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Mortgage Market Update

There are numerous news articles about the national economy published on a regular basis which means you always have access to information about the Canadian market as a whole. This week I want to summarize some predictions that are applicable to our local economy here in Alberta only. I believe that we’re sort of an anomaly when compared to the national outlook and below you’ll find some quick forecasts on the key factors affecting our mortgage market going into the 2nd quarter of 2014.

Interest Rates

The Bank of Canada announced on April 16th that Prime Rate, which affects variable rate mortgages, would remain the same for a record breaking 29th time. The next Prime Rate announcement comes June 4th and it is predicted to again remain the same at 3%, bringing us to almost three and a half years with no change! This forecast accompanies slow but steady national economic growth and stabilizing global economies. Fixed rates in the U.S. recently saw a very tiny decrease, but Canadian fixed rates are not expected to follow suit. As low rates affect our broader economy, namely the savers and investors, the rates are not expected to drop much lower than they are now. That being said, I don’t think we will see them go up by a large amount anytime soon either as rates are expected to stay at these levels until closer to the end of the year, baring any unexpected economic surprises. Keep your eyes peeled for rate specials offered as we tend to see a number of mortgage lenders become more competitive for business going into the busy spring/summer mortgage market.

House Prices

Vacancy rates are low in Alberta, mortgage interest rates are low and local prices are affordable in comparison with wage levels all leading to increased competition this year for desirable properties. When demand goes up and supply isn’t increasing enough to meet the need we start to see multiple offers leading to bidding wars causing home prices to increase. The downside to that is what comes when the supply and demand start to even out which is evidenced by a fast growing residential construction trade here in Alberta. Canada’s long housing cycle is finally turning, showing subdued growth overall with exception of a few real estate markets including Calgary and some other Alberta cities. Home values are at near record level highes so a housing correction does remain a threat. We’re hoping for a soft landing, but in the event home prices do tank a bit, be prepared by building up as much home equity as you can. Pay off your mortgage balance faster or perform some value-adding enhancements to your home to help build equity. An increase in renovation spending shows homeowners are investing more into their homes to the benefit of themselves and to the advantage of our local economy.

Mortgage Insurance

If you haven’t already heard, default mortgage insurance premiums are going up effective May1, 2014 and this will impact you if you’re purchasing a home with less than 20% downpayment.Keep in mind, sometimes there are exceptions where the insurance is still required if you put down 20% or more. While the increased premiums will not have a huge effect on your mortgage payments, they could affect affordability slightly. Be prepared by running some preliminary mortgage numbers with your mortgage professional so you have an idea of what to expect when it comes time to buy using an insured mortgage product.

Mortgage Product Offerings

Talk of the mortgage market should include what the mortgage lenders are thinking about when it comes to product offerings. A strong housing market promotes competitive interest rates, but what about the niche or specialty mortgage products that we used to have available? With all of the recent changes to mortgage rules and regulations, mortgage lenders are under more scrutiny and qualifying for a mortgage is not as ‘easy’ as it used to be. We still have many product offerings, though exceptions are harder to get approved and document requirements are becoming more intensive. If you’re wondering if you qualify for a mortgage, contact an experienced mortgage professional for a mortgage pre-approval or a preliminary chat about your financial situation to see what your financing options are.

If you’re looking for mortgage news you can use, there are many articles available to you through print or online media publications. Don’t be intimidated by what you read as property ownership is a great idea for some. If you’re on the fence about buying, renting could be the solution for you right now. Either way, being a strong borrower and having a strong mortgage application is always an asset. If I can pass on one important tip, it is that the housing market and interest rates are out of our control but your credit score and savings are within. Be prepared for a changing mortgage market by building and maintaining a strong financial profile and if you want to know what makes you a strong borrower, again, contact an experienced mortgage professional and ask.

Do you have mortgage questions? The Mortgagegirl has answers. Contact Jackie at 780.433.8412 or Stay in the loop by following on Twitter @mortgagegirlca.

One thought on “Mortgage Market Update

  1. Pingback: Rental Property Mortgages 101 |

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