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in the mortgage marketplace ...
At 9:45am this morning, it's widely expected that the Bank of Canada will announce it's first reduction in it's policy rate since March 2020.   Starting in March 2022, we saw increases taking that policy rate up to 5% where it has sat since July of last year.

We know what the effects of the increases have been on the economy and on the real estate market.  What will this first, and subsequent, interest rate reductions result in?

1.  More purchasers entering the market.  With concrete evidence of a turn in rates, consumer sentiment will shift and the combination of pent-up demand, FOMO, and easier qualification over time all will combine to bring people off the sidelines.

2.  A move back towards adjustable rate mortgages compared to fixed rates - although I think that is several months off in the future.  There is still too much of a premium on variable/adjustable rate options compared to 3-5 yr fixed rates.

3.  Less panic over renewal terms - the media has taken every opportunity to whip up fear and borrowers into a frenzied state over how much higher their payments will be at renewal.  As this key benchmark rate starts to decline - as bond rates start to come down in anticipation of this trend reversal - it should bring some level of calm for those renewing in the next 12-18 months.

4.  This most certainly could - likely will - raise concerns over home price inflation.  It's pretty simple.  More demand - limited supply - prices will only move in one direction.  It's why we said early in 2024 that those thinking about purchasing - that was the time.  The old adage applies - the best time to buy was yesterday - the second best is today.

5.  Likely longer turn around times with lenders on mortgage requests.  There is only so much capacity in the system.

6.  Finally - if you like a 5+% GIC rate - grab it now!!  They won't be around for much longer.

Note - if by some slim chance, Governor Macklem postpones a rate reduction until July, hold this post for 30 days - all will still apply lol.
 
rate snapshot ...
STAND BY - short term yields have plunged the past few days - we might finally be seeing a shift in shorter term rates - especially if we have a Prime rate reduction.

Preferred options remain relatively stable but a few others starting to drop now - with a couple lenders now below on insured, 3 and 5 yr terms.  

** a reminder - lowest rate is not the same as lowest cost **

For properties priced below $1 million, with less than 20% down payment, example rates would be:
  • 1 yr fixed  6.74% or $6.84 per $1k in mortgage
  • 3 yr fixed  5.19% or $5.92 per $1k in mortgage
  • 5 yr fixed  4.99% or $5.81 per $1k in mortgage
For clarity, a $500,000 at 4.99% on a 25 yr amortization would have payments of 500 x 5.81 = $2,905 monthly.

Note also that rates can change daily, certainly differ between lenders and definitely differ based on down payment, mortgage features and hidden costs.
in Jim's practice ...
FINALLY - we have an archive set up for current and past posts - and one location to send your clients to view - or to link in your own social media/blog/websites

Right Here - or - https://mymortgageplace.ca/mortgage-market-minute/

It's missing a subscription link - and we'll clean it up a bit - but feel free to reference at will.

Have a successful week!  
I'm not sure why anyone would choose someone other than Jim.  Both buying and renewing a mortgage have been so easy and well explained with Jim as our broker.
He does the math and figures out what is best for his clients - both short and long term.
Kincardine is lucky to have him!

(PS, May 2024)
chatwithjim.ca

the best place to refer clients to get questions answered quickly!  No Phone Tag.  They book directly into my calendar to schedule a call!
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Jim Cook is a nationally-recognized broker with some quarter billion in mortgages funded. 
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