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Mark Herman – Calgary Mortgage Broker

Rates Increasing: How Much? & How Fast?

April 26, 2022 Bank rates, Canadian mortgage, economy, Finance

With interest rates now on the rise, 2 Questions: How much? & How fast?

Summary:

  • Rates are up by 1.45% on the Variable already (Prime was 1.75% and is now 3.2%)
    • There HAS BEEN a 1 x .25% increase and 1 x .5% increase so far = .75% so far
    Expected increases are 1 x .5% or .75%, and 1 x .25% still to come.
    • so expect Prime to get to 3.95% from 3.20% today, April 25th.
    • Insured variable rates are at Prime – 0.95% = 3.2 – .95% = 2.25% today
    • and they are expected to increase to 3.95% – .95% = 3.00% and then hold and decrease in the Fall of 2022.
    • these rates are lower than the current 5-year fixed rates of about 4% and are expected to come down in the Fall, 2022.

    DETAILS:

    Traditionally the Bank of Canada has used 0.25% as the standard increment for any interest rate move up, or down.  Occasionally the Bank will move its trendsetting Policy Rate by .50%, as it did at its last setting on April 13. Read More

Investment Mortgages WILL Be Harder to Get in 2023!

April 26, 2022 economy, investment rental property, Mortgage Rules

Its true! This thing called Basel 3 will make it harder to get an investment mortgage in 2023!

Lots of junk below, the short version is:

Canadian banks will need to apply more risk to investor mortgages and to lower that risk they may:

  • Increase the down payment needed from 20% to a higher amount … maybe 25% or 30%
  • Lend to fewer investors – which already make up 25% to 30% of the Canadian market.
  • New Zealand already started 40% down payment for investment properties!

“Avoid the new rules by buying your investment property in 2022!

Mortgage Mark Herman, top Calgary, Alberta mortgage broker.” Read More

List of Data Needed for Lo/No Condition Offers

February 18, 2022 Calgary mortgage

Documents needed for Low/ No Condition Offers are below.

For Employees:

Employment Data

  • Employment letter ** – order from payroll or HR
  • 2 x recent pay slips

Tax Data

  • Last 2 years of your NOAs – Notice of Assessments – you get them back after you pay your federal income taxes
  • Last 2 years T4’s – to verify continued employment in your industry

Confirmation of down payment

90 days of detailed account history is needed – by way of:

  • 3 months of on-line bank statements (print-out to PDF and email is perfect) showing funds on deposit AND / OR
  • For RRSP/ TFSA funds: 3 x monthly account statements OR at least 2 statements, 3 months apart OR a year-end summary and recent statement.
  • If your name is not on the statements please print the “welcome page” that should show your name AND last few digits of the account numbers so they can be cross referenced.

** Employment letter – A letter of employment is needed that includes the following: Read More

Bank of Canada holds benchmark interest rate steady & updates 2022 economic outlook

January 26, 2022 Bank rates, economy, mortgage rates

Summary:

  • Prime did not change today, Jan 26, and the Bank of Canada (BoC) clearly said they are planning on starting the needed rate increases at the next meeting in 6 weeks, on Wednesday March 2nd.
  • The Market has “priced in” between 4 and 6 increases in 2022, each by .25%, and between 2 and 4 increases in 2023, each by .25%
    • There may be fewer increases if inflation returns to the target of 2% from today’s 40 year high of about 5%.
    • The USA is seeing record 7% inflation and Canada usually gets dragged along with the US numbers so that balances the possibility of fewer increases.

      • Read More

    • Mortgage Rates Up Due to Inflation

    October 21, 2021 Calgary mortgage

    Prices are Rising Everywhere– This Transitory Could Last A Long Time
    Today’s release of the September Consumer Price Index (CPI) for Canada showed year-over-year (y/y) inflation rising from 4.1% in August to 4.4%, its highest level since February 2003. Excluding gasoline, the CPI rose 3.5% y/y last month.

    The monthly CPI rose 0.2% in September, at the same pace as in the prior month. Month-over-month CPI growth has been positive for nine consecutive months.

