With the stress test requiring people to qualify at rates higher than what’s posted, what tips can Realtors offer their clients on how to best approach their lending needs as rates increase?
Advanced planning will be the key to your client’s success. We can look back at the last few months and see that those who got a rate hold pre-approval were able to secure fixed rates in the 2% range compared to those who did not and now feel discouraged with fixed rates being over 4% in a very short period of time. No one can control the market, however, you can protect yourself by being prepared and if a purchase is a consideration, secure your formal rate holds. The same goes for the ongoing service to your clients. If they have a renewal coming up, don’t wait. Look to see if renewing early can save you thousands. Different timings in the market present different opportunities. At this snapshot in time, borrowers qualify for the highest amount if they take a variable rate. It’s important to note that variable-rate mortgages can be locked in at any time with no cost, fees or re-approval approval process.
Can you see the government adjusting the stress test and what kind of impact would it have if they did?
I don’t foresee any adapting of the stress test in the near future with the snapshot of the current economic turmoil. However, it’s likely that the federal government may implement the changes they suggested during the campaign: raising the insured amount to 1.25 million instead of the 1 million dollar cap for insured mortgages and increasing the amortization. Both will present more opportunities for buyers to get more value for their money and offset the increase in rates. We have seen the pendulum swing in this direction before back in 2006/07 when rates were still higher than they are today. Some banks are only accessible through mortgage brokers that specialize in extended ratios and don’t follow the insured guidelines already have 40-year mortgage amortizations, which isn’t new it’s just priced differently and had been paused from time to time and started back in 2006.
What kinds of opportunities, if any, does this lending environment create for consumers who are in a good financial position?
This is a great question, as we look at the Canadian landscape over 30 percent of the homes owned are mortgage-free. This presents an opportunity for multigenerational wealth planning so the family can all benefit from investing in real estate as early as possible, however, the key is to start early. There are non-taxable ways that parents can gift their children funds to purchase a home or income/vacation property without impacting cash flow with today’s reverse mortgages. Canadians can design the life they want to live, build their family legacy and still enjoy life while supporting our economy.
Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages.
In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.
Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at email@example.com or at 604-802-3983.
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