||How are higher rates affecting your mortgage payments?
The July and September rate hikes by the Bank of Canada have increased variable mortgage rates by a total of 0.5%. If your variable rate was 1.95%, it is now 2.45%.
While there are institutions whose mortgage payments will stay the same, regardless of the change to the Prime, most lenders` payments will change as rate increases.
A $100,00 mortgage, with an amortization of 25 years, would have seen an increase of around $25 monthly, or $300 annually.
If your mortgage has a balance of $350,000, a net increase of 0.5% would hit your wallet by $85 monthly, or $1,020 annually (rough estimate).
The next scheduled dates for announcing the change to the Prime rate are October 25h and December 6th.
If you have a variable rate and would like to discuss your options, please call me!
||No Change to Bank of Canada Rate
The Bank of Canada announced on December 6th that it is holding the overnight rate steady, and indicated that they will be cautious in raising rates going forward.
The Bank noted that consumer spending, business investment, and infrastructure spending are contributing to growth, but that export growth has slipped and the global outlook faces continued uncertainty due to "geopolitical developments and trade policies."
The Bank has therefore deemed that "the current stance of monetary policy remains appropriate."
Good news for homeowners with variable-rate mortgages and lines of credit. The next rate-setting day is January 17, 2018.
||Why You Should Refinance Now
If you are considering a refinance for any reason - to consolidate your debt, pay for your kids` education, renovate your home or buy an investment property - you should consider doing it now.
New mortgage rules include stress testing for conventional mortgages which, when implemented on January 1, 2018, will make refinance more difficult for many Canadians.
The present day reality is as follows... If you wanted to refinance your mortgage, your broker or bank could approve you for the maximum amount that your income can carry, based on on the contract rate of your mortgage (let`s call it 3.29%) and 30 years amortization.
This will roughly approve you for a mortgage that is 5 times your salary. In other words, your income of $100K will approve you for a mortgage of $500K.
The new mortgage rules will lower your "qualifying power" by at least 20%, since the "stress-test" will be using the higher of posted Bank of Canada rate (currently 4.89%) and 25 years amortization or contract rate + 2%.
Practically speaking, that $100K income could lower your maximum approved mortgage below $400K.