It all boils down to one element in the deal, and that is money. Doesn't matter what part of the journey you're experiencing within the home purchasing or selling process the old saying goes "the man who makes the gold makes the rules" and that is your financial institution, or your lender. I take the time and ensure the people I show houses too have been pre - qualified and if they need help in the financial end, I navigate that too!
At the moment we are experiencing a rather fair to good market in Saint John and surrounding area with statistics to support the trend, which buy the way the trend is always your friend.
One of my fellow colleagues David Johnston from Johnston Mortgage Team is in the lending business. David's tag line is "I work for you not the lender" Everyone one needs a David in their corner when purchasing a residential or commercial property. David sent me an interesting article from his camp as to where the mortgage rates are speculated to go in terms of rate increase and % of dollars required as a down payment.
I am a bit of a knowledge junkie and have learned to discern to eat the meat and throw away the bones when reading economic reports from the experts.Sometimes the experts have conflicting opinions don't you agree? I add a dash of common sense when I need to translate it to the Saint John Real Estate Market. In my opinion based on history economic set -backs don't hit us as quickly in the Atlantic Provinces but they do eventually arrive. Traditionally as well our incomes are lower as well compared to other provinces so that effects our purchasing power.
Knowing the Government once the stimulus money has run out, the home improvement tax credits are now finished but the Government still has to create more liquidity to operate, to change the tide of past revenue losses.
Voila this could be there next big idea! Push the "ride the fencers" who are thinking of purchasing, selling or downsizing off the fence and tell them to purchase, sell, downsize now as the lending rate is going up and the required deposit is going up too. Good or bad once in motion we have to live with it.
Here is David's article. Look forward to your feedback...Kim
Johston Mortgage Team
johnston.d@mortgagecentre.com 849 8660 (Phylis, David's wife will answer the phone)
January 15, 2010
-Study-on-Rising-Mortgage-Rates Claims that Canadians are taking out risky variable-rate mortgages and borrowing more than they can afford “are not based on actual data” and “are misinformed.” That’s according to CAAMP, who issued this study of 40,000 mortgages from 2009: Revisiting The Canadian Mortgage Market…
Despite rising home prices, first-time mortgagors took out “far less” than they could afford last year, says CAAMP.
"The vast majority of Canadian mortgage borrowers are not taking on undue risks. They have factored rising interest rates in to their mortgage decisions," stated Jim Murphy, president and CEO of CAAMP.
CAAMP ran simulations to estimate what would happen if the Bank of Canada hiked rates 3% over two years (and fixed rates rose 1.25%).
It found that income gains should offset much or all of the increases in mortgage payments that most Canadian’s would experience.
"The bottom line from the simulations is that even though mortgage payments will probably rise for most borrowers, the increase in their incomes will more than offset the higher payments," said CAAMP chief economist Will Dunning. “All in all, the degree of risk from rising mortgage rates appears to be small and manageable,” he writes.
A key finding in the report was that 86% of Canadian home buyers took out fixed rates in 2009. Here’s a breakdown of the terms they selected:
* 5% chose 1- to 2-year terms
* 20% chose 3-year terms
* 5% chose 4-year terms
* 70% chose 5- to 10-year terms
Other notable findings from the study:
* 5%: Number of Canadian households who purchase a home each year.
* 50-60%: Number of those who are first-time home buyers.
* 0.03%: Percentage of first-time home buyers (compared to all home owners) that are “pushing the envelope” by getting mortgages they may not be able to afford.
CAAMP estimates these “at-risk” borrowers amount to 4,000 households out of 13,250,000 in Canada.
* 10%: Annual growth rate of mortgage debt in the last five years.
”This growth rate was far in excess of growth of incomes and therefore mortgage debt has become a growing burden for Canadian households,” CAAMP said.
CAAMP attributed this growth to rising home prices and increased home ownership. 70% of households now own homes, versus 63.6% in 1996.
* 5.425 million: Number of Canadian mortgage holders.
* 22.3%: Average GDS ratio of a home buyer in 2009
32% is the traditional GDS (gross debt service) maximum. This stat is a pleasant surprise. According to CAAMP’s findings, most Canadians appear to be under buying, not overbuying--as some critics charge.
* 32.8%: Average TDS (total debt service) ratio of a home buyer in 2009
Similar to GDS above, this is well below the standard. 40-42% is the typical TDS maximum.
* 0.44%: Current percentage of mortgage holders in arrears.
CAAMP says arrears averaged 0.50% in the 1990s. Mortgage arrears are highly correlated with Canada’s employment rate. Reduced hours/pay and separations/divorce are secondary factors. CAAMP says it “appear(s) most likely that the arrears rate is close to peaking.” Today’s
* Arrears around 0.42 %
Dunning closed the report by writing: “Virtually every Canadian who is in a position to buy a home and qualify for a mortgage is well-educated and capable of assessing what is in their best interests, of looking forward, and of anticipating threats to their financial well-being.”
Let’s keep it that way by advising homeowners to remain conservative.
_______________________________________________________
CAAMP Sidebar: More details on the study above:
* Data was collected from a CAAMP survey of its corporate members
* Sample size was 40,000 mortgages totaling $10 billion
* This represents about one-sixth of total mortgage activity for home purchases in Canada.
* The mortgages were all funded in 2009
* The data included purchases only. No renewals or refinances.
* The vast majority of mortgages in the data set are high-ratio and insured.
Knowledge is power when purchasing a home, call David as his tag line states "I work for you not the lender" put David to work, I am.
Chat later, Kim
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