January 26th, 2022 BoC Maintians the overnight interest rate at 0.25%

• The Bank of Canada left the overnight interest rate at 0.25%. The retail prime rate will also remain unchanged at 2.45% (TD 2.60)

• Inflation levels were still soaring entering into the first quarter of 2022 however the bank is expecting these to cool to around 3% before year-end.

• The bank still believes that the economy has mostly recovered from the pandemic and has implied that they will carefully increase rates this year.

Surprisingly Interest Rates Held At Record Lows

The Bank of Canada shocked the markets today when they decided to leave the overnight interest rate unchanged at 0.25%. Maintaining the overnight rate goes against the market projection which stated the chances of a rate increase at 85% heading into today's announcement. According to BNN, there is now over a 90% chance that a rise in rates will happen at the next meeting in March.

The Central Bank is in a very tough position.

They need to raise rates to handle rapidly increasing inflation levels while being aware of households and businesses that have struggled for the last few years. Raising rates too abruptly could result in triggering a recession.

What does this mean for mortgage rates?

Fixed-Rate Mortgages Controlled by the government of Canada's 5-year bond yield fixed-rate mortgages have been on the rise for over a month inching close to 3%. Variable Rate Mortgages These mortgages are still low ranging from 1.15% (insured) to 1.45% (uninsurable) Don't know what insurable and uninsurable mortgages are? Click here A rate increase is inevitable in 2022, the question is when and how rapidly will it happen? If you are currently in a variable rate mortgage and are thinking of locking it in, I would be more than happy to discuss your situation in a call anytime. In most circumstances, the spread between fixed-rate and variable-rate mortgages is still too large right now to save money in the big picture. If you would like to learn more about mortgages, discuss your position, or learn more about this announcement please reach out to me anytime. You can book something directly into my calendar by clicking here.

The next BoC rate announcement is scheduled for March 2nd, 2022

December 8th, 2020 BoC maintains the overnight interest rate at 0.25%

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As expected the Bank of Canada announced this week that it will be maintaining its overnight interest rate at 0.25%. The retail prime rate will also remain unchanged at 2.45%

• Markets are showing high inflation levels however the bank is expecting these to cool hitting the expected target of 2% mid-year.

• The bank still believes that the economy still needs some support with low rates for the time being.

In this last meeting of the year, the central bank left the overnight rate unchanged at 0.25% as most experts expected. The BoC is now unable to call the strong inflation displayed for more than half of 2022 'transitory'. The recent inflation trends combined with strong employment increases are signals that they will need to address the markets with a rate hike in early 2022. The Canadian economy is well on its way to recovery as much quicker than expected with recent jobs data crushing the estimated projection of 40,000 new jobs by 113,700 adding a total of 153,700 in November. If you read the full press release the bank uses a much softer tone when addressing a potential rate hike in 2022. The bank acknowledges that inflation is creating pressure for a rate increase however they still believe that this will resolve itself mid-year 2022. This viewpoint means that they will keep stimulating the economy by keeping rates low, for at least the time being.

What does this mean for mortgage rates?

Fixed-Rate Mortgages Controlled by the government of Canada's 5-year bond yield are already reacting to the anticipated BoC rate hike in 2022. Current 5 year fixed rates range from 2.64% (insured) - 2.89%(uninsurable) Variable Rate Mortgages These mortgages are still low ranging from 1.15% (insured) to 1.45% (uninsurable) Don't know what insurable and uninsurable mortgages are? Click here A rate increase is inevitable in 2022, the question is when will BoC pull the trigger and how many shots will be fired? If you are currently in a variable rate mortgage and are thinking of locking it in, I would be more than happy to discuss your situation in a call anytime. In most circumstances, the spread between fixed-rate and variable-rate mortgages is much too large right now to save money in the big picture. If you would like to learn more about mortgages, discuss your position, or learn more about this announcement please reach out to me anytime. You can book something directly into my calendar by clicking here. Happy Holiday's, and all the best in 2022, Kirk Fournier The next BoC rate announcement is scheduled for January 26, 2022

Why a mortgage pre-approval does not guarantee a mortgage approval!

A majority of consumers shopping for a home believe that obtaining a pre-approval guarantees mortgage financing. This is one of the most common misunderstandings of the home buying process. In this video I breakdown the risks still involved in purchasing real estate after getting pre-approved.

DON'T FEEL LIKE WATCHING?? THE ENTIRE VIDEO IS TRANSCRIBED BELOW

A mortgage pre-approval does not guarantee mortgage financing.

[00:01] - Kirk

Did you know that if you get a preapproval for a mortgage, it does not guarantee that you're going to get a mortgage approval when you're ready to purchase? Let's talk about why!

Generally, homeowners armed with a preapproval shop with more confidence and they should, as they know at that time, how much they can qualify for, but why would a preapproval not automatically guarantee a mortgage approval?

The two main reasons are pre-approvals contain no information about the property and the risks associated with it, nor do they take an account any life changes you have between your pre-approval and the time of purchase.

Property Risks

[00:36] - Kirk

1-Appraisal Risks:

Let's dig a little deeper into that. Let's talk about property risks. The five major risks about a property are number one, appraisals. Depending on what you purchase for a house, an appraisal still needs to be done so the insurer can guarantee that value. In hot markets like Toronto, a lot of houses are selling way over asking. The lender can't verify that. value is actually the market value of the property. A buyer is going to be stuck trying to figure out how to pay the difference between the appraisal and the purchase price.

[01:05] - Kirk

2-insurance risks:

If a house has asbestos, knob and tube wiring or aluminum wiring, all these can create problems when trying to find an insurer.

3-Location Risks:

A lot of lenders only lend in certain locations. It's important to be only looking for homes within the criteria of the lender that you have your pre-approval with. This is becoming more common now with more buyers getting out of the city due to high prices and being able to work from home.

[01:38] - Kirk

4- Farms

Anything that looks like a farm is considered agriculture and that is a completely different type of mortgage.

5-Condos:

Some lenders have blacklists for certain properties due to certain issues with the management team. Also, condos should be over five hundred square feet. Anything under five hundred square feet is considered a micro condo. Yes, you can still get a mortgage for them, but they should have a defined bedroom. Now, let's talk about life changes between when you got your preapproval and purchase.

Life Changes

1-Employment Risk

[02:08] - Kirk

Now, let's talk about life changes between when you got your pre-approval and purchase. Did your employment change, were you on salary but now your hourly, do you now work for yourself? Do you have commission-based income all of a sudden, or are you seasonal all of a sudden? All of that can greatly affect your mortgage approval.

2-Debts

The second part of life changes is debts. Did you go out and buy a nice car or a boat? Have you racked up a lot of credit card debt since the preapproval? All of this can greatly affect your application.

[02:33] - Kirk

My name is Kirk. I love to talk about mortgages. Please feel free to reach out to clarify anything from this video or anything else you want to know about mortgages.

To book a time for a chat please click here!