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The Mortgage Trends of 2011

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The Mortgage Trends
of 2011

Among the various developments this past year there were a few mortgage trends that stood out:

New Mortgage Regulations

The government has yet again tightened mortgage rules for the third time since 2008.

Those with a high-ratio insured mortgage saw the loss of 35-year amortizations and refinances above 85% of their loan-to-value (LTV) ratio. This in turn means that not only do well-qualified borrowers lose an amortization option but more interest expenses are accrued for anyone not able to refinance their high-interest debt.

They also made it difficult for non-bank lenders to offer a Home Equity Line of Credit (HELOC) by removing insurance on secured credit lines.

Record Low Fixed Rates

Nervous investors have been readily buying up safer Canadian bonds – increasing prices and decreasing yields. Therefore we’re seeing other rates drop too. The bond market actually has more influence over fixed mortgages than the BoC’s posted rate which of course trickles down to variable mortgages also.

The Fall of the Variable

Before August 2011 variable-rate mortgages were a good choice for the savvy homeowner but after the U.S. debt downgrade, not so much. However even though the media has declared variable-rate mortgages ‘over’ a comeback is inevitable.

In light of last year’s trends should you be restructuring your mortgage to cash in on these low interest rates? It depends.

The best fixed-rate option would be a closed mortgage however you can’t escape the interest rate that you agreed to pay for five years without a penalty. In order to determine just what that prepayment penalty will be you will need to:

  • Calculate the difference between your high-rate mortgage and the current rate to come to the interest rate differential penalty.
  • Determine how much time remains in your term.

Of course the best way to know whether switching is a good idea for you would be to contact me today. I can answer all of your questions and help you review your options.

Published Thursday, April 19, 2012 10:39 PM by CITY HOMES LTD

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November 3, 2015 3:34 AM

Paul Rios said:

As a homeowner, personally, I really feel bad for the mortgage concept. In different countries, we have found different types of rules and regulations especially on mortgage and here from this article, we can get some quick tips on different mortgage trends. Thanks for highlighting such important points.

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