Government of Canada tweaks rules on mortgage qualification

Earlier this week, a few changes to mortgage qualification in Canada that would be implemented on April 19th, 2010 were announced by Finance Minister Jim Flaherty. These changes include an adjustment in the qualifying rate used in mortgage qualification, a reduction in the amount of equity Canadian Homeowners will be able to pull out of their homes, and an increase in the down payment requirement for those looking to purchase rental/revenue or investment properties.

Here's an explanation, and my take on these changes:

1. Borrowers will need to qualify using a 5-year fixed rate regardless
of what term they choose. If you want a 1.95% variable rate, for
example, you will need to show that you can afford payments at the
lender's 5 year rate. Since banks use their posted rates(normally at
least 1% higher than what you eventually get down to after
negotiating) to qualify potential borrowers, this change will have a
much greater effect on them as opposed to some of the lenders
available through mortgage brokers(who only have 1 fully discounted rate
available). While it has not yet been clarified as to whether ALL mortgage lenders will be required to use the same rate, my understanding is that each lender will be using their own posted bank rate.

2. No longer will you be able to refinance your home to 95% of it's
value. 90% will be the new refinance maximum. The bad thing about this
change is that homeowners will no longer be able to replace as much
high interest credit debt with relatively lower interest mortgage
debt. The good news is that upon sale, you will be more likely to have some equity left in the home.

3. People buying non-owner occupied rental properties will need to put
down 20% to get an insured mortgage, versus 5% previously. The idea
behind this move is to reduce speculative purchasing in the Canadian
Market, and provide more breathing room to investors in the event of market property value swings.

Keep in mind that these changes will only take effect on April 19th,
2010 --meaning buyers still do have a little time to get into a
home/refinance/buy an investment property before things change. One
thing of note however, is that most mortgage lenders in Canada are
likely to implement these changes BEFORE April 19th in order to ensure
that all files are being underwritten in accordance with the new
legislation on the effective date of change.

For more information regarding these changes, call one of the qualified mortgage professionals at Alberta Mortgage @ 780-479-2222 or visit www.albertamortgagecentre.com today.

Variable Rate Mortgage Spreads Expected to Get Better

Posted by Anuj Gupta, AMP, BComm of Alberta Mortgage

In 2008, it appeared that Variable Rate Mortgages had changed forever. The consensus opinion among industry experts was that Canadian Home Owners would not see "Prime - " for a long time. The prediction was that it would at least be a few years before the market would even see variable rate mortgages @ Prime. However, with increased competition and returning stability it appears that Canadian Homeowners can expect a much sooner return to the days of deeply discounted Variable Rate Mortgages.

Shortly after the initial "market meltdown of 2008" in early 2009, many Canadian mortgage lending institutions either increased their variable rate spreads as high as Prime + 1.00%, or abandoned variable rate lending terms altogether. It appeared that things had changed forever. However, in the 3rd Quarter of 2009 we saw heavy competition in the Variable Rate Market return. Lenders began aggressively pricing their Variable Rate Mortgage Products, and have continued the trend. Presently, Variable Rate Mortgage terms have fallen to Prime - 0.30%*, and swing of 1.30% in 12 months!

As 2010 continues, I would expect to see this trend continue. Of course, anything can happen --but the market is indicating a return of deeply discounted variable rate mortgage terms.

For more information regarding variable rate mortgages, or to be prequalified call one of the qualified mortgage professionals at Alberta Mortgage @ 780-479-2222 or Apply Online @ http://www.albertamortgagecentre.com.

*subject to qualification criteria.

Mortgage Interest Rates Commentary

Here’s a little commentary on interest rates I found that provides some insight into why I believe we will not see any dramatic increase in mortgage interest rates –in contrast to some of the stories I’m sure many of you have been hearing. It looks like we have good news for Variable Rate Mortgage holders, and those looking to get into the market:

“The annual inflation rate rose a less-than-expected 1.3 per cent in December, said Statistics Canada, and core inflation stayed at 1.5 per cent - a half a percentage point below the Bank of Canada's target rate.

In addition, consumer prices dropped last month.

"The way markets look at it is that because inflation remains subdued, it puts even less pressure on the Bank of Canada to raise interest rates and that softens the currency," Bank of Montreal chief economist Douglas Porter told The Canadian Press

. He added that business can't raise prices due to the weakness of the economy and the strength of the Canadian dollar has quashed import prices.
Bank of Canada governor Mark Carney will release the bank's next Monetary Policy Report Thursday.”

