Time Runs Out As Interest Rates Rise

By Larry Yatkowsky, Vancouver Realtor®

It’s Here

You waited. You waited some more. Now you don’t have to wait anymore for now it begins.

And So It Begins

According to Invis Team Rob Reagan-Pollock the
Hheadline news continues to be the sell-off of bonds and upward pressure on interest rates. The combination of better than expected employment growth and US Federal Reserve talk of reducing stimulus has the mortgage market hopping! Bond yields which control longer term fixed rates are up 0.40% since May. Some of our lenders delayed their increases to capture market share but we are seeing holdouts increase their rates now.

The Headlines

house man percent bal

Rob Says

“It may be a coincidence but since the Provincial election, we have seen an increase in sales and refinance activity.”

You Decide

Is it the right to buy or sell?

Is life moving you? I can help.

Quotes Courtesy – Invis Rob Regan-Pollock

About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

When Life Moves You - contact Larry:

*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

PurrPurrJones Says:
June 17th, 2013 at 4:06 pm

Time to ratchet up rates. The bar is low enough…

2001 – Genworth (GE Capital) mortgage insurance was expanded to cover equity take out refinancing. CMHC also introduced a new refinance product that was “designed to allow homeowners to optimize the use of home equity
2001 – CIBC offers below-prime mortgages.
2002- Genworth (GE Capital) expanded its insurance to cover applicants with good credit ratings, but who cannot provide traditional income verification by introducing Alt-A BFS (business-for-self) loans.
Pre-2003 – CMHC: 5% down with price limit depending on area, 25 yr amortizations, no price limit if 10% or more down
Sep 2003 – CMHC: 5% down, 25 yr amortizations, removed all price ceiling limitations. Now any mortgage would be insured regardless of the cost.
2003-2004- CMHC introduces new products including Rental Refinance, Homeownership On-Reserve and Secured Line of Credit. Genworth (GE Capital) follows by introducing Home Equity Line of Credit Mortgage Insurance. In addition, Genworth (GE Capital) mortgage insurance was expanded to cover cash-back loans.
2004 Genworth (GE Capital) and CMHC expanded their insurance coverage to secondary homes and GECMIC expanded its coverage to vacation properties. CMHC also introduced the Mortgage Loan Insurance for Energy-Efficient Homes and for Self-Employed borrowers
Mar 2004 – CMHC: Flex-Down product allows 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured)
Mar 2006 – AIG enters the Canadian mortgage insurance market
Mar 2006 – CMHC: 0% down, 30 yr amortizations (Genworth announces 35 yr amortizations)
Jun 2006 – CMHC: 0% down, 35 yr amortizations, interest only payments allowed for 10 years
Nov 2006 – CMHC: 0% down, 40 yr amortizations, interest only payments allowed for 10 years
2007- ecoENERGY Retrofit Program offered Canadians up to $5,000 to make their homes more energy efficient. Ended in 2012.
April 2007 -Minimum down payment required to avoid the CMHC fees changes from 25% to 20%.
2007- Some lenders scrap GDS ratio altogether, bumping their acceptable TDS ratios up to 44%. On an exception basis, borrowers are sometimes approved with TDS ratios of 46% or more.
Oct 2008 – CMHC: 5% down, 35 yr amortizations.
2008- CMHC applies more stringent maximums for riskier borrowers (35% GDS and 42% for credit scores below 680) No GDS requirements for low risk borrowers, TDS at set 45%
2009- Home Renovation Tax Credit Program- Applied to eligible expenditures of more than $1,000, but not more than $10,000, resulting in a maximum credit of $1,350.
2009- The maximum amount that can be withdrawn as part of the HBP increased to $25,000
April 2010- Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. Investors need 20% down.
March 2011- CMHC only allows 30 yr amortizations. Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs.
July 2012 – CMHC only allows 25 yr amortizations, insured mortgages limited to $1 million. Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes. New caps on GDS (39%) and TDS (44%) Riskier borrowers (35% GDS and 42% for credit scores below 680 stays the same)

and now this:

http://www.vancouversun.com/mobile/business/mortgages/Average+mortgage+debt+grows/8478530/story.html

We are due for a pause. As interest rates march higher it will be time for people to deleveage. This will caue some pain in the enconmy however it will be for the better long-term..

June 17th, 2013 at 5:43 pm

@PurPur
Record comment longer than post.

Alex Says:
June 18th, 2013 at 10:06 am

Hi Larry,
I’ve been tempted lately, but then I did the math the other day and buying would cost me at least $2000 a month more than renting, even with 3% interest rates. (That’s just mortgage and property taxes; I’m not taking into account any maintenance, repairs, etc.) I think I’ll keep on keeping on with renting for now…

June 19th, 2013 at 2:14 pm

@Alex
Millions rent.

Andy Says:
August 29th, 2013 at 7:08 pm

@alex – smart move. Try the New York Times calculator for whether it makes financial sense to buy or rent. With the rent vs purchase prices in Vancouver there are very few scenarios where buying makes any financial sense at all right now.

http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0

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