We are halfway into the month of January and the 2015 predictions have come out, so what does the New Year hold for the mortgage market? Let’s take a look at what’s on the radar regarding prices, interest rates and what the lenders are thinking about going forward. Knowing what to expect can be helpful whether you’re looking to buy, thinking about refinancing, or your mortgage is due for renewal at any time over the next 12 months.
The Bank of Canada has whispered of a Prime Rate increase in the first or second quarter of 2015, however, the recent drop in oil prices could change that way of thinking. I believe we will see the economic regulators keeping a close eye on the U.S. situation, where oil prices go over the next 60 days, and the direction that employment takes, and then, we may see if rates finally take that talked about hike. If rates do indeed rise, the majority of Canadians are prepared for the increase and those with variable rate mortgages could see a payment increase of only about $30-$50* based on a 0.25% prime rate increase. You can see a rise in rates at some point in 2015 should not come as a big shock and the good news is your mortgage payment should change minimally, which is nice for the wallet.
Home values should be in your thoughts especially if you’re thinking of financing a condo, a rental property, second home or a property located in a smaller real estate market area. The reason why I am specifically mentioning those types of housing is because in the case of any rate increases, it is those properties that will feel the price fluctuations first. I also mention this because these are the types of properties mortgage lenders will shy way from first in the event of any market distress. Most other property types will likely experience pricing changes, though due to them ranking high on the marketability scale they would not be as affected with any rate increases.
Having a good credit score is always an advantage for you when borrowing money for any reason so do whatever you can to keep on top of your debts. If you get into any trouble, take immediate action to remedy it to avoid those issues affecting you in the long term. If you have any concerns, I would suggest you start by identifying your financial goals and then consult a credit professional who can guide you in the right direction. If you have bruised credit and still need a mortgage, fret not, you can still get financing. Options would include bringing on a co-signer which would allow you to go to a prime lender for a mortgage. Or go the alternative route though don’t be surprised if the lender is looking for a larger downpayment as well as a very marketable subject property. You could also pay higher rates and fees. Sometimes it makes sense to wait to get a mortgage until your credit score improves enough to qualify for the best interest rates.
Surveys done in 2014 showed Canadians are prioritizing debt repayment. This is key because spending habits can show how strong an economy is. Income confidence encourages spending, spending boosts the economy, and a healthy local economy is good for real estate. Depending on where that spending cash is coming from could predict your financial health for 2015. Keeping your consumer debt levels low is an added strength on your mortgage application if you plan on looking for financing over the next 12 months as it affects your qualifying debt ratios.
In addition to the above items, lenders will be looking at income sources used to make your mortgage payments. Mortgage lenders are not excluded from any market changes, they will be keeping an eye on their books too. Borrowers with a verifiable and reliable income source are more appealing to their bottom line as they’re less likely to default on their payments.
Should you buy now or wait
Home ownership usually pays off if you plan on owning the property long term. Once you get into short-term flipping or buying higher risk properties, that’s when the investment gets a bit more speculative. In other words, if you need a home to live in, it’s a good idea to buy. If you’re unsure of what your future plans are, don’t be afraid to rent for a while. The real estate market isn’t going anywhere, it’s a just updating it’s look a bit.
If I had to consult my crystal ball, I would say 2015 isn’t going to be a lot different than 2014. Mortgage financing will still be accessible and affordable and the best preparation at anytime is to keep your financial profile as healthy as possible. We could see some additional mortgage rule changes and rates may rise. But if you’re confident in your earnings, have manageable debt levels and a handle on your credit score you should not be concerned.
If you have mortgage questions, contact the Mortgagegirl at 780.433.8412 or email firstname.lastname@example.org. Stay in the loop by following on Twitter @mortgagegirl.ca
*Payment increase based on a variable rate mortgage of $250,000-$300,000, 25 year amortization and rate increase from 2.35% to 2.60%.