May 31st Rate Date – No Change for Variable Rate Clients

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is proceeding broadly as expected in the Bank's April Monetary Policy Report (MPR). The U.S. economy continues to grow at a modest pace, limited by the consolidation of household balance sheets. Growth in Europe is maintaining momentum, although the risks related to peripheral economies have increased. The disasters that struck Japan in March are severely affecting its economic activity and causing temporary supply chain disruptions in advanced economies. Commodity prices have declined recently but are expected to remain at elevated levels, supported by tight global supply and very strong demand from emerging markets. These high prices, combined with persistent excess demand conditions in major emerging-market economies, are contributing to broader global inflationary pressures. Despite the challenges that weigh on the global outlook, financial conditions remain very stimulative.

In Canada, the economic expansion is proceeding largely as expected in the April MPR. The economy grew at an annual rate of 3.9 per cent in the first quarter, reflecting continued strong business investment, smaller contributions from household and government spending, and a modest drag from net exports. Although temporary supply chain disruptions are expected to restrain growth sharply in the current quarter, this is expected to be unwound in subsequent quarters.

While underlying inflation is relatively subdued, the Bank expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3 per cent in the short term. Total CPI inflation is expected to converge with core inflation at 2 per cent by the middle of 2012 as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored.

The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation. On the other hand, the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn, consistent with achieving the 2 per cent inflation target. Such reduction would need to be carefully considered.

New Mortgage Rules to Take Effect in March

Mortgage Changes were announced recently that will come into play March 18th, 2011. These are summarized here:

http://www.moneyville.ca/article/923422--roseman-what-mortgage-changes-mean-for-you

There were no changes to minimum down payment or condo debt servicing as was previously rumored.

Potential Change in Mortgage Rules to Affect Condo Buyers

The government is currently discussing whether or not to change mortgage qualifications which would directly affect condo buyers. In short, as mortgage brokers we currently input 50% of the condo fees of a building when a condo is purchased. Therefore, only 50% of the condo fees need to be debt serviced into appropriate ratios established and accepted by banks & lenders, most commonly 32% GDS and 40% TDS. The proposed change would mean 100% of condo fees would need to be entered and the client would need to be able to debt service this higher amount. The government's thought process behind this is that the purchaser will be paying 100% of those fees anyhow so it should be built in to ensure they can afford the condo. Those against the move caution that people who purchase a home do not have to have repair estimates built into their debt servicing for financing.

There are also discussions on raising the minimum down payment from 5% to possibly 6 or 7%. Reports indicate that it would be unlikely to go as high as a minimum of 10%. There is also mention in the article about reducing amortization from the current maximum of 35 years to 30 years, however, they say that the effect here would be minimal so it may not be worthwhile to change.

Read below for the full story!

New Rules Would Hit Condo Buyers

The federal government's efforts to get tough on borrowing are now focused on the condominium sector, with new rules in the works to make it more difficult to qualify for a loan on a high-rise apartment, the National Post has learned.

Sources say rules now being discussed would add 100% of condominium fees to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage. Currently, only 50% of the fee is considered. The move has the potential to squeeze thousands of consumers out of the market.

"I know for a fact they are talking about it," said one source close to finance officials who asked not be identified, about the proposal which is part of series of a new rules that the government is described as "seriously considering."

It is almost a guarantee that the government will once again lower the maximum length of amortizations for a mortgage, down to 30 years from 35. Longer amortizations lower monthly mortgage fees making it easier for consumers to borrow more.

The Canadian Association of Accredited Mortgage Professionals says 30% of new mortgages last year were for amortizations of 35 years, so a considerable percentage of Canadians are taking advantage of the current rules.

About three years ago, amidst a battle for customers between federal Crown agency Canada and Mortgage and Housing Corp and private mortgage default insurers, amortizations lengths rose almost overnight from 25 years to 40 years before Ottawa cracked down. "Going from 35 years to 30 does almost nothing," said the source, adding that's why the government is looking at the changes to condominium qualifications.
Ottawa is also still considering a far more controversial proposal to increase the minimum downpayment required to buy a home but it is unlikely to go from the current 5% to 10%, as some have speculated. A 6% to 7% range seems more likely, said the source.