--source: mortgagebrokernews.ca

One thing to keep in mind about interest rates is the key difference between fixed and variable rates. Variable rate mortgages are set against the Bank of Canada’s Prime Lending Rate and are therefore directly connected to the Canadian Government’s monetary policy(ie. High inflation = increase interest rates). Therefore, you can expect to see variable rate mortgage holders remain happy with their mortgages for the foreseeable future. In contrast, fixed rate mortgages are priced based on the Canadian Mortgage Bond Market –meaning they are often subject to investor speculation and media reporting. This relationship is the reason why 2009 saw rapid increases and decreases throughout the year in fixed mortgage interest rates. I would expect we’ll see the same type of ups and downs for at least the first 2 quarters of 2010, but in my estimation the average rate should remain fairly stable.

What will we see this year? I expect to see interest rates rise slightly(0.25-0.50%) over the course of the year, but I will keep you all posted throughout. Let me know if you have any questions. For more information regarding mortgage interest rates, or to get your rate held call one of the qualified mortgage professionals at Alberta Mortgage at 780-479-2222 or Apply Online @ http://www.albertamortgagecentre.com today.



Regards,

Anuj Gupta, AMP, BComm

Mortgage Associate

Alberta Mortgage

780-479-2222 ext 14

www.albertamortgagecentre.com





When Results Matter

Fixed Rates Set to Rise

After an up and down 2009, it looks like 2010 will be starting off with rising interest rates. With the economy appearing to have begun recovering, fixed mortgage interest rates are now expected to move upwards in an attempt to combat rising inflation. As interest rates rise and property values increase, it may become increasingly difficult for prospective home buyers to qualify for mortgage financing. It may be a good idea at this time to contact a qualified mortgage professional now and secure a mortgage rate if you are looking a purchasing a home sometime in the first quarter of 2010.

For more information about interest rates, and to secure a rate hold call one of the qualifed Mortgage Associates at Alberta Mortgage @ 780-479-2222 or visit http://www.albertamortgagecentre.com.

Fixed vs. Variable Rates: the debate

Since late in 2008, the Canadian Mortgage Lending market has been experiencing a dramatic period of change. From fluctuations in interest rates to the emergence and disappearance of home financing products, the past 24 months have provided potential and existing home owners with a wide range of opportunities and challenges. Now, as the markets begin to settle, a new debate has emerged for the Canadian Home Owner: Fixed vs. Variable. Over the course of the coming weeks, we will discuss some of the potential benefits and challenges associated with both Fixed and Variable rate mortgages. We'll start of with Fixed Rate Mortgages.

5 year fixed rate mortgage have continued their downward trend through the first 2 weeks of December. Many are expecting to see even further decreases in rates over the course of the coming winter months, as buyer activity shrinks in the face of subzero temperatures, and a general post holidays slump in real estate activity. Fixed rate mortgage interest rates remain at or near historical average lows, and provide an excellent opportunity for existing and potential home owners to secure a great interest rate for the next 3 - 5 years. By taking advantage of a historically low mortgage interest rate, home owners can have peace of mind knowing that at least one component of their home ownership cost will be a constant for the near future.

However, while security is always great, variable rate mortgages are once again becoming increasingly attractive. As Canadian mortgage lenders become more confident in the market, and credit becomes more abundant, look for even more attractive Variable Rate Mortgage products to come out. In fact, over the past 12 months we've seen a tremendous shift in Variable Rate products --from Prime + 1.25% earlier this year, to now Prime - 0.25%! With Prime currently sitting at 2.25%, home owners can take advantage of as low as a 2.00% interest rate, and significantly increase their interest savings.

The debate will continue with next week's blog post, but for more information in the meantime call one of the qualified Mortgage Associates at Alberta Mortgage at 780-479-2222 or visit http://www.albertamortgagecentre.com.

5 Year Fixed Rates Falling --Closer to September Levels

As predicted a few weeks ago, 5 year fixed mortgage interest rates have fallen. From a high of 4.39% in mid-October down to 3.99% today, the situation for home buyers is improving. We might not see rates fall much (if any) lower, but look out for a relatively long stretch of continuously low mortgage interest rates. For homeowners looking to take maximize their savings over the course of their mortgage term, a Variable Rate Mortgage may be the solution, as home owners will be able to take advantage of a historically low Prime interest rate for the time being, and then lock before rates go up.

For more information regarding mortgage interest rates and trends, contact one of the qualified mortgage professionals at Alberta Mortgage today @ 780-479-2222 or visit us online @ http://www.albertamortgagecentre.com.

"Prime -" Variable Rate Mortgages Are Back!

This week, "Prime -" came back. Today, a few of our mortgage lenders announced the return of "Prime -" mortgage products in Canada. Existing and potential Canadian Homeowners can now get a 3 or 5 year Variable Rate mortgage at Prime - 0.10%!* Considering just 8 months ago we were looking at variable rates as high as Prime + 1.50%, the new rates are very welcome news.

To find out how much you could possibly save by switching to a new variable rate mortgage through Alberta Mortgage, call one of the qualified mortgage professionals at Alberta Mortgage today, or apply online.

*Subject to qualification criteria