“1″-handle Rates Return: Fixed rates have once again dipped below the psychological 2% level, albeit only three-year fixed rates. It’s a threshold that, when broken, often creates incremental demand for mortgages. Normally that demand comes from refinances and purchases, but with home sales down 57% nationwide, purchases have largely dried up. Credit tightening, a lack of major lenders below 2% and a stubbornly high 5.04% qualification rate will also ensure that any mortgage boost is modest.
Available via brokers, banks and credit unions on insured mortgages and on insurable mortgages up to 65% LTV
Less Stress: The minimum “stress test” rate is officially dropping to 4.94%. That’ll make it slightly easier to qualify for a mortgage if your debt ratios are near the allowable limits. The new stress test rate takes effect Monday, May 25 for default-insured mortgages. For uninsured mortgages, “Lenders are free to use the updated figure as soon as it is published,” says banking regulator OSFI. (It’s now published.) “However, for operational reasons, lenders may opt to update their systems on Monday to align the effective date for the insured space.”
RBC on Higher Down Payments: In follow-up to Evan Siddall’s comments yesterday and speculation about minimum down payments rising, RBC said: “CMHC acts as an adviser to the DoF and in our opinion, Mr. Siddall’s views are respected within Ottawa. As a result, we think there is a reasonable chance that higher minimum down payments may happen, but if it does, the magnitude and timing are unclear, especially since any change might further weaken the economy or at the very least is likely to prolong a recovery in housing market activity…”
Monitoring Deferrals on Credit Reports: Free credit score provider Borrowell has a new feature for people who’ve deferred their mortgage payments. It tells you if your mortgage lender is improperly reporting deferred payments as delinquent to the credit bureau Equifax. “Late payments typically account for 35% of credit scoring models,” Borrowell says. And—as we know too well—creditors make mistakes on credit reports, so it’s not a bad feature. Details…
Prolonged Recovery: Fed Chair Jerome Powell worried people on Sunday when he said the recovery could “stretch through the end of next year.” And today we learned that the Fed projects a material chance of a second wave of the coronavirus late this year. Rate Impact: Potentially Bearish
Oil Rally: Oil prices are the highest they’ve been in over two months. WTI spot crude is now $71 above its all-time low of -$37.63 (yep, that’s a minus sign), which was set just one month ago. Rate Impact: Bullish
Deflated Inflation: Prices for many items (particularly clothing and transportation) sank in April. Yet, an average of the core inflation measures preferred by the Bank of Canada showed little change (down just 0.03%) because of how they’re calculated. For the time being, rising oil prices could further stem inflation’s slide. Rate Impact: Neutral