Mortgage rules rumoured to be changing yet again!
Early last week the 5 year Government Bond Yields rose above 1.50%, closing at 1.51% which is a 3 month high. 5 year fixed interest rates are closing tied to the bond rates so this means that the fixed rates could soon be on the rise. In fact, they already rose 10 basis points in the last week.
So what does this mean? Well the 5 year fixed rates around the 3% range could soon be gone. If you managed to lock in at these historic lows, you're definitely sitting pretty. A recent study does show that 93% of Canadians are currently choosing fixed rates over the variable counterpart, this is a huge 180 degrees as it was a few years ago.
In other news, it's rumoured that Jim Flaherty, Canada's Finance Minister is looking to tighten the requirements for governement backed insured mortgages. This will be the fourth intervention in the real estate market since 2008.
Ideas that have been tossed around are making the minimum down payment on a purchase 10%, as opposed to the current 5% minimum. He may also reduce the maximum amortization to 25 years, it's currently at 30.
I am a big advocate of providing a large down payment as it does save you some money in the long run by not having to pay the additional insurance premiums. The downside to this is it will knock a select few out of the running to purchase a new home as providing a hefty down payment is already a significant road block in markets such as Vancouver. Reducing the time frame to pay off the entire mortgage loan to 25 years will push some borrowers over the threshold of affordability but in the long run, significant interest savings will be had.
Whichever decision is made; if any, we should know by late March. One more sidenote is that the Benchmark lending rate of 1% will likely remain in place for the remainder of the year, meaning that the Prime Lending Rate is at 3%. The Bank of Canada has held this rate for an unprecendented 17 months.
As always, I encourage you to contact me if you have any questions with your current mortgage or are looking for one. Please find me on facebook at Jason Nesseth | Mortgage Specialist | British Columbia and on twitter @jasonmortgages.
"Working with you for the life of your mortgage"
Jason Nesseth with TMG The Mortgage Group Canada Inc. If you have any questions or comments about this blog, please feel free to call Jason at 604.375.7375, email jason.n@mortgagegroup.com or visit his website at jasonnesseth.com.
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