It’s a confusing time for everyone and starting to feel a bit like the twilight zone. Here’s an update on the impact COVID-19 is having on mortgage rates, qualification guidelines and mortgage payment difficulties.
We saw mortgage rates at the lowest they had ever been last week. Now banks are starting to increase their rates this week. WHY? Fear has saturated the market to the extent that lenders are now concerned about liquidity and rising defaults, according to observers.
“The banks are in this to make money, and if they don’t think that they’re going to be able to make money because all of a sudden their default rate is going to go up, then they’re going to protect themselves by raising rates” Shawn Stillman, founder of mortgageoutlet.ca explains.
For the first time since the financial crisis of 2009, the Bank of Canada delivered an emergency inter-meeting rate cut of 50 bps on March 13, 2020. This may impact variable-rate mortgages.
“This unscheduled rate decision is a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices,” the bank said.
All eyes are now on Canada’s Big 6 banks to see if they will pass along the full rate cut again in their prime rate reductions.
Changes to the federal mortgage stress test scheduled for April 6, 2020, have been put on hold indefinitely, the Office of the Superintendent of Financial Institutions (OSFI) announced. This was supposed to reduce the stress test criteria marginally. However, the qualifying rate may naturally come down as a result of everything unfolding.
This is a tough time for Canadians. If you’re finding it hard to manage your mortgage because of the impact of COVID-19, there will be some solutions to help you out. The 3 mortgage default insurers are working with lenders to help, increasing the flexibilities to allow payment deferral of up to 6 months starting now. The government has not yet announced its full plan of action but is working on something to help out. This announcement should be coming out later in the week.
There is nothing more important than the health and safety of our clients and our team. We are still open for business and working remotely from home. We continue to support our clients through video chat, over the phone, text or email.
You should be in contact with us if you…
-Currently have an offer pending on a home
-Have a mortgage renewal coming up within 4 months
-Are considering buying a new home in the next 4 months
-Have debt that you would like to consolidate into your mortgage
-Need support contacting your lender for payment deferral
Feel free to continue using us as a resource. If you have any questions or require clarification on anything during this strange time. Stay healthy and safe.
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