2019 Canada’s mortgage market was an interesting one to say the least! From the plunge in interest rates, to the late-year surge in mortgage growth to the growing influence of online discount mortgage lenders, it was a year of firsts and milestones.
The phenomenon of five-year fixed rates selling for less than variable rates will most likely end in 2020, at least temporarily. Whereas the average five-year fixed is about 15 basis points below the average variable today, fixed rates will be back on top. (A basis point is one-hundredth of a percentage point.) That will motivate a small percentage of borrowers to shift from five-year fixed to variable-rate mortgages. Longer-term, the fixed-variable gap will stay narrower than it has in the past and go negative more frequently, meaning you’ll pay less for the “insurance” of a long-term fixed rate.
Something to be aware of… get ready for lots of lenders and brokers advertising “instant mortgage approvals” this year. Please know these WILL NOT be full approvals. Reason being, unlike the United States, Canada doesn’t have the technology (yet) to automatically validate your income, employment and down payment electronically. That means most, if not all, “instant approvals” will be overhyped conditional approvals delivered electronically to borrowers. “Conditional” means the lender must still manually review your documents, and sometimes send out physical appraisers to your property, both of which are anything but instant.
Other predictions out there that are a small possibility are:
- Regulators could add a stress-test exemption for people switching lenders and/or change the stress test’s minimum qualifying rate.
- The federal government’s First-Time Home Buyer Incentive could get easier to qualify for in Toronto, Vancouver and Victoria.
- The banking regulator might approve people’s ability to buy a home selling for more than $1-million with just a 10-per-cent down payment. (The current minimum is 20 per cent of the purchase price.)
- The national average home price should grow at a pace closer to the 6.2 per cent forecast by the Canadian Real Estate Association than the analysts’ consensus forecast of 3 per cent.
Only time will tell…..
Cheers to an amazing 2020
By Candice Liberatore
Mobile Mortgage Specialist
Tel: 604 836 6099
Fax: 844 882 7584