The proposals only affect those Canadians who require mortgage default insurance. Anyone borrowing from a financial institution covered by the Bank Act must get insurance if they have less than a 20% down payment.

"I'm concerned and disturbed if they are making changes, particularly to condos," said Stephen Dupuis, chief executive of the Toronto-based Building Industry and Land Development Association. "They have already imposed stricter rules and that was plenty."

In April, 2010 new mortgage rules went into affect that forced consumers to qualify based on a higher interest rate than was on their actual contract. It also required all housing investors, as opposed to people who use a home as principle residence, to have a 20% down payment which mostly affected the condo industry.

Mr. Dupuis said he can live with the amortization period being shrunk but any attempt to increase the minimum down payment will only hurt the market. "There seems to be a fatal obsession with real estate and engineering the real estate market which may be an unhealthy obsession."

But Ottawa has coming under increasing pressure from the financial industry to tighten mortgage rules. Ed Clark, chief executive of Toronto-Dominion Bank, has called on the federal government to take steps to curb consumer access to bank loans. The government is said to have looked into imposing new rules on lines of credit but that would be tougher to implement because it would require a change to the Bank Act, said a source.

The condominium proposal would have an immediate impact because the average condominium fee on an existing home is 55¢ a square foot in Toronto, according to research firm Urbanation Inc. which says the average condominium apartment in Toronto is 900 square feet. Currently only half that approximate $500 in monthly condo fees counts toward monthly expenses for qualifying purposes. To qualify for a mortgage only 32% of gross income can go towards housing, which also includes mortgage payments including principle and interest, taxes and utilities.

Vince Gaetano, a vice-president with Monster Mortgage, said he too has heard the discussion of condominium fees being included in debt calculations and figures it makes sense.
"Yeah, condos provide extracurricular activities like swimming pools, gyms tennis courts and all that stuff. But the reality is you are paying the fee so why make it 50% it should be 100%," says Mr. Gaetano. "This is going to put some pressure on people. The rules have not changed in ages and this is way before the proliferation of condos."

Brad Lamb, a real estate broker and developer, said the practice would discriminate against condominium owners. "When you buy a house you don't put any future maintenance costs [in your debt calculation]," says Mr. Lamb.

"All it is is a knee jerk reaction by idiot bankers pressuring idiot politicians that don't understand the nature of the condominium market in Canada. What is driving the condominium market in Ottawa, Vancouver, Toronto and Montreal is investors. This won't affect them. This just attacks the lowly first-time buyer."

Garry Marr, Financial Post · Thursday, Jan. 13, 2011

No Change to Prime Rate

Prime Rate Remains at 3% - Article Below!


Bank of Canada maintains overnight rate target at 1 per cent OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent. The global economic recovery is proceeding largely as expected, although risks have increased. As anticipated, private domestic demand in the United States is picking up slowly, while growth in emerging-market economies has begun to ease to a more sustainable, but still robust, pace. In Europe, recent data have been consistent with a modest recovery. At the same time, there is an increased risk that sovereign debt concerns in several countries could trigger renewed strains in global financial markets. The recovery in Canada is proceeding at a moderate pace, although economic activity in the second half of 2010 appears slightly weaker than the Bank projected in its October Monetary Policy Report. In the third quarter, household spending was stronger than the Bank had anticipated and growth in business investment was robust. However, net exports were weaker than projected and continued to exert a significant drag on growth. This underlines a previously-identified risk that a combination of disappointing productivity performance and persistent strength in the Canadian dollar could dampen the expected recovery of net exports. Inflation dynamics in Canada have been broadly in line with the Bank's expectations and the underlying pressures affecting prices remain largely unchanged. Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered. Information note:The next scheduled date for announcing the overnight rate target is 18 January 2011. Copyright 2010 TMG The Mortgage Group Canada Inc. All rights reserved.

