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Get Yer Affordable Housing Here!

—The Mortgage Report: Aug. 5—

  • Is This a Joke?: “The CMHC defines housing as affordable when ‘it costs less than 30% of a household’s before-tax income,’ which includes rent or mortgage (principal and interest) payments, property taxes and other home bills,” reports the Financial Post. The punchline is, you have to move to a remote fishing village in Newfoundland to find that kind of affordability. Then again, home-based jobs are catching on so that might just work for people. Just be sure your rural one-room seaside cottage has high-speed internet.
  • CIBC’s New Insured Specials: It used to be mainly mortgage finance companies and other small lenders that advertised cheaper rates for default-insured mortgages. Now, most of the big banks are doing it. Canada’s imperial bank launched two new special rates on Wednesday, both for high-ratio applicants only:
    • 5yr fixed: 2.22%
      • Canada’s lowest widely advertised 5-year fixed from a Big-6 bank
      • Scotia’s eHOME is down to 1.93% last we looked, but it doesn’t openly advertise its rates
    • 5yr variable: 2.13% (prime – 0.32%)
  • TD Cuts: The green machine dropped a bunch of posted fixed rates today:
    • 6mo convertible: 3.14% to 3.09%
    • 1yr: 3.24% to 3.14%
    • 2yr: 3.39% to 3.19%
    • 3yr: 3.79% to 3.49%
    • 4yr: 3.94% to 3.74%
    • 5yr: 4.84% to 4.59%
      • This is the most interesting. If a few of the other Big 6 banks matched TD’s 5-year posted rate, it could slash the minimum stress-test rate (currently 4.94%) by 35 bps and boost mortgage shoppers’ buying power by up to 3.4%.
    • 6yr: 5.64% to 5.24%
    • 7yr: 5.80% to 5.35%
    • 10yr: 6.10% to 5.60%
  • COVID Update: Rates north of the border usually follow rates south of the border. Hence, U.S. economics matter. Hence, U.S. viral metrics matter. Oppenheimer reports positive trends on that front—namely that new daily positives are declining, hospitalization rates are falling, the mortality rate spike was disproportionately small and short-lived, and U.S. hospital occupancy (65.9%) is below its 10-year average. Their takeaway: another nationwide shutdown is unlikely, which would put us on the path to an interest rate recovery sooner. And by “soon,” we mean well into the future.
  • Next Stop, AA?: The U.S. may be on track to lose another AAA credit rating. If it does, global investors could eventually price it in (i.e., build rate premiums into U.S. Treasury yields), something Canadian borrowers would feel—to at least some degree. The Story…

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  • REITfan says:

    Hi Spy,
    I saw an employer post requiring urban setup for remote work.

    My renewal window is this Nov-Apr, i’m looking to switch to Tangerine’s 5yr fixed and setup HELOC as well, but I’m hesitant to take the risk as my self-employment tax income for the past 3 yrs is low. I have an excellent credit history and my debt responsibilities are below 120K mortgage and below 4K LOC. My equity is more than 50%.

    Should i just remain with Scotia and accept what they offer? As my mortgage is collateral setting up STEP is akin to refi. Based on your experience, which lender will offer me a more favourable HELOC or readvanceable rate?

    • The Spy says:

      Hi REITfan,

      On a REIT note, I feel for you with all the commercial leasing headwinds right now.

      On a mortgage note, when someone has a mortgage + secured LOC less than $200,000, it’s hard to get lenders clamouring to provide deep discounts.

      If you want to refi, the first step is to ensure you show enough provable income so that your gross debt service and total debt service ratios are less than 39% and 44% respectively (note: many lenders have lower debt ratio limits than that). If you’re not sure whether your provable income meets those tests, give a broker a jingle and have them confirm.

  • Sheriff says:

    As a self-employed myself I did some digging around but accepted a 3 yr. fixed @ 2.02 from a big 6 today. (I needed more flexiblity than 5yr.) Although I likely could’ve gotten a haircut from another lender, (I’ve traditionally been a variable buyer where the lowest rate wins) I balanced the ease of renewal with a little more HELOC on top. The collateral charge renewal for another 3 years provided the balance of credit access, no fees, and just outright lending off my similar crap NOA’s. I still like a deal but I had to strike a balance, and shortened my amort. to make the best of this sub .30 5yr. yield environment. I still feel a little defeated, just my 2c. Thanks for all your input Spy!

    • The Spy says:

      Hey Sheriff,

      You did fantastic for yourself given it’s a readvanceable (which sell at higher margins) and given your proof of income is challenging. The difference between 2.02% and 1.99% is meaningless in the big scheme. Good work.

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