Mortgage Matters-October 23, 2024

Market Insights

Amazing News announced today!

The Bank of Canada delivered a whopping 0.50% rate cut this morning, bring Prime Lending rate down to 5.95% from 6.45%! 

This affects you if you are in a variable rate mortgage or have a variable rate loan product.

How much does this affect you and your payment? If you owe $200,000 for example, your payment would drop by about $60/month!

Keep in mind that it would reflect on your next month's payment, unless you have a fixed payment. In that case more would go to principal and less would go to interest.

If you are renewing your mortgage or getting a new mortgage that hasn't closed yet and have selected a fixed rate mortgage, this does not mean that your rate has dropped. Fixed rate mortgages are tied to the bond market, and in the last couple of days we have actually seen a slight increase in bond yields. When this happens we sometimes see that reflected in an increase in fixed rates. 

I do suspect that we will continue to see fixed interest rates drop over time and go under 4%. In order for rates to drop under 2% we know what needs to happen-an economic crisis like the pandemic. I don't think any of us want that!

If you are unsure whether to take a fixed or variable rate mortgage, reach out to us. We can discuss what is right for you!

So Many Mortgage Rule Changes are Coming!

Recently, the Federal Government announced some pretty sweet changes to mortgage lending, my dear client. Here is a summary of those changes:

Effective November 21, 2024

• When switching your mortgage to another lender at renewal, you no longer need to qualify at the Stress Test Rate and instead can qualify at the actual contract rate. This is huge as it allows borrowers to have a choice at renewal if another lender is offering a better rate than their current mortgage lender.

Effective December 15, 2024

• First time home buyers and buyers of New Construction homes can now extend their payments over 30 years (previously 25 years). A first time home buyer has either:
• Never purchased a home before.
• Not owned or occupied a principal residence in the last four years.
• Recently experienced a breakdown in a marriage or common-law relationship, in line with the Canada Revenue Agency’s approach to the Home Buyers’ Plan.
• The cap for insured purchases has been increased from $1 million to $1.5 million

Effective January 15, 2025

• Homeowners can access up to 90% of their home's value in order to refinance to build a secondary suite. This is to help combat the shortage of rental units in the country. Here is the Coles Notes on the rules (courtesy of Canadian Mortgage Trends):
• Maximum loan-to-value (LTV): The LTV ratio can be up to 90% of the “as improved” property value, with the total property value capped at $2 million.
• Amortization period: The maximum amortization for this refinancing is 30 years, allowing borrowers to spread payments over a longer term.
• Number of units: Homeowners can add up to four units on their property, including the existing one.
• Self-contained units: Each secondary suite must be a fully self-contained unit, meaning it has separate living facilities, such as a private entrance, kitchen, and bathroom. This ensures compliance with municipal zoning requirements.
• No short-term rentals: The additional units must be long-term rentals and cannot be used for short-term rental purposes (e.g., Airbnb).

We are still waiting for communication from our lenders on how this will play out, but expect to have something soon. At that time we will communicate that to you. Either way, this is great news!

If you are intrigued by any of these changes, please reach out by email here! 

It might be time to have a strategy session!

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