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| Our Rate of the Day - 2.05% | ||
| TERM | OURS (oac) | POSTED |
| variable | 2.05% | 2.75% |
| 1 yr | 2.54% | 3.70% |
| 2 yr | 3.09% | 4.20% |
| 3 yr | 3.50% | 4.75% |
| 4 yr | 3.89% | 5.44% |
| 5 yr | 3.89% | 5.79% |
| 7 yr | 4.90% | 6.49% |
| 10 yr | 5.35% | 6.80% |
As expected, the Bank of Canada has increased the overnight rate from 0.25 % to 0.5%.
This means that if you have a Variable Rate mortgage your interest rate just increased by 0.25%. The Prime Lending rate is now 2.5%
We have some great rates from Lenders offering Prime -0.6%, which right now is only 1.9% interest. Still a great interest rate!
How will HST affect Buying or Selling a Home in Ontario as of July 1st?
The new tax will take effect on July 1, 2010. The HST tax will effectively combine the Provincial Sales Tax of 8% percent with the Federal GST Tax of 5% percent, to create a new “harmonized” total tax of 13% percent. This new tax will be applicable to many real estate services which hitherto only had one or the other tax applied.
- there is no HST tax payable on the sale of a resale home (residential).
- home buyers and sellers will have to pay extra tax on a range of services associated with the real estate transaction: services such as legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on these services.
In a nutshell, after July 1, 2010, if you are a seller, there will be a 13% percent tax payable on the real estate commission you pay – currently there is only the 5% percent GST payable on this fee. Your lawyer’s fee will also be subject to the 13% percent HST.
If you are a buyer, any Home Inspection you pay for will be subject to the 13% percent HST. And so will the cost of movers hired. In addition, the cost of the CMHC premium for “high-ratio” mortgages has traditionally been taxable for PST – this amount will now be taxable for the full 13% percent HST.
It will be interesting to see what the new HST tax does to our Housing Market in Ontario. Certainly affordability is going to be affected as legal fees, home inspection fees, mortgage insurance premiums, and real estate commissions will cost more. Add into the fact that the interest rates are on the rise, our market will inevitably be affected.
The Bank of Canada announced yesterday that they would maintain their overnight rate at 0.25%.
This means that the Prime Lending Rate will remain for now at 2.25%. The next chance for the Bank of Canada to raise their rate is June 1st. It is expected at that time that they will start to increase the rate.
Variable Mortgage rates, which are tied to the Bank of Canada overnight rate and the Prime Lending Rate, remain unchanged as a result.
Lenders are currently offering 5 year Variable Mortgages at Prime – 0.5%. This means that you can lock in these terms for 5 years. The Interest Rate of 1.75% would be your interest rate now until the bank of Canada raises their rate. Then your interest rate would go up, probably by 0.25%. Your monthly (or weekly or bi-weekly) payment will also go up.
Current 5 year fixed rates are sitting at 4.39 %(best rate out of 30 lenders). Only if the Bank of Canada increased their overnight rate 10 times during the term (5 year), would you be paying equal to or more interest than a variable rate mortgage. Remember that a variable rate mortgage can always be converted to a fixed rate mortgage at any time during your term as long as you stay with the same lender.
Effective July 1st, 2010 the Government is implementing the Harmonized Sales Tax in Ontario. This means that services that are currently NOT subject to Provincial Sales Tax of 8% will now be taxed. ….at a rate of 15% which is a combination of the current GST of 7% + Provincial Sales Tax of 8%.
Services that are part of the Home Buying process; Home Inspection, Appraisal, Real Estate Fees, Legal Fees, Moving costs etc; are currently only taxed at 7% GST. Starting July 1st these services will all be taxed at 15%. As a buyer you are going to be paying more for all of these services.
Buyers of new homes will receive a rebate of up to $24,000 regardless of the price of the new home.
This rebate ensures that buyers of homes priced up to $400,000 (about three-quarters of new homes built in Ontario) will, on average, pay no more – or possibly even less – tax than under the PST system.
For a full list of services that are affected CLICK HERE
Policy Changes to CMHC Self-Employed
CMHC is also announcing policy changes to the CMHC Self-Employed Product Without Traditional Third Party Validation of Income. Effective April 9, 2010, self-employed borrowers with more than 3 years in the same business and commissioned-income borrowers will be required to confirm their income and will not be eligible for the Self-Employed Product Without Traditional Third Party Validation of Income. This product is intended for a small portion of borrowers who find it very difficult to document income – in particular, recently self-employed borrowers. For the majority of self-employed borrowers, income validation is readily available through financial statements, contracts, T4s and other third party income validations. The changes will ensure that self-employed borrowers with third party income validation will benefit from a lower premium. Furthermore, the maximum loan-to-value ratio available under the CMHC Self-Employed Product Without Traditional Third Party Validation of Income will be reduced from 95% to 90% for purchase transactions and from 90% to 85% for refinance.
Not too much of a surprise here; most experts did not expect that the Bank of Canada would raise its overnight lending rate, and they did not.
http://www.bankofcanada.ca/en/fixed-dates/2010/rate_020310.html
OTTAWA — The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
In the statement accompanying Tuesday’s decision, Governor Mark Carney and his rate-setting panel acknowledged that growth and inflation have been hotter than policy makers estimated in their January forecast, saying the economy’s 5-per-cent growth in the fourth quarter was “spurred by vigorous domestic spending and further recovery in exports.”
A few weeks ago Finance Minister, Jim Flaherty, announced new mortgage rules will be implemented in Canada on April 19th. The reaction across the country has ranged from panic (for those investing in rental properties or flipping homes), to indifference. Overall though, I sense a lot of confusion over the announcement as many people just do not understand the changes.
I have been contacted by clients and Real Estate Agents that are confused about the new rules, and the most common question I am getting is from first time home-buyers concerned that they will need a 10 or 20% down payment. This is not the case.
Here is an overview of the changes:
1. Tighter restrictions to Qualify for a Mortgage
All ARM (variable rate mortgages) and Fixed mortgages with terms less than 5 years are to be qualified at the 5 year posted rates.
Currently most banks use the 3 year posted rate to qualify ARM clients. The current spread between a 3 and 5 year posted rate is approximately 50 bps. This will reflect higher debt service ratios many borrowers, making slightly more difficult to be approved IF the borrower has a large debt load and not enough income to cover.
2. Need to keep more Equity in your home if you Refinance your Mortgage
The maximum LTV for refinances changes from 95% to 90%. Many lenders had reduced this criterion independently over the course of the last year or so. It is designed to prevent mortgagors from “turning their houses into ATMs”. Again note that this only applies when you are REFINANCING your mortgage, NOT a new purchase, or a Mortgage Renewal.
3. More money needed as a down payment for Investment Properties
The maximum LTV for non-owner occupied houses is reduced to 80%. The intent here is to reduce the degree speculative buying that would be naturally encouraged with such low interest rates. This will affect investors that were using the CMHC insurance for rental properties to purchase either residential rental units, or purchasing homes for “flipping”, or speculating i.e. Condo buying. Furthermore, the government is only going to allow 50% of the rental income to be used to qualify the debt service ratios, so this will also make it tougher for this type of investor.
In Summary
It is estimated that these changes will only affect a very small percentage of the marketplace, and most experts agree will not have a signifigant impact on the HOT housing market in Canada. The spring market is just around the corner, and with the low inventories of homes for sale, and interest rates at all time lows, the coming months are going to prove to be a very exciting time for Real Estate Agents and Mortgage Brokers.
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