The Bank of Canada acknowledged that a couple weeks ago that the slowdown in the Canadian economy has been deeper and more broadly based than it had expected earlier this year. The Bank had forecast weak exports and investment in the energy sector and a decline in consumer spending in the oil-producing provinces in January. In addition, the global economy has slowed more than expected.
Consumer spending and the housing market have been soft despite strong job growth. We are certainly experiencing a buyers housing market. It is important to remember that during this time if you are looking at selling your property, you will be selling a bit lower than 6 months ago however, you will be buying low too.
Based on the Bank of Canada remarks, we are left to assume that the Bank is unlikely to hike interest rates again this year. This will affect anyone with variable rate mortgages, home equity lines of credit (HELOC), and lines of credit. Fixed mortgage interest rates went up slightly and have now moved back down a little with quite a few lenders. Fixed interest rates are still relatively low compared to what interest rates were back in 2005 (5.35% for 5 years).
In addition, I would like to mention the importance of maintain a good credit report. The lenders are not just focusing on your credit score, they are also analyzing the report for any late payments and reasons for it. There is a lot more due diligence being done on their part, and more than ever your credit score will have an impact on the interest rate you get. Lenders consider a credit score of 680 or higher a good score. However, life happens and there are reasons for late payments at times. We can help you by having access to different lenders, so if you think there is an issue with your credit be rest assured that you will still be able to get financing. If you want more information on credit, please let me know.
Handy tip: Even though interest rates have moved up, it might still be worth it to look at refinancing to pay credit card debt, improve your cash flow or look at refinancing to purchase an investment property.
Here is an example of a client that refinanced and improved their cash flow dramatically:
Source: For illustration purposed only, E&O exempt, the mortgage was rounded up to include estimated pre-payment penalty, legal fees and appraisal. Final approval will be given once an application, credit report and final approval has been given by the lender. *Refers to interest only payments and no principal is paid down.
Even though their mortgage interest rate is higher than what they originally had, by consolidating their debts, our clients were able to improve their monthly cash flow by approximately $545.09 per month, saving hundreds of dollars on higher credit card interest rate. Now, they are paying down their debt, instead of just making interest only payments. In addition, with the extra funds they have started saving money on a monthly basis.
With the constant changes in mortgage guidelines it can be confusing: how the changes can impact your ability to qualify for, what value of home you can purchase, or if you are able to refinance. It is critical now more than ever, buyers and homeowners need an expert that can lead you through the maze and provide you with advice and options, so you can be confident that you are making the right decision and I am delighted to help!
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