The new mortgage stress test is unnecessary and harmful.

With additional mortgage regulations on the horizon it is more important than ever to deal with a mortgage broker who understands the industry and can help you make the right financial decision for your mortgage needs.
If you are considering refinancing your mortgage to access equity for any purpose NOW is the time.

These new regulations could potentially have a considerable impact on your borrowing power.

Mortgage Broker News.ca

http://www.mortgagebrokernews.ca/news/osfis-new-mortgage-stress-test-is-unnecessary-and-harmfulthink-tank-232341.aspx

A new stress test for all uninsured mortgages is unnecessary and could increase costs for homebuyers, according to the latest report from the Fraser Institute.

Study author Neil Mohindra wrote the proposed stress test “will do more harm than good” by limiting access to mortgages for some homebuyers.

“The mandatory standard for stress testing could result in a less competitive and more concentrated mortgage market,” Mohindra stated, as quoted by The Canadian Press.

The study came amid news that the Office of the Superintendent of Financial Institutions is finalizing new lending guidelines.

Among the changes being considered is a requirement that homebuyers who have a down payment of 20% or more and do not require mortgage insurance still have to show they can make their payments if interest rates rise.

The head of OSFI has said that Canada’s banking regulator wants to reduce the risk of mortgage defaults because of high levels of household debt.

“We are not waiting to see those risks crystallize in rising arrears and defaults before we act,” OSFI head Jeremy Rudin said last week.

Canadian household debt compared with disposable income hit a record high in the second quarter. Statistics Canada reported last month that household credit market debt as a proportion of household disposable income increased to 167.8%, up from 166.6% in the first quarter.

However, Mohindra said that instead of a prescriptive test, OSFI could use its existing powers to fix what it believes are deficiencies in policies and procedures.

The Bank of Canada has raised its key interest rate target by a quarter of a percentage point twice this year.

The increases have pushed up the big bank prime lending rates which are used to determine rates for variable-rate mortgages and lines of credit.

Ever wonder how your mortgage rate is determined? What factors make it jump from percentage to percentage? We are getting down to the nitty gritty today and giving you the facts on what impacts mortgage rates.

What affects a Mortgage Rate?

There are 10 factors that affect a mortgage rate:

1. Location
Depending on which province your home is located in, this will have an overall effect on your mortgage rate. Generally speaking, provinces with more competitive markets will have lower rates.

2. Rate Hold
A rate hold is a guarantee on a rate for 90-120 days. If your closing dates do not fall within this timeframe, then your hold will be re-assessed. If your rate hold is re-assessed and the lender’s rates at that time of re-assessment are higher than your initial rate, then your rates will go up accordingly. We always follow up with all of our clients on a regular basis to avoid this situation whenever possible!

3. Refinancing
Movement on your mortgage of any form can affect your rate typically when you are working with your existing lender. New buyers will have lower rates than refinances, but refinances will have lower rates than mortgage transfers. Mortgage Brokers can access multiple lenders to find the most suitable product for their client’s unique needs.

4. Home Type
Lender’s assess the risk associated with your home type. Some properties are viewed as higher risk than others. If the subject property is considered higher risk, the lender may require higher rates.

5. Income Property/ Vacation Home
As previously mentioned, lenders assess the risk on your property. If you are buying an income property or a vacation home than the lender can assess at a higher risk and a higher rate may apply. This is one of the major benefits to having a mortgage broker on your team! They have access to a variety of lenders that can offer you a rate lower than others as they can compare a large variety.

6. Credit Score
We have talked a lot about credit on our blog, and there is a reason for that. Your credit score is a large determining factor for your rate. Lenders want to see that you have a history of managing your credit well and that you will be able to pay back the lender overtime. For more information on fixing your credit, check out our free e-book, Credit Medic.

7. Insured or uninsured
With the changes that the federal government made back in October 2016 this has had a significant impact on mortgage rates if your mortgage is insured or not. Read our Change of Space guide to find out the full impact of these changes.

8. Fixed/Variable Rate
The type of rate you are wanting to get will also affect your rate. Fixed rates are based on the bond market and variable rates are based on the Bank of Canada (economy).

9. Loan to Value (LVT)
The higher the Loan to Value the higher the risk. You can have someone who has a $1 million mortgage but has $2 million in equity in that property and they would be viewed as a lower risk than someone who has a $200,000 mortgage and their property is only worth $220,000. To boot with the federal changes, the person with the higher risk mortgage (insured) is likely to get a more competitive interest rate than the client with $2 million in equity.

10. Income level
The final part in this rather large equation is your income level. Although this does not necessarily impact the rate itself, it does impact your purchasing power and the amount you are able to put down on a home. Essentially indirectly impacting the rate.

