Prime rate was once again left unchanged for the 13th time in a row. The general consensus among economists these days is that rates are going to increase, no question about it. A recent survey of primary market dealers indicated rates are likely to start their climb in the first quarter of 2013. What does this mean for the mortgage market and the mortgage borrower?
Bank of Canada Governor Mark Carney recently said “… the onus isn’t just on individual Canadians, but also on the banks and institutions that must make some wise decisions and not lend to people who clearly can’t pay the money back, as well as the federal government for tightening mortgage lending rules.” This kind of news tells us that lenders & mortgage insurance companies will likely be scrutinizing mortgage applications more closely to ensure the borrower can still be in a favorable financial position when the inevitable rate increase occurs. The borrower carrying low personal debt levels will look more appealing to a lender, and don’t be surprised if lenders start requesting more supporting documents than usual to establish a comfort level with the application strengths.
Lately, there have been whispers in the news of a “housing market down-turn”, but that doesn’t mean the sky is falling. There have been some major market centres that have seen double digit declines in the average housing prices month to month, most notably being Toronto and Vancouver. However most feel the housing market in those centres will correct themselves, and fear not, Alberta’s housing market is predicated to stay strong and steady!
Among the other rumors circulating, is the persistent buzz about sub-prime mortgages. With some newly introduced restrictions from the Chartered Bank regulatory body, the big banks have been forced to do some re-organizing. This means we will likely see banks exercise more caution when it comes to higher-risk mortgage products like the stated-income for self-employed, and 0% down-payment mortgages. Fear not as there are more than enough mono-line lenders in the market to pick up where the banks are lacking who offer competitive interest rates on niche products that the banks are passing on.
Top 3 points to focus on going forward; rates are going up, the housing market is stable, and the government would like you to borrow responsibly.