Canadian Mortgage Broker News – Housing starts expected to decline for 2011

Canadian Mortgage Broker News - Housing starts expected to decline for 2011

Canadian Mortgage Broker News – Rate is higher but still historically low

Canadian Mortgage Broker News - Rate is higher but still historically low

Lending Rate now 2.75% (up 0.25%)

FOR IMMEDIATE RELEASE – 20 July 2010

Bank of Canada increases overnight rate target to 3/4 per cent

OTTAWA – The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

The global economic recovery is proceeding but is not yet self-sustaining. Greater emphasis on balance sheet repair by households, banks, and governments in a number of advanced economies is expected to temper the pace of global growth relative to the Bank’s outlook in its April Monetary Policy Report (MPR). While the policy response to the European sovereign debt crisis has reduced the risk of an adverse outcome and increased the prospect of sustainable long term growth, it is expected to slow the global recovery over the projection horizon. In the United States, private demand is picking up but remains uneven.

Economic activity in Canada is unfolding largely as expected, led by government and consumer spending. Housing activity is declining markedly from high levels, consistent with the Bank’s view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010. While employment growth has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession.

The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.

Inflation in Canada has been broadly in line with the Bank’s April projection. While the Bank now expects the economy to return to full capacity at the end of 2011, two quarters later than had been anticipated in April, the underlying dynamics for inflation are little changed. Both total CPI and core inflation are expected to remain near 2 per cent throughout the projection period. The Bank will look through the transitory effects on inflation of changes to provincial indirect taxes.

Reflecting all of these factors, the Bank has decided to raise the target for the overnight rate to 3/4 per cent. This decision leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.
Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Information note:?A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 22 July 2010. The next scheduled date for announcing the overnight rate target is 8 September 2010.

Prime Rate up 0.25% to 2.50%

Bank of Canada increases overnight rate target to 1/2 per cent and re-establishes normal functioning of the overnight market

OTTAWA - The Bank of Canada today announced that it is raising its target for the overnight
rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly
raised to 3/4 per cent and the deposit rate is kept at 1/4 per cent, thus re-establishing the normal
operating band of 50 basis points for the overnight rate.

The global economic recovery is proceeding but is increasingly uneven across countries, with
strong momentum in emerging market economies, some consolidation of the recovery in the
United States, Japan and other industrialized economies, and the possibility of renewed weakness
in Europe. The required rebalancing of global growth has not yet materialized.
In most advanced economies, the recovery remains heavily dependent on monetary and fiscal
stimulus. In general, broad forces of household, bank, and sovereign deleveraging will add to the
variability, and temper the pace, of global growth. Recent tensions in Europe are likely to result
in higher borrowing costs and more rapid tightening of fiscal policy in some countries - an
important downside risk identified in the April Monetary Policy Report (MPR). Thus far, the
spillover into Canada from events in Europe has been limited to a modest fall in commodity
prices and some tightening of financial conditions.

Activity in Canada is unfolding largely as expected. The economy grew by a robust 6.1 per cent
in the first quarter, led by housing and consumer spending. Employment growth has resumed.
Going forward, household spending is expected to decelerate to a pace more consistent with
income growth. The anticipated pickup in business investment will be important for a more
balanced recovery.

CPI inflation has been in line with the Bank's April projections. The outlook for inflation reflects
the combined influences of strong domestic demand, slowing wage growth, and overall excess
supply.

In this context, the Bank has decided to raise the target for the overnight rate to 1/2 per cent and
to re-establish the normal functioning of the overnight market. This decision still leaves considerable
monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the
significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary
stimulus would have to be weighed carefully against domestic and global economic
developments.

Information note:
The next scheduled date for announcing the overnight rate target is 20 July 2010. A full update
of the Bank's outlook for the economy and inflation, including risks to the projection, will be
published in the MPR on 22 July 2010.

Should I lock in?

Leah's Bottom Line: If you are debating whether to lock in or not, ask yourself: What was the prime rate at when I chose this product a few years ago? Let's assume it was 2007 and you chose a prime minus 0.6% variable rate mortgage. At that point in time, prime rate was 4.75% (meaning your rate was 4.15%) and you clearly qualified with respect to your financial situation at that point in time.

