The Karen Millar Team

The Shops at Don Mills
8 Sampson Mews #201
Toronto, ON
M3C 0H5

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Tuesday, 15 November 2016

Mortgage Update

Jake Abramowicz kindly sent me the following update. Please call myself of Jake to discuss:


It feels like the low-rate party is over.

Having a look at the Government of Canada 5 year Bond Yield (which dictates the mortgage rates for 5 year fixed), the spike seen recently is pretty significant:

So far 2 of my lenders have increased rates by 20-25 basis points (from 2.44 to 2.69) and it's just a sign of things to come. We already know TD Bank increased its prime rate from 2.7% to 2.85% but that was on variable-rate mortgages. However we have not seen much action on fixed rates (except that rates have been trending downwards). The opposite is true here, and most likely, moving forward.


Come early next year there's another policy change on the table where lenders will have to share more of their risk when it comes to mortgage lending. From a taxpayer perspective it's argued that this is not such a bad thing - we should not be on the hook for when (or if) the market takes a dive, where when (or if) people walk away from their loans. This along with the already-announced rule changes will absolutely increase cost of borrowing and we're already seeing the markets dictate by how much (and how quick) come this week.

The bottom-line is, expect rates to be 25-50 basis points higher by the end of this year, beginning of next, where we'll be back to the just-under 3% for 5-year fixed money (which is still tremendously low but not what we've been used to over the past few months).

A rise in fixed rates also means a rise in posted rates, which means a lessening of affordability since many mortgages are now stress-tested at the posted rate (those with less-than 20% down ... for now).

If you have any buyers on the fence seeking pre-approvals, now is the time to get that done.
 I haven't been singing the praises of pre-approvals at all when rates move sideways, but a 20-25 basis point jump is reason enough to get it on the books.

Oh and in other news, I'm sure you're all aware that the Provincial Government increased land transfer taxes on $2M and greater homes while reducing them for first-time buyers' tax impact. Here's a great synopsis from Romana King at MoneySense. Still TBA is if this helps buyers closing before January 1st 2017 (I've asked my lawyer)


Jake Abramowicz

The Mortgage Jake App is available for iTunes & Android

I've been interviewed in such outlets as: Bloomberg TVMoney SenseGlobe and MailToronto Star and CFRB 1010 Talk Radio."

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