Your Fall Mortgage Update 2018
The slowdown in the housing market in the Greater Vancouver area continued last month as the market still adjusts to the provincial budget hike, the foreign purchase tax and the suggested speculation tax that could be introduced in the fall along with stricter mortgage lending rules and higher interest rates. Additional rate hikes by the Bank of Canada are expected to come this fall, likely in late-October now that the new United States – Mexico – Canada Agreement (USMCA) has been reached.
While home prices did increase in the past few years, prices are now coming down. Even though there are a lot of homeowners that have a lot of equity in their properties, for them to be able to use it they still have to qualify and be able to debt service the mortgage and lines of credit. The banks have tightened their lending guidelines so much that some long-term. clients are not qualifying to purchase a principal residence, refinance or buy a rental property.
Even credit unions that are not federally regulated have implemented the same stress test as the federally regulated institutions. The good news is that we have a couple of lenders that have implemented their own stress test which helps clients qualify for a bit more. However, it’s only a matter of time before these lenders follow the federal regulated institution stress test.
Fixed interest rates have moved up, and they are still relatively low compared to what interest rates were back in 2005 at 5.35% for 5 years. The variable/adjustable rates have also moved significantly lower and are way below prime. Therefore, people who have prime minus .60% (3.10%) or a higher rate should look at researching whether now might be the time to move to a better rate.
With the tightening of mortgage rules, your credit score and history can have an impact on the interest rate that you get. Missed or late payments stay in your credit report for 7 years, regardless if you have paid off or closed the account. While lenders consider a credit score of 680 or higher a good score, lenders look beyond the credit score when assessing how much you qualify for and the interest rate they will give you.
All in all, the mortgage world is significantly different than it was before. There has been an unprecedented amount of changes in the last few years.