Overnight Rate: What it is and why it should matter to you!

 

What is the “overnight” interest rate?

The Bank of Canada (BOC) carries out monetary policy by influencing short-term interest rates.

By raising and lowering the target for the ‘overnight’ rate they are able to do this.

Financial institutions borrow and lend between each other, doing so they charge interest on funds exchanged, this is called the “overnight” rate.

The BOC sets the target for this rate and is often referred to the Bank’s key interest rate.

Changes in this rate can influence other interest rates: consumer loans,mortgages,international exchange rate, etc. Therefore, we watch them closely.


Market Update: Canadian Bonds Up Which Means Mortgage Rates Up Too!

 

With bonds at a 25 month high, interest rates are on the rise again.

On Monday the 9th expect some lenders rates to be up to 3.85% for a 5 year fixed term.

Prime has not changed but lender’s rates are fluctuating with a trend up.

This rate might shock some people but there are options, think about a two-year term, rates sit around 2.79-3.05%.

Even if at renewal time rates are still up around 3.85% you saved money for two years.


Deconstructing The Latest Ontario Mortgage Trends

 

Ok, its not new information that the government has been trying to lower the risk in the housing market since the crazy times in 2008.

They implemented changes last year to mortgage amortization and products and recently made more changes to how Ontario borrowers can qualify for certain mortgage products… now the trend continues with Ottawa making another change.

CMHC will be putting a cap on the amount of government-guaranteed mortgage-backed securities (MBS) that a lender can sell to other investors or hold onto.


Surprising Recent Mortgage Rate Trends

 

Rates at the beginning of last week were at a consistent low of 2.99% and by the end of the week, they have jumped to 3.29% with some lenders posting as high as 3.44%.

The question everyone is asking is whether these rates will continue to inch their way up or slide back down.

The most high profiled was RBC, which ramped up certain discounted fixed rates by 20 basis points last Monday.

On June 10 TD also raised rates on their fixed rate mortgages. And it’s safe to say both institutions will be matched by most other major banks.

So where are rates going? That’s the big question right now and it’s almost impossible to predict unfortunately.


3 Important Mortgage Industry Changes You Should Know About

 

Rates are going up, up, up… ok maybe not that high but just recently lenders have sent out updated rate sheets to all brokerages indicating a small increase.

The most common trend I see impact the 5 year fixed rates, which have gone up 0.05-0.10% from an average of 2.94% to now a 3.14% for most lenders.

But there have been other changes as well….

I know the entire mortgage industry is starting to sound like a broken record. So many industry changes have been announced over the past year, but the impact they have on our market is huge.

For instance, it’s now even more difficult for an A+ buyer to get a mortgage they so easily qualified for just a few years ago. Lenders are looking for less and less risk when lending and making changes to protect themselves.

In today’s post we review a few important changes in the mortgage industry that may affect your ability to borrow.


Weekly Wrap Up: May 17-2013 Mortgage News & Updates

 

35 Year Mortgage Amortization Changes on the Horizon?

Last year CMHC and the Department of Finance (DoF) cut back amortization from maximum 35 years to 25 years for insured mortgages and most financial institutions federally regulated. Conventional (uninsured) mortgages and other non-federally regulated lenders are still offering amortizations over 25 years but choose to do so on case by case basis.

Just this past week it’s out there, The Office of the Superintendent of Financial Institutions Canada (OSFI) and the DoF are in discussion whether to cut back amortizations across the board to 25 yr maximum.

No decision yet, first they need to hear from the industry and what effect it could have on the housing market. Their goal is to soften the market and stabilize housing while reducing exposure to rising rates.


CRA is on the Hunt for Real Estate Investors…

 

The Toronto Star posted an article how Canada Revenue Agency (CRA) is cracking down on those who are claiming their real estate investments as homes to avoid paying the tax.

Here is a breakdown of real estate sales tax:

  • No tax on personal residence
  • Tax on half a gain from selling a recreational, rental or other investment property
  • Full taxation for making a business of buying and selling (flipping property)

New Changes to the Mortgage Industry

 

Changes Taking Effect July 9, 2012:

  • Refinance amounts lowered to 80% from 85%
  • Amortization periods lowered from 30 to 25 years
  • New HELOC’s lowered to 65% LTV from 80%

What does this mean to you?

Simply put, it will become a bit harder to qualify for a home refinance or home equity line of credit with traditional lenders.