Vancouver Real Estate Blog

Bank Of Canada January 2012 Announcement

As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 9:00 am EST, January 17^th, 2012, the Bank of Canada again did what we expected
them to do… they maintained their overnight rate. What this means to you
is that the prime rate on your mortgage or line of credit will not change and
remains at 3.00%. This is great news as you still have a great low rate
and so continue to make the most of the low payments you will still have and
maybe chat with a financial advisor about a Tax Free Savings Account or
some RRSP contributions to trigger a potential income tax refund next year!
If you don’t have a financial advisor, let me know and I’d be happy to
recommend one to you.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“the outlook for the global economy has deteriorated and uncertainty has
increased… The Bank continues to assume that European authorities will
implement sufficient measures to contain the crisis, although this assumption
is clearly subject to downside risks. The Bank expects the U.S. recovery will
proceed at a more modest pace going forward. For Canada, net exports are
expected to contribute little to growth, reflecting moderate foreign demand and
ongoing competitiveness challenges, including the persistent strength of the
Canadian dollar. In contrast, very favourable financing conditions are
expected to buttress consumer spending and housing activity.”

The outlook hasn’t really changed since the last announcement... they expect that growth will slowly continue but it is anticipated that prime rate might not actually increase until into 2013. When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally. Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

We have seen fixed rates remain very low at around 3.29% to 3.49% for a five year
fixed term. Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product (if you are on a variable rate) as the
interest is very much lower than a fixed term rate right now. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is March 8th, 2012 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are so
low right now and so it is a great time to buy a property or consider
refinancing especially as my mortgage specialist can hold rates for up to six months, if you know of someone that is looking for advice on their home or mortgage options, with no
obligation, would you mind passing my contact information on to them – this is very much appreciated.

Renewing Your Mortgage This Year? 5 Year Term Lowest In 65 Years

RENEWING YOUR MTGE IN 2012?

If it was a 5 year term aren”t you lucky!

Rates are back down to 65 and 70 year lows! A 5 year term at over 5% in 2007 will enjoy renewing at rate lows of 2004. WOW!

This would be the time to consolidate some debt or plan that kitchen renovation. Use the increase in equity in your home to add further value. Payments may actually stay the same or reduce at these low rates eventhough increasing your mtge.

The key, though, is to lock-in these rates with an early pre-approval.

JAN 5 2012

Mortgage Brokers Most Banks 6 mo. 4.45 4.55 1 yr 2.80 3.50 2 yr 3.20 3.85 3 yr 2.99/SPCL/CMHC 4.05 4 yr 3.09 4.79 5 yr 3.24/SPCL 5.29 7yr 3.89 6.35 10 yr 4.39 6.75

5 yr VARIABLE 2.90 %   50/50 5YR/VAR 3.25 % PRIME 3.00 %

Canada's Federal Government brings in New Mortgage Financing Rules

Our Federal Government has just announced that they want to help Canadians save more money. So they have introduced some money saving rules too spend less.

1) The government will reduce the maximum mortgage amortization period from 35 to 30 years

2) The maximum amount of the value of a home that can be re-financed will drop from 90 per cent to 85 per cent

3) The government insurance will no longer be available to financial institutions wishing to insure home equity lines of credit

“These are prudent measures that promote responsible lending practices and further strengthen our internationally recognized mortgage finance system,” Jake Moldowan, Board president said.

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

Tougher rules are in response to recent warnings from the Bank of Canada Governor, Mark Carney, about rising household debt levels.

For information, visit the Federal Department of Finance at www.fin.gc.ca.

 

Borrowing Funds for Strata Repairs

“Strata corporations can borrow funds,” says Tony Gioventu, Executive Director of the Condominium Home Owners Association of BC. If a strata Corporation wants to do major work like rainscreening, seal the entire under ground garage, replace all old windows,etc.

