Friday Mortgage Round Up: August 17th, 2012

CMHC Housing Market ForecastCanadians love to invest in real estate – but Bank of Canada Governor Mark Carney suggested this week that in order to smooth out the economy, we should invest in more “productive capital” instead. Carney encourages Canadians to push through the volatility that the marketplace is experiencing, which is largely kindled by the persistent European debt issues, and believes that this is how we are going to grow our economy over the next 5-10 years. Hopefully, time is exactly what Europe needs to get their ducks in a row.

CMHC Housing Market Outlook

As for our housing market, CMHC has added their voice to cooling market predictions, and it’s thankfully a little less extreme than earlier reports.Third quarter reports anticipate that moderation is on the horizon for multi-unit housing starts. CMHC reported that construction starts fell 6.1 per cent in July to an annual pace of 208,500 which is largely due to the decrease in multi-unit condo and apartment starts in BC. Overall, CMHC’s point forecast for housing starts will decrease by 6.8 per cent in 2013.

This balanced market will slow down the rate at which home prices are climbing.  CMHC’s annual point forecast for the average MLS price will increase by 2.5 per cent to $377,300 in 2013 while existing home sales will remain stable (moderate increase of 0.6 per cent) at a point forecast of 469,900.  CMHC is predicting a slowdown in pricing, new construction and existing home sale figures – which is nice to hear after experts last week believed sale prices would drop by 10 per cent over the next 2-3 years, which could leave some Canadians underwater.

A Solution to the Waterlogged Americans

Over 4 million homeowners in the U.S. owe more money on their mortgage than their home is worth!  Economists Joseph Stiglitz and Mark Zandi say that the biggest barrier for U.S. recovery is, in fact, their housing market crisis. So, what can the Americans do?

One solution (some say the only one at this point) is something called mass mortgage refinancing.  In an interview with Bruce Sellery, business journalist & Author of “Moolala” aired on CBC’s Lang & O’Leary Exchange, Sellery and Lang discussed the implications of such a concept pitched to cure the paralyzed market.

Mass mortgage refinancing would involve creating a government-financed trust that would be used to buy the mortgages of homeowners whose mortgage is greater than 2 points above the treasury rate, pumping any interest savings back into the economy.  Aside from the legal implications of such a maneuver, there are damaging effects to the market and those already invested in pooled mortgages.

Sure, it isn’t necessarily a fair resolution for all, and is more like a one-time/quick fix with no long term solution.  But what would really happen if mortgage payments were decreased and made more affordable?  Economics tells us that a decrease in costs (effectively an increase in disposable income) would give rise to consumer spending elsewhere.  But this bailout isn’t meant to spark spending, but rather to promote savings. To most, real estate is the largest savings vehicle; the market has turned these vehicles into lemons, but the banks aren’t decreasing their prices to accommodate this shift.  The banks are maintaining the large mortgage profit margins and, as a result, are pushing people out of their homes.

Maybe the Tightening Effects in Canada Aren’t So Bad After All

After looking at the stressful predicament that so many American homeowners are in, the recent restrictions and changes to insured mortgages don’t look so tough!

As a young professional who recently exited the housing market and got back into a rental unit, I can attest to not welcoming the stunting mortgage changes with open arms.  However, I do applaud the government’s attempt to cool the market while simultaneously ensuring that as a future home owner, I am well equipped to financially endure anything that the economy will throw at me – armed with a safe level of home equity.

TD to Join RBC in Lower Loan-to-Value Ratio for HELOCs

Although any federally regulated lender has until the end of their fiscal year to comply with the new B-20 Guideline to decrease the LTV on HELOCs from 80 per cent down to 65, RBC jumped the gun.

Effective August 15, 2012, new clients at RBC were only offered a maximum 65 per cent LTV on their HELOCS. TD followed their rival’s suit and effective August 19th, 2012, their HELOCs will also be capped at the 65 per cent level.  Borrowers can still receive up to 80 per cent LTV for refinancing by using a combination of a mortgage and HELOC product. Week in Review

I’m getting tired of having nothing to report for effective rate changes – yet again.  So I’m switching it up a little this week with a day-over-day track of where the best mortgage rates were – exciting, isn’t it?  As you can see ALL rates started and ended this week at exactly the same level *yawn*.

If you’re interested in what the actual rates are, just check out the chart from my last blog.

The 5 year terms really took over this week with 49.5 per cent of visitors comparing the 5 year fixed rates and 49.1 per cent searching the best 5 year variable rate.


Related Topics

Mortgage News / Mortgages

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