Each of these factors plays a factor in the rate you will be able to get through a lender. The easiest way to get the lowest rate is to work with a dedicated mortgage professional. They will put together a fail-proof plan to get you the sharpest rate. They also have access to a variety of lenders which saves you the time and trouble of shopping for your mortgage on your own. As a final point, mortgage brokers can also assess your unique situation and find the right mortgage for you. Their goal is to see you successfully find and afford the home of your dreams and set you up for future success.

surging economy, while signaling its appetite for further tightening may be curbed by a rising Canadian dollar and sluggish inflation.

Policy makers raised their benchmark rate for a second time since July, by 25 basis points to 1 percent. At the same time, they cited risks including continued excess capacity, subdued wage and price pressures, geopolitics and the higher Canadian dollar, along with worries about the impact of rising interest rates on highly indebted households.

“Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation,” the Bank of Canada said Wednesday in a statement from Ottawa.

Governor Stephen Poloz is trying to strike a balance between bringing interest rates back to more normal levels amid the strongest

growth spurt in more than a decade, and acknowledging the persistence oflow inflation and subdued wage pressures. He may also be attempting to restrain market expectations it will get too far ahead of the Federal Reserve.

Futures trading suggests investors were anticipating — before Wednesday’s rate decision — as many as three hikes from the Bank of Canada by the end of 2018, versus one more for the Federal Reserve. Only five of 26 economists surveyed by Bloomberg News expected the central bank to hike its benchmark rate. Futures trading was assigning about a 40 percent chance of an increase. Another rate increase is now almost fully priced in by December.

Market Reaction

Canada’s currency climbed as much as 1.8 percent after the decision, reaching C$1.2146 against its U.S. counterpart, the highest intraday level since June 2015, and extending the gain this year to 10 percent. Bonds yields surged, with the two-year note jumping eight basis points to 1.43 percent, the highest in more than five years.

The bank didn’t repeat language from previous statements about the current degree of stimulus being appropriate, which may suggest it will stay on its tightening path.

“What they are saying to me is they are leaving the door open to future
hikes,” said Derek Holt, head of capital markets economics at Bank of Nova
Scotia in Toronto. He changed his forecast last week to correctly predict the
rate increase.

Considerable Stimulus

The bank cited Canada’s stronger-than-expected economic performance for the hike, warranting a removal of some of the “considerable” stimulus in place. In effect, the Bank of Canada fully removed the two rate cuts from 2015, which were meant to counter the negative impact of falling commodity prices.

The Bank of Canada also cited recent better-than-expected data supports its view that growth is more “broadly-based and self-sustaining.” It also cited more “widespread strength” in business investment and exports, and “stronger-than- expected indicators of growth” globally.

Yet, there was an introduction of cautionary language in the statement, and new worries about financial market developments, that weren’t in the last rate decision and suggests the central bank isn’t quite ready to declare victory on whether the economy has totally eliminated its slack.

“There remains some excess capacity in Canada’s labor market, and wage and price pressures are still more subdued than historical relationship would suggest,” according to the statement.

The Bank of Canada said there remains “significant geopolitical risks and uncertainties” around international trade and fiscal policies that have weakened the U.S. dollar. The suggestion is the Canadian dollar gains aren’t totally reflective of growth. It was the first reference to the Canadian dollar in a rate statement since March.

The bank also said it will pay close attention to the “sensitivity” of the economy to higher interest rates given “elevated” household indebtedness, and added it will pay “particular focus” to the evolution of the economy’s potential growth rate, possibly a suggestion that the economy can run at a faster pace than the bank originally thought without triggering inflation.

— With assistance by Greg Quinn, and Erik Hertzberg

Copyright Bloomberg 2017

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The Bank of Canada offered its strongest signal yet that it’s ready to raise interest rates as the economy gathers steam, in surprise comments that sent the Canadian dollar and bond yields soaring.

In a speech Monday, Senior Deputy Governor Carolyn Wilkins highlighted how the nation’s recovery is broadening across regions and sectors, giving policy makers “reason to be encouraged.” She downplayed worries about Toronto’s housing market and said policy makers need to keep their eye on the future evolution of growth, not only current economic conditions.

“As growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required,” Wilkins said in Winnipeg, Manitoba. “At present, there is significant monetary policy stimulus in the system.”

Wilkins said policy makers will be focusing on the data and talking to “many people” ahead of the next interest-rate decision on July 12.

The remarks are an indication policy makers anticipate the next rate move will be higher as momentum has shifted after two years of pain from a slump in oil prices. It’s also effectively a rebuke of pessimists betting on a disorderly unwinding of Toronto’s housing bubble that has left the Canadian dollar one of the worst performing currencies this year.

The Canadian dollar extended gains after Wilkins’s comments, appreciating 0.9 percent to C$1.3350 per U.S. dollar at 2:04 p.m. in Toronto, the steepest increase since March and the biggest advance among Group-of-10 peers on Monday. The gain helped turn the loonie’s year-to-date loss against the greenback into a gain.

