The Fianacial storm continues?

One of the great things about blogs is you can reflect back on previous directions to see how accurate you have been. A month ago we talked about the financial crises and potential impact, 30 days later we still are not sure if the bleeding has stopped. The stock market has continued it's decline and the Canadian housing market has declined as well in sales volume. Most people would see a lot of negative information in these events and indeed this is not good news. That being said, there are some positives to look at. Prime rate and mortgage interest rates should be trending much lower, which is going to lower payments for everyone. If you are looking to buy home, they are now on sale along with a lot of stock's in the markets. when crises does hit this is when you need to choose your perspective, to see the opportunities.

How the Banks Change?

Well we are in the beginning of a financial storm. We have seen some wild ups and downs in the stock market. This has lead to the Canadian banks changing there polices and mortgage options on almost a daily basis. The biggest change has been on the variable mortgages which used to be based on prime or a prime- system. they are now all on a prime plus rate which is not in the best for the consumer. We are also seeing the rates on fixed rate mortgages about half a percent higher then they should be. If you are currently on a variable rate mortgage, stick with it. For all our new clients, we will be working harder then ever to make sure the right product is available for you.

Mortgages In A State of Change?

Yes, at this time we are in a very different mortgage market in Canada then we were six months ago. The current and recent downturn in the financial markets have changed the discounting that the banks are doing on all mortgage products. We were getting discounts on variable rate mortgages at -.90% below prime to now Prime. The fixed rates are also on the higher side as the banks are getting a 2% bonus on what it costs them to loan the money out at. For the Canadian consumer this means we will need to make sure more then ever that they have the right mortgage products to ride out this period of instability.

Canadian Mortgages Heading For Meltdown?

In my opinion they are not. We had Merrill Lynch Canada say today that we are going to have the same US style meltdown in Canada. I have been helping clients in Canada with mortgages for 16 years. I do not see from my client database or the lenders a major meltdown on the horizon. Canada was never as loose on lending as the US. The Canadian banks and regulators have done a good job in making sure that the high ltv mortgages were for the majority properly documented.
We are in a good position to weather the storm that the US financial markets have created.

Canadian Mortgage Rates Heading Lower?

Well, we saw the GDP numbers today and the Fiance minister called a scrum right away to say everything is going good. The reality maybe is that technically Canada was in a recession in the second quarter. This means we should be seeing the mortgage rates and pime rate heading lower. Consumer spending is also down. To get all of us to open the wallets, we need to instill the confidence that borrowing costs will remain low. Look for the prime rate to drop .25% at the next meeting.

Update In The Mortgage World

Well it has been a long time since my last blog and the mortgage world is in the process of changing dramatically. We have seen the Canadian government now step in and change the rules on mortgages. The government has set out to cool the housing market and stabilize the current mortgages so we do not have a meltdown like we have been seeing in the united States. True 100% financing is no longer allowed, 40 year amortization is gone and new minimum credit score of 620 is required. These changes due take affect on Oct 15, 2008. There is still a lot of great options available to Canadians for mortgages. These measures are going to help the housing, mortgage industry in the long run.

Canada To Follow The US?

That seems to be the question right now, there is no correct answer. We are seeing signs that mortgage rates will continue to trend lower in Canada and the US. The housing market and mortgage market are very different in Canada vs the US. If rates continue to go lower in Canada and the employment stays strong, we should be in great shape in Canada. In the interim everyone is continue to watch the next moves of the Bank of Canada and the US Federal Reserve.

Mortgage Terms Changing

The mortgage terms are changing dramatically for today's consumer. Today client's have the choice of going up to 40 years as an amortization period. Zero down payment mortgages are available along with being able to buy a rental property with five percent down payment. You can also now have a line of credit up to ninety percent of the value of your home. This is just a small sample of the positive changes the lenders and insurers are doing to help more Canadians purchase homes. These products also allow consumers to better manage their mortgages as financial tools vs a debt tool.

Where Are Mortgage Rates Going?

After being in the mortgage business for 15 years, this question never gets boring! The reason, mortgage rates are always changing for various reason's. There is no science or magic graph to predict which direction mortgage rates will be heading. The safe est bet is they go up and they go down. Watch for trends in the financial markets to best gauge how mortgage rates are going to move. The trend right now? Lower mortgage rates are on the way. We have two prediction's of prime rate to be lower by 1.25% for 2008. Watch the markets to see if this will be true.

Oil and Gold On The Rise

We are seeing gold and oil rise to new historic levels. This is making alot people concerned about interest rates. Why? If history is any indicator, when these two factors rise, this usually means Canadian mortgage rates will rise as well. This could spell the return of inflation. On the flip side the economy in the US has unemployment rising which is calling for lower prime rate down south. These are some very interesting times in the Canadian mortgage market.

Canadian Mortgage Rates

We are seeing the credit crunch take a even worse turn for the consumer. I have talked a lot on my blog about the spread between the bond rate and the best discounted mortgage rate that is available to consumers. Today, the spread is one of the highest I have seen since covering this. The spread is currently over 2.00% in favor of the banks. This means Canadian mortgage rates are going to remain higher in the short term for consumers.