Monthly Mortgage Update: August 2013
Holla! It’s summer, so why are you reading about mortgages?! Get outside!
……….
Okay, clearly you’re a keener, so at least promise to read this in an outdoor setting.
Fixed Mortgage Rates are Holding Steady
Fixed mortgage rates are holding steady now, after a somewhat drastic spike last month, with the best 5-year rates hovering around 3.20 per cent – 0.50 per cent higher than what was being offered just a couple months ago. Rates will continue to remain at this level, unless there is a material change in bond yields, which fixed mortgage rates follow with a strong correlation. Even if bond yields do fall, lenders are quick to raise rates but slow to drop them. So, don’t hold your breath!
The spread between fixed and variable mortgage rates has also grown with the recent rise in fixed rates (and no rises for variable rates). On Realosophy’s blog, Dave Larock ran an interesting simulation on the risk/reward trade-off between fixed and variable rates now that variable rates are comparatively more attractive.
Mortgages in Flood-Prone Areas
The recent flooding in Calgary has raised some questions about homeownership and mortgages in flood-prone areas. We wrote a post this week about how some lenders are imposing stricter guidelines on qualifying for a mortgage in hazardous areas. These lenders are requiring additional home inspections and appraisals on purchases and refinances, and are even holding off on “auto-renewals”. This may translate to lower home values in flood-prone areas in the future. Check out our blog post for more detailed information.
And what about those homeowners already locked into mortgages that saw their homes ravaged by flooding? Well, to start, most homeowners don’t have flood insurance, contrary to popular belief. Although most commercial properties, condos and high-value homes do have flood insurance, typical homeowners do not.
Without flood insurance, the homeowner “is on the hook for the mortgage” says Calgary Mortgage Broker Dan Eisner of True North Mortgage, meaning that “their lender will expect them to continue to make regular mortgage payments.” HOWEVER (and this is a big however), local governments will often step in with funding to help homeowners in this situation.
If the government, for some reason, doesn’t step up, the client will need to declare bankruptcy in order to escape the responsibility of the mortgage. Anecdotally, Eisner says “this rarely happens in Canada.” Conversely, in poorer nations where the government doesn’t have the ability and insurance is not as prevalent, natural disasters like this can affect the region for years (just look to Haiti as an example following their 2010 earthquake).
Ratehub.ca News
RateHubber Pro Money Tips Facebook Series
We’ve gathered 20 of the top personal finance experts in Canada – from authors and bloggers to columnists and television personalities – and asked them to share with us their top money tip on our Facebook page. We’ll be posting a new tip every Monday and Wednesday for the next two months, so check back often for those!
CMP Top Mortgage Brokers
Last week, we ran a series on Canadian Mortgage Professional (CMP) Magazine’s Top Mortgage Brokers in Ontario with five questions for the top five brokers in the province. Look for the series on our blog.
Land Transfer Tax (LTT) and CMHC Calculators
After some hard and tedious work by our web developers (honestly, is anything they do not tedious?), you can now add provincial Land Transfer Tax (LTT) and CMHC calculators to your own website with a simple copy and paste of some code. Visit our widget section for instructions.
If you’re interested in seeing what happens behind the scenes at Ratehub.ca HQ, visit our new Instagram account!
‘Til next month!
–KL
Kerri-Lynn (KL) is the Chief Marketing Officer at Ratehub.ca. Her mortgage recaps can be found monthly on our blog.