While most of us have gotten used to incredibly low interest rates, this isn't the norm. Prime rate has been at 2.25% for the last 11 months so when we hear that it will rise, we generally panic. However, you need to ask yourself "are you comfortable in your current financial situation to sustain an increase in prime back to where it normally is?" If prime rate has averaged roughly 4.81% over the last 5 years, and you have a built in discount of say, prime minus 0.6% - that means your rate would be 4.2% on average. Translated into a monthly payment via any mortgage calculator on the web and see if you are comfortable with that figure. This is roughly what your payments would have started out at back in 2007 if we use the above example. If something has changed in your life and you are no longer comfortable with that figure or you feel more secure in a fixed rate, you may want to lock in.

Leah

ARTICLE from Canadian Mortgage Trends:

With people banking on the main interest rate going up in June, it seems like a good time to for homeowners to lock in their fixed-rate mortgages.

About 12 percent of mortgage holders with fixed-rate mortgages "locked in," or switched from variable rate mortgages, in the past year, , according to a report this month by Will Dunning, chief economist at the CAAMP , and another 10 percent had already switched from variable more than a year ago.

The rate for conventional five-year mortgages was at 6.25 per cent at the end of April, nearing the 5.25 per cent rate at the end of May last year - the lowest since 1973 when the Bank of Canada data began.

"As interest rates rise, expect home buyers to increasingly opt for fixed-rate loans, in turn leaving banks with more fixed-rate assets to hedge in the swap market" said Mohammed Ahmed, a rates strategist at Canadian Imperial Bank of Commerce in Toronto.

Housing starts rose to a seasonally adjusted annual pace of 201,700 units last month.

Spring Fever Newsletter

Now that we are into May, Calgary is in full spring fever mode, despite our current weather not being anything spring-like! First time home buyers are abound, seeking deals before their rate holds expire, while variable rates are becoming more enticing with steeper discounts for those ready to take on the added risk.

There have been a multitude of changes over the last several weeks which have come into effect and may affect you in an upcoming purchase. To fully clarify exactly what these changes are, I'll devote this newsletter to explaining the latest changes and how they may affect you.

Higher Interest Rate Used to Qualify Clients

*These rules affect Hi-Ratio Mortgage Holders (ie: those with less than 20% down payment) Old Rules: Previously, if you signed on for a 3 year fixed rate term at 3.65%, I would have qualified you for the mortgage AT 3.65%. The only difference would have been a variable mortgage; those mortgages have always been qualified on higher rates to protect you again future rate increase and most commonly the 3 year POSTED bank rate would have been used to qualify you. New Rules: In order to eliminate a surplus of clients in the next several years who are no longer able to afford their houses as their renewal rate in 3 years is much higher, the new rule is that all clients are qualified on the "benchmark qualifying rate" unless you are signing on for a 5 year or greater fixed rate term, in which case you are qualified at that rate. For fixed rate mortgages with terms of less than 5 years as well as all variable mortgages, you are qualified based on the benchmark qualifying rate. What is the 'qualifying benchmark rate?' As of today, the rate is 6.10%. CMHC defines the benchmark rate as the Chartered Bank - Conventional Mortgage 5-year rate that is the most recent interest rate published by the Bank of Canada in the series "V121764" each Monday. Refer to the official link for the most up to date rate information. Leah's BOTTOM LINE: Based on a higher qualifying interest rate, borrowers will need approximately 25% more income in order to qualify for the same home compared to the old rules.

Rental Properties

Old Rules: Able to purchase a rental property with 5% down payment. New Rules: Requires 20% down payment for rental properties. As of April 19th, CMHC will also be implementing changes to the calculation of a borrower's Total Debt Service Ratio where rental income is generated from the subject property. 50% percent of the gross rental income from the subject property may be included into the borrower's gross annual income for the purposes of calculating the borrower's Total Debt Service Ratio. Leah's BOTTOM LINE: This is a more complex matter to explain, so I invite you to contact me directly to review your situation or alternatively, please read the CMHC link for more specific information.

	Re-financing Your Home
Old Rules: Previously able to re-finance up to 95% of the value of your home. New Rules: May only re-finance up to 90% of the value of your home. Leah's BOTTOM LINE: This will keep an additional 5% worth of equity in the home than before.

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