    Today’s inflation is a global phenomenon–prices are rising everywhere, primarily due to the interplay between global supply disruptions and extreme weather conditions. Inflation in the US is the highest in the G7 (see chart below). The economy there rebounded earlier than elsewhere in the wake of easier Covid restrictions and more significant markups.

    Central banks generally agree that the surge in inflation above the 2% target levels is transitory, but all now recognize that transitory can last a long time. Bank of Canada Governor Tiff Macklem acknowledged that supply chain disruptions are “dragging on” and said last week high inflation readings could “take a little longer to come back down.”
    Prices rose y/y in every major category in September, with transportation prices (+9.1%) contributing the most to the all-items increase. Higher shelter (+4.8%) and food prices (+3.9%) also contributed to the growth in the all-items CPI for September.

    Prices at the gas pump rose 32.8% compared with September last year. The contributors to the year-over-year gain include lower price levels in 2020 and reduced crude output by major oil-producing countries compared with pre-pandemic levels.

    Gasoline prices fell 0.1% month over month in September, as uncertainty about global oil demand continued following the spread of the COVID-19 Delta variant (see charts below).
    Bottom Line

    Today’s CPI release was the last significant economic indicator before the Bank of Canada meeting next Wednesday, October 27. While no one expects the Bank of Canada to hike overnight rates next week, market-driven interest rates are up sharply (see charts below). Fixed mortgage rates are edging higher with the rise in 5-year Government of Canada bond yields. The right-hand chart below shows the yield curve today compared to one year ago. The curve is hinged at the steady 25 basis point overnight rate set by the BoC, but the chart shows that the yield curve has steepened sharply with the rise in market-determined longer-term interest rates.

    Moreover, several market pundits on Bay Street call for the Bank of Canada to hike the overnight rate sooner than the Bank’s guidance suggests–the second half of next year. Traders are now betting that the Bank will begin to hike rates early next year. The overnight swaps market is currently pricing in three hikes in Canada by the end of 2022, which would bring the policy rate to 1.0%. Remember, they can be wrong. Given the global nature of the inflation pressures, it’s hard to imagine what tighter monetary policy in Canada could do to reduce these price pressures. The only thing it would accomplish is to slow economic activity in Canada vis-a-vis the rest of the world, particularly if the US Federal Reserve sticks to its plan to wait until 2023 to start hiking rates.

    It is expected that the Bank will taper its bond-buying program once again to $1 billion, from the current pace of $2 billion.

    The Bank will release its economic forecast next week in the Monetary Policy Report. It will need to raise Q3 inflation to 4.1% from its prior forecast of 3.9%.

    Nov 2021; Mortgage Rates & Inflation Report

    October 12, 2021 Bank rates, mortgage rates

    This just in data is when mortgage interest rates are expected to rise.

    DATA JUST IN

    Canada’s latest employment and inflation numbers have triggered new expectations about the next steps by the Bank of Canada and the arrival of interest rate increases.

    BoC Governor Tiff Macklem continues to offer soothing words about inflation, which is current running at 4.1%.  That is an 18 year high and more than double the central bank’s 2.0% target.

    Macklem has repeatedly said high inflation is temporary; the result of low prices during the pandemic lock-downs, and supply chain problems that have cropped-up as the economy reopens.

    Macklem points out that a key factor in long term inflation – wage growth – has not materialized.  That is despite Canada returning to pre-pandemic employment levels with the addition of 157,000 jobs in September.  It should be noted that the growth of Canada’s labour force during the pandemic means the country is still 276,000 jobs short of full employment.  Last week however, Macklem did concede that this temporary inflation may linger for longer than initially expected.

    Several prominent economists have weighed-in.  Benjamin Tal cautions that inflation is a lagging economic indicator.  He says the risks for long-term inflation are present and the Bank of Canada would be better to start raising rates earlier to help mitigate those risks.  Doug Porter says there is a growing chance rate increases will come earlier.  He expects they will happen quarterly rather than every six months.  And, Derek Holt would like to see a rate hike by the end of the year, given that emergency levels of stimulus are in place while inflation is well above target.

    Look for mortgage interest rates to start going up close to the end of 2021 and continue until they are back close to PRE-Covid Rates of about 3.35% for the 5-year fixed. Read More