Chad Moore Calgary Mortgage Broker

Here’s a link to a recent news story of TD raising their posted interest rate.  TD has a reputation for being THE FIRST Bank to raise interest rates and ask questions later.  In fact, TD raised their Prime lending rate, when no other Bank followed, and kept it higher than the market – still to this day!  I wrote on the topic here.

Here’s why this matters to YOU (you’re a homeowner or a prospective buyer):

Qualifying for a Mortgage will become more difficult!

With a down payment of less than 20% buyers need to qualify (afford) to make their Mortgage payments AS IF their interest rate was higher.  This higher interest rate is called the “Mortgage Qualifying Rate” (MQR).

The MQR is found by taking the mode of all Big 5 Bank posted interest rates.  TD raised theirs to 5.59%.  With recent upward pressure on the Canadian Bond market, it’s reasonable to think other Banks will eventually follow suite.

This will put upward pressure on the MQR.  This in turn decreases peoples home affordability (lowers their maximum purchase price) shrinking home buyer demand.

With a down payment more than 20% buyers will also have higher qualifying interest rates to contend with.  As of January 1st, 2018 ALL home buyers are subject to a Mortgage qualifying stress test.  WIth 20% or more down payment the stress test is 2% above your actual contract Mortgage rate.

With the backdrop of our economy and increasing home inventory, I think it’s important for buyers and sellers to be aware of our changing housing market.

The Latest From Canada’s Bond Market:

There has been a recent run up on the Canadian Bond market, with a sharp decrease just today.  Regardless, some of my Mortgage lenders interest rates have been increasing, with the latest Posted Interest rate hike by TD.

What To Do?

1.  Be aware.  Stay informed.  Talk to your Bank or Mortgage Broker.  If they are not reaching out to you now, they probably won’t reach out to you in the future when other market shifts bring opportunity to save you money.
2. Rate hold.  Talk about any interest rate holds that would protect you from future interest rate exposure.  Also know that interest rate holds are usually set with a premium added so they are not best rates “today” but could prove very useful 120 days out.
3. Anticipate the market.  I publish content for you to understand, and draw your own opinions, on macro-economic happenings and local Real Estate data.  I offer my thoughts on combining the two.  Continue reading so you can merge and make sense of more data and fit it into your home purchase decision.

Conclusion:

I think our Bond market is going to take a ride along with the US Treasury Bill’s.  With increased US fiscal spending plan, Government corporate tax cuts, increasing US wages and growing consumer confidence I think the US economy will be on a “sugar high” for a couple years.  I think this will drag Canada’s Government Bonds higher resulting is what might have been unplanned consequences of our new Mortgage rule changes??

In the middle of this is Canada’s central Bank.  They have said time and again, they are planning on seeing through near term inflationary pressure and will be heavily reliant on incoming economic data to make any rate changes.  I’ll be looking for new positive economic spinoff data we might see from the US (growing exports, and more natural resource usage (lumber/oil etc)).

Shameless Self Plug:

Call or email me to help arrange your Mortgage today.  In the future, should there be any strategic change to the market, I’ll be watching and able to advise you on Mortgage and Real Estate solutions that work for you.

403-809-5447

chad@canadamortgagedirect.com

Talk soon,

Chad Moore