Impact of tightening lending guidelines.
Maximum loan to value for refinances changed from 95% to 90% to 85% to 80%
Consumers now have to qualify on the Chartered Bank Benchmark Rate which is currently 4.79% for variable rate mortgages or fixed rate terms less than a 5 year fixed rate.
In other words even though the 3 year fixed rate is currently around 2.79%, we have to qualify on 4.79% which means clients qualify for considerably less than on this rate versus the 5 year fixed discounted rate.
1. The purpose of using a qualifying benchmark rate is to ensure that those who qualify for a mortgage in Canada can qualify with breathing room. In the event of a downturn or increase in rates down the road, this prevents Canadians from becoming orphaned homeowners without a lender willing to assist them.
On conventional mortgages (20% down payment or more) the maximum amortization for most of the big banks is 30 years, however we have access to a number of lenders that offer a 35 year amortization which I will cover later in the presentation.
Timeline
Effective October 15th, 2008
Effective April 19th, 2010
Effective March 18th, 2011
Effective July 9th, 2012
Maximum loan to value for refinances changed from 95% to 90% to 85% to 80%
Consumers now have to qualify on the Chartered Bank Benchmark Rate which is currently 4.79% for variable rate mortgages or fixed rate terms less than a 5 year fixed rate.
In other words even though the 3 year fixed rate is currently around 2.79%, we have to qualify on 4.79% which means clients qualify for considerably less than on this rate versus the 5 year fixed discounted rate.
1. The purpose of using a qualifying benchmark rate is to ensure that those who qualify for a mortgage in Canada can qualify with breathing room. In the event of a downturn or increase in rates down the road, this prevents Canadians from becoming orphaned homeowners without a lender willing to assist them.
On conventional mortgages (20% down payment or more) the maximum amortization for most of the big banks is 30 years, however we have access to a number of lenders that offer a 35 year amortization which I will cover later in the presentation.
Timeline
Effective October 15th, 2008
- Maximum amortization for government-backed insured mortgages was reduced from 40 to 35 years.
Effective April 19th, 2010
- Consumers now have to qualify on the Chartered Bank Benchmark Rate which is currently 4.79% for variable rate mortgages or fixed rate terms LESS than a 5 year fixed rate term. In other words even though the 3 year fixed rate is just over 3%, we have to qualify on 4.79% which means it is harder to qualify for this rate versus the 5 year fixed discounted rate.
- Maximum loan to value for refinances changed from 95% to 90%
- Rental properties require a minimum 20% down payment versus the previous 5 percent.
Effective March 18th, 2011
- Maximum amortization for government-backed insured mortgages was reduced from 35 to 30 years.
- Maximum amount Canadians can borrow in refinancing their mortgages was lowered from 90 per cent of the value of their homes to 85 per cent.
Effective July 9th, 2012
- Maximum amount Canadians can borrow in refinancing their mortgages was lowered from 85 per cent of the value of their homes to 80 per cent.
- Maximum amortization for government-backed insured mortgages was reduced from 30 to 25 years.
Benchmark rate has stayed the same for 4 years
CBC News Posted: Sep 03, 2014 10:13 AM ET Last Updated: Sep 03, 2014 11:51 AM ET Canada's central bank held its key interest rate at one per cent Wednesday, the same level is has been at for four years.
In its latest policy decision, the Bank of Canada also kept its “neutral” stance, which means that governor Stephen Poloz has no plans to raise or lower rates anytime soon.
The central bank says the risks to the outlook for inflation and household debt remain the same as before.
"The balance of these risks is still within the zone for which the current stance of monetary policy is appropriate," said the bank's statement. "The bank remains neutral with respect to the next change to the policy rate: its timing and direction will depend on how new information influences the outlook and assessment of risks."
The rate has been at one per cent since September 2010, the longest pause in Canadian history.
Retail banks use the overnight benchmark for setting their prime lending rate, or the rate they pay to each other for short-term loans. That can affect how much interest consumers pay on things like credit card debt and mortgages.
Although the bank is stuck in neutral, Bank of Montreal chief economist Doug Porter notes the bank seems to be more positive than it has been this year.
"The economy clearly perked up in recent months, pulled along in the slipstream of an improving U.S. backdrop. The overall tone is thus slightly less dovish than recent statements," said Porter.
Growth in Canada was almost exactly in line with the bank's expectations in the second quarter.
Last week, Statistics Canada reported the economy grew by an annualized 3.1 per cent, the strongest pace since 2011.
Exports, which have been a consistent area of concern for Poloz, were a main driver, surging by 4.2 per cent in the quarter after declining by 0.2 per cent in the first three months of the year.
But according to the bank, "this pickup will need to be sustained before it will translate into higher business investment and hiring."
The bank says the global economy is chugging along at an expectedly mixed pace, with strong business investment driving the U.S. recovery and the situation in Ukraine weighing on Europe.
Rate hike expected in 2015 Economists generally share the same consensus that the central bank will begin to raise it key rate next year in lockstep with the U.S. Federal Reserve.
"The bank continues to be perfectly content biding its time until the Fed finally moves rates off the floor, and that event looks to be a mid-2015 affair," said Porter.
CBC News Posted: Sep 03, 2014 10:13 AM ET Last Updated: Sep 03, 2014 11:51 AM ET Canada's central bank held its key interest rate at one per cent Wednesday, the same level is has been at for four years.
In its latest policy decision, the Bank of Canada also kept its “neutral” stance, which means that governor Stephen Poloz has no plans to raise or lower rates anytime soon.
The central bank says the risks to the outlook for inflation and household debt remain the same as before.
"The balance of these risks is still within the zone for which the current stance of monetary policy is appropriate," said the bank's statement. "The bank remains neutral with respect to the next change to the policy rate: its timing and direction will depend on how new information influences the outlook and assessment of risks."
The rate has been at one per cent since September 2010, the longest pause in Canadian history.
Retail banks use the overnight benchmark for setting their prime lending rate, or the rate they pay to each other for short-term loans. That can affect how much interest consumers pay on things like credit card debt and mortgages.
Although the bank is stuck in neutral, Bank of Montreal chief economist Doug Porter notes the bank seems to be more positive than it has been this year.
"The economy clearly perked up in recent months, pulled along in the slipstream of an improving U.S. backdrop. The overall tone is thus slightly less dovish than recent statements," said Porter.
Growth in Canada was almost exactly in line with the bank's expectations in the second quarter.
Last week, Statistics Canada reported the economy grew by an annualized 3.1 per cent, the strongest pace since 2011.
Exports, which have been a consistent area of concern for Poloz, were a main driver, surging by 4.2 per cent in the quarter after declining by 0.2 per cent in the first three months of the year.
But according to the bank, "this pickup will need to be sustained before it will translate into higher business investment and hiring."
The bank says the global economy is chugging along at an expectedly mixed pace, with strong business investment driving the U.S. recovery and the situation in Ukraine weighing on Europe.
Rate hike expected in 2015 Economists generally share the same consensus that the central bank will begin to raise it key rate next year in lockstep with the U.S. Federal Reserve.
"The bank continues to be perfectly content biding its time until the Fed finally moves rates off the floor, and that event looks to be a mid-2015 affair," said Porter.