As early as January, Governor Stephen Poloz had been talking about the possibility of another rate cut, after lowering the key rate twice in 2015 to 0.5 percent.

Swaps trading suggests investors are placing an 11 percent probability of a rate increase next month, and a 56 percent chance by the end of this year. On Friday, those probabilities were 5 percent and 30 percent. The central bank hasn’t raised interest rates since 2010.

Bond Sell-Off
The comments also sparked a sell-off in Canada’s federal government bonds, pushing the yield on two-year notes up seven basis points, the steepest rise since December, to an almost three-month high of 0.81 percent. The rate on five-year securities rose above 1 percent for the first time in three weeks.

“Markets have barely priced in any real risk of a rate hike this year and will need to adjust,” said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. “This is quite a change in messaging on the face of it – and likely brings forward expectations for Bank of Canada tightening just at the time when the market is doubting how much more the Fed will move.”

Wilkins said encouraging signs included the fact that more than 70 percent of industries are growing, the labor market has improved and demand in energy-dependent provinces is strengthening. In fact, the drag from the oil price shock — the reason for two rate cuts in 2015 — is done, according to Wilkins.

“The adjustment to lower oil prices is now largely behind us, and we are looking for signs that the sources of growth are broadening across sectors and regions,” Wilkins said. “The signs are encouraging.”
As an analogy, Wilkins likened monetary policy to a car slowly braking before a traffic light.

“If you saw a stop light ahead, you would begin letting up on the gas to slow down smoothly,” she said. “You do not want to have to slam on the brakes at the last second. Monetary policy must also anticipate the road ahead.”

Wilkins said it was too early to tell how measures by the Ontario government to cool Toronto’s housing market will impact activity and prices, citing the rebounding Vancouver market as an example. If Toronto’s market performs better than expected, that would be a boost for household spending and another driver of growth.

“Given we expect household spending to slow somewhat, it could surprise us and provide an unexpected boost to growth in the near term,” Wilkins said.

Other Details
Diversity of economic growth “helps support strong and sustained overall growth.” Risks to the economy include potential changes in U.S. policies, faster-than-expected household spending. Core inflation measures have “drifted down in recent quarters,” consistent with lagged effects of slack in the economy, she said. “Other indicators also point to ongoing spare capacity,” such as wage gains, Wilkins says.
First quarter growth rate of 3.7 percent was “pretty impressive.” Bank of Canada modeling shows broadening in provincial activity in 2017. Exports still remain a disappointment. Gains in employment spreading across the country.

Copyright Bloomberg 2017

Congratulations! You are now the proud owner of a new home! You also likely own a rather intimidating mortgage as well. That debt may seem like a daunting mountain you’ll be chipping away at for years, but you could actually pay it off faster than you realize. Here are five hot tips from mortgage-handling pros to get you in the free and clear fast.

Pay more than the minimum.
Let your mortgage servicer know ahead of time that you plan to pay vigorously. They will most likely help you put together a more aggressive payment schedule. If you plan to do all the calculating yourself, still make sure you let the servicer know to expect higher than usual payments. Some require a notation that extra money should be applied toward your loan. Always check your statement afterward to make sure the right funds were applied.

Pay more often.
If your mortgage lender offers a bi-weekly payment schedule, take it! Not only will this allow you to make a half-payment every other week, it also cuts down on the amount of interest you’ll be paying too. Check with your lender first to see if they offer bi-weekly payments, otherwise your payment may be held in escrow until you make the other half payment, which defeats the whole purpose.

If a bi-weekly payment schedule doesn’t work for you, consider making one extra payment per year instead. The best way to do this is save a twelfth of a regular payment every month. By the end of the year you will have a whole extra payment to put into your loan. It’s not as fast as more aggressive payments, but you will still save thousands in interest and still knock years off your term.

Set goals and stick to them.
Make your payoff goal challenging but reasonable; the easier the goal, the longer you will probably stay in debt. How fast you will pay off your mortgage depends on how many sacrifices you are willing to make. Some smart homeowners have managed to pay off a 15-year loan in as little as 2 years, but they also made a lot of cuts to their expenses. Which leads us to the next tip…

Be mindful of the “little things”.
Buying lunch every day may be convenient, but it also cuts into the cash you could be putting towards your payoff. In fact, taking a sack lunch from home could save you up to $1,000 a year! That’s $1,000 you could knock off your mortgage. Other big savings from small changes include making coffee at home or cutting down on new clothes shopping. More proactive payers put all of their extra income – from tax refunds, bonuses, or even second jobs – toward their loans.

Consider refinancing your mortgage.
If you have a 30-year or longer loan, consider refinancing it to a shorter term with a lower interest rate. This works particularly well if you already plan to make higher, more frequent payments. It’s important to look out for a good deal, at least one percent lower interest than you are already paying. If you aren’t already making higher payments, a shorter term will drive up the cost of your monthly payment, so make sure you can afford it. However, you could save thousands off interest in the long run.