Dave's Email 10-21-08 - Mortgage Market Update

The Bank of Canada has once again dropped rates by .25%. (Not the .50% that some economists were hoping for.).

Slowly this morning the Banks appear to be following suit, by reducing their prime to 4.00%. BMO, CIBC, Royal Bank, Scotia Bank TD Bank and ING have now confirmed the same reduction to their prime. MCAP has confirmed their drop tomorrow.

This is great news for those who are staying Variable. But once again there does not seem to be any lenders lowering their fixed rates. I think there is still an element of concern with the Global Banking issues. On the more positive side is that fixed rates appear to have stopped rising at this point.

A few of our lenders have re-introduced some of their Quick closing discounts which is giving access to 5.40% 5 year fixed rates again. But, with Prime +1.00% at 5.00% the variable rates mortgages appear to be the more popular choice of this week.

October 17th has come and gone, the official end to the 40 year amortizations and 100% financing. Although Genworth claims that almost 25% of their business last year fell in either 100% financing or 40 year amortizations I do not see the loss will significantly impact access to mortgage financing. I think the largest portion of that 25 % was 40 year amortizations, and still having access to 35 year amortizations does significantly increase mortgage payments.

The one other change that did take effect on Oct 17 is minimum Beacon Scores. CMHC originally announced the minimum beacon score was going to be 620, however then decided to back off and go with 600. They also announced that on exception those with 580 and or above can be considered on an exception basis but can not make up more the 3% of the lenders portfolio. This is where lending is truly being effected, or how things are tightening up. Even though sub 600 beacons are permitted by CMHC, it is not freely being approved by the lenders. Exceptions that would easily been approved in the past are no longer being granted by lenders. We even have one lender; Macquarie, who has actually raised their minimum beacon score to 680. This is the lender's way of saying they are going to be very selective in granting credit for the immediate future. This change is affecting who gets a mortgage and who doesn't..

So you now have even more reasons to maintain a good credit rating. I have attached a copy of a PowerPoint presentation I used to present which gives some in-site to your beacon score.

If you have any questions about your current mortgage or would like some ideas on how to make your current mortgage payment a little more affordable, then please give me a call.

I am still going Variable with my mortgage next month.

Thanks,

David Kendall
Senior Mortgage Consultant
211 York Road, Unit 3, Dundas, Ont. L9H 1M9