“There are several banking institutions in BC who lend to strata corporations for major construction and upgrades". Before a strata corporation plans to borrow for repairs they should start with a complete construction report on the scope of work and established an accurate cost estimate, so that the strata corporation can go shopping for a loan, looking for the best rate.

Repayment of the loan is typically done by one of two methods.

1) By special levies until the loan has been paid off.

2) As an expense from the operational budget, where the monthly maintenance fee would include the additional payments of the loans based on unit entitlement.

The strata corporation enters into a loan agreement, which is a contractual document that will grant the lender the first priority of receipt of special levies or strata fees. Because the strata cannot mortgage common property, this is the security required by most lenders to insure that they have the legal authority to collect on behalf of the strata corporation in the event that the strata corporation defaults on the loan.

Before any agreement has been reached between the Strata Corporation and the lender, approval is needed by the owners of the strata by a ¾ vote for the value of the loan, the terms and conditions of the loan, and the period of the loan must be stated and the resolution that the owners are voting on must encompass all the conditions and payment schedules of the loan. It is advisable that the Council seek legal help in drafting the resolution and be involved in the loan negotiations. This is for everyones protection.

The Strata has a duty of care to all owners, and in such, must make the economics of the loan very clear to all the owners. For example spell out in the voting document exactly how much the strata fees or special levies will be increasing and for how long.

 

Canadian Homeowners and spectulative rental purchasers

Jim Flaherty's(Federal Minister Of Finance)  announcement outlined 3 new aspects to borrowing money in Canada. See below or check out my blog post below:

1) All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage lower  interest rate and a shorter term.   

2) The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one's home;   

3)Non-owner occupied properties will require a minimum down payment of 20%.

What does these 3 points mean to the average Canadian??

Change #1. Currently, for clients taking a term of 3 years or less, OR, for clients taking a Variable interest rate mortgage (currently at Prime - .1%, or 2.05%), financial institutions qualify clients based on a 3 year rate (which is typically lower than the 5 year rate). By making the change to qualifying ALL clients based on the higher 5 year rate, the government is ensuring that clients can handle an interest rate hike, even if their existing mortgage rate is significantly lower than the 5 year at which they will now be qualifying for.

 Change #2. I think this is a good change. This really forces the Canadian homeowner population to keep a minimum amount of equity in their properties and will always allow for a minimum contingent of funds if clients are ever forced to sell their property for personal reasons.

 Change #3. The primary purpose of this change is to discourage market speculation and put a barrier up to make it more difficult to enter the real-estate investment realm for people who really can’t afford to loose money. Right now, for investment properties/rental properties, there are lenders out there doing 90-95% financing on non-owner occupied properties. Typically however, it has always been a minimum of 20% down with major financial institutions and it’s only the smaller lenders that were willing to take on more risk that have been doing the higher lending amounts on non-owner occupied properties. This new piece of legislation really just evens out the playing field in the lending market.

Overall these changes will help us in the future. Isn't that what we want. As Canadians we are a bunch of pretty conservative individuals. We should all be thankful. Just look at the USA and see where greed ends up!! Personal Bankruptcy for 100,000 people including those that a quite innocent.

Also one should take note that foreign buyers who buy real property here in Canada are required to have a 35% deposit. So 20% is very realistic.

Bank Of Canada Rate stays at 0.25%

 In Vancouver the news from Mark Carney, The Governor of the Bank of Canada, saying that the Benchmark lending rate will hold firm at 0.25% as promised last October. Mr. Carney said that he does not see any signs in this key lending rate to change until the middle of the year. As the recovery takes shape and like Canada who is seeing positive GDP growth across our country, so is the USA. Both countries are seeing stronger than anticipated growth.

As growth occurs I believe we will see the Bank of Canada raise it's Lending Rate to fight off inflationary fears. I would expect to see this new increase by the Fall of 2010.

For more information click on the link below.

http://www.bankofcanada.ca/en/fixed-dates/2010/rate_190110.html