of Canada’s posted rate which is currently 4.84%. The changes are two options:
Option 1: All mortgages must be qualified at Bank of Canada posted no matter what the term (4.84%)
Option 2: All mortgages must be qualified at the Contract Rate plus 2.00% (5 year fixed 3.19% Contract rate would have to qualify at 5.19%)

Because this will make mortgages more difficult to attain I have been encouraging people to look in to financing sooner than later if their goal is to acquire more properties or make any changes.

If you or anyone you know has questions about your mortgage please call us. My team and I would be happy to together to discuss the most educated decision specific for your individual needs