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Daily Mortgage Report – April 29

TD Canada Trust cuts mortgage rates
  • TD Canada Trust rate cuts:
    • Special fixed rates drop from:
      • 3yr: 2.99% to 2.89%
      • 5yr (high ratio): 2.99% to 2.79%
    • Posted rates drop from:
      • 1yr fixed: 3.59% to 3.44%
      • 2yr fixed: 3.74% to 3.54%
      • 5yr variable: 2.65% to 2.35% (P – 0.25%)
    • Every time a bank cuts 1- and 2-year posted rates, it raises the chances of customers paying bigger prepayment penalties for discharging a mortgage early.
  • Slow Rebound: The implications of lower immigration, a “record amount of supply set to hit the market,” lack of a falling stress test rate and high prices relative to incomes are this, says Capital Economics: “…Unlike following the Global financial crisis, neither home sales nor prices will fully recover for years.”
  • Speculation on HELOCs: HELOCs account for 17% of the Big 6 Banks’ mortgage portfolios. And now some are speculating that banks will pull back on HELOC lending. (Reuters Story) Banks say there’s been no “notable” increase in HELOC borrowing thus far, but certainly there’s been an increase. If you’re a HELOC borrower who wants to keep the credit taps flowing, the points to remember are this: Don’t let your credit score slide, and hope your home value doesn’t plunge (lenders monitor both, among other things). And never, ever miss your monthly HELOC payment, even accidentally.
  • Past the Tipping Point: After years of trying to convince consumers to bank online, “…Banks are finally seeing record shifts into digital banking,” notes Barclay’s analyst John Aiken. The head of the Canadian Bankers Association says, “When we’re trying to discourage people from going anywhere physically and doing as little as possible face to face…digital [banking] options are not only resilient, but they’re providing customers flexibility to do whatever they need to do from home.” Mortgage renewals, for example, are now routinely being handled online by most of Canada’s biggest lenders.
  • Regulatory Pause in Order: Due to “the policy costs, such as lost access to credit by borrowers and lost residential investment growth,” C.D. Howe recommends no more mortgage tightening in the near term. The recommendation, part of a report to be released tomorrow, is based on four financial stability indicators that can “anticipate future crises:” the house price-to-rent ratio, the price-to-income ratio, the debt-servicing ratio and the household credit-to-GDP ratio.

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  • Vincent says:

    The stress test is a joke and banks should be ashamed

    • The Spy says:

      Hi Vincent, The stress test has served an important purpose, but the minimum stress test rate itself is a joke. Hopefully regulators reschedule the transition to the new benchmark rate calculation soon. It was supposed to happen April 6.

  • ABroker says:

    I don’t see banks widely pulling back on HELOCs. They’re well enough capitalized and desperate for secured lending right now.

  • Tbahz says:

    Explain this: “ And never, ever miss your monthly HELOC payment, even accidentally.”

    Goes without saying, never miss a payment obligation regardless if it’s HELOC but why this warning?

    • The Spy says:

      If you’re a late on a HELOC payment, there are a variety of bad things that can happen besides the obvious. They include banks freezing your borrowing, reducing your credit limit, and increasing the rate among other things. And that risk is higher if your credit score and/or home value is dropping, or debt ratio is rising. A lot of people have HELOC payments automatically come out of other bank accounts but we’re aware of clients who went NSF, missed a HELOC payment and subsequently saw their HELOCs frozen.

  • Li says:

    Stress test is not a joke, it’s to reduce risks exposure to those that don’t qualify. bank isn’t here to be your friend. And they can pull HELOC entirely or reduce amount borrowing consider equities market and over value home price to be under pressure. Would you lend money to someone that may be in risks of not paying you back lol

  • RMA says:

    When the Canadian mortgage default rate is 0.23%, yes, the stress test IS a joke!!

  • King Tom says:

    HSBC now 2.14% Five year closed term high ratio.

  • Appraiser says:

    Hard to understand the logic here from Rabidoux et. al. via Reuters story.

    Even though reality says that banks are currently inreasing their HELOC lending slightly and have seen no “notable” increase in HELOC draw-downs; but “speculation says they are going to cut back”… Huh ?

    Pure perma-bear fantasyland.

    As @ABroker put it “…the banks are desperate for secured lending.” I could not agree more.

  • Paul says:

    Hi Guys,

    I am trying to get a mortgage in BC.

    Do you guys think the rate would go even lower than now?

    When would it be a good time to get the mortgage?

    I have 6-7 months to get the mortgage.

    Thanks 🙂

    • The Spy says:

      Hi Paul, Mortgage rate holds commonly range from 30 days (for quick close rates) up to 130 days. So start shopping about four months ahead of time. Rates are downtrending as we speak and few expect them to reverse materially higher in the next few months.

  • Vincent says:

    Yea right because 5.04 qualifying ratefor the stress test is totally in line with expectations..

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