Canada’s Banking Regulator Announcement

General Angela Calla 16 Apr

Canada’s banking regulator announces cap on banks’ mortgages to highly indebted borrowers

Canada’s banking regulator is capping the amount of highly leveraged loans in lenders’ residential mortgage portfolios.

Last month, The Globe and Mail was the first to report the Office of the Superintendent of Financial Institutions (OSFI) had told banks they will have to limit the number of mortgages that exceed 4.5 times the borrower’s annual income, which is also known as a loan-to-income (LTI) ratio of 450 per cent.

In the new rules announced Friday, the regulator said that high household debt poses a risk to the “safety and soundness” of banks and the stability of the financial system.

“High LTI loans originated during the low interest rate time periods have created a long-term vulnerability to the Canadian financial system,” OSFI said. “OSFI’s LTI framework will help prevent a similar buildup of loans on books given to highly leveraged and indebted borrowers in the future.”

Residential mortgages portfolios ballooned as interest rates and prices soared, making Canadian homeowners among the most highly indebted globally.

The new income cap adds to existing mortgage qualification rules, including the federal stress test, which requires borrowers to be able to pay their mortgages if interest rates are two percentage points higher than the negotiated rate.

The measure applies to new mortgages in the bank’s overall portfolio, not to individual borrowers. By comparison, the stress test is applied to the borrower.

Even so, the limits will make it more difficult for some borrowers to get a large enough mortgage to purchase a property.

The number of highly leveraged borrowers has dropped since the COVID-19 pandemic’s real estate boom in early 2022. The amount of new mortgages with a LTI ratio above 450 per cent was 12 per cent in the last quarter of 2023, falling from 26 per cent in the first quarter of 2022, according to data from the Bank of Canada.

The new rule will only apply to new mortgages and not to existing loans or loans that come up for renewal. Banks will be allowed to exceed the income ratio for some clients, which could allow flexibility for borrowers in expensive cities such as Toronto and Vancouver.

In developing the LTI limits, OSFI sought feedback from the industry early last year on mortgage lending risks, and specifically debt serviceability. The regulator said that this approach also allows financial institutions to continue to compete in the market.

The limits apply to loans secured against a property, including a second mortgage from another lender and home equity lines of credit.

The new rule does not apply to insured loans for which the borrower must pay for mortgage insurance because their down payment is less than 20 per cent of the property’s purchase price.

OSFI will assess each bank’s loans above the 4.5 times threshold on a quarterly basis. The measure will take effect in the first quarter of next year.

(Article courtesy of The Globe and Mail – Canada’s banking regulator announces cap on banks’ mortgages to highly indebted borrowers – The Globe and Mail)

 

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

March’s Weak Jobs Report Sets The Stage For A June Rate Cut

General Angela Calla 9 Apr

Today’s StatsCanada Labour Force Survey for March is much weaker than expected. Employment fell by 2,200, and the employment rate declined for the sixth consecutive month to 61.4%.

Total hours worked in March were virtually unchanged but up 0.7% compared with 12 months earlier.

The details were similar to the headline: as full-time jobs dipped, total hours worked fell 0.3%, and only two provinces managed job growth. Among the type of worker, a 29k drop in self-employment was the primary source of weakness, while private sector jobs managed a decent 15k gain. The issue for the Bank of Canada is that wage gains are not softening even with a rising jobless rate. Average hourly wages actually nudged up to a 5.1% y/y pace, now more than two percentage points above headline inflation. With productivity barely moving, these 5% gains will feed into costs and threaten to keep inflation sticky.

The unemployment rate in Canada jumped to 6.1% in March of 2024 from 5.8% in the earlier month, the highest since October of 2021, and sharply above market expectations of 5.9%. The result aligned with the Bank of Canada’s rhetoric that higher interest rates have a more significant impact on the Canadian labour market, strengthening the argument for doves in the BoC’s Governing Council that a rate cut may be due by the second quarter. The unemployed population jumped by 60,000 to 1.260 million, with 65% searching for jobs for over one month. Unemployment rose to an over-seven-year high for the youth (12.6% vs 11.6% in February) and grew at a softer pace for the core-aged population (5.2% vs 5%).In March, fewer people were employed in accommodation and food services (-27,000; -2.4%), wholesale and retail trade (-23,000; -0.8%), and professional, scientific, and technical services (-20,000; -1.0%). Employment increased in four industries, led by health care and social assistance (+40,000; +1.5%).

Average hourly wages among employees rose 5.1% (+$1.69 to $34.81) year over year in March, following growth of 5.0% in February (not seasonally adjusted). This is still too high for the Bank of Canada’s comfort.

Bottom Line

The central bank meets again next Wednesday, and a rate cut is unlikely. I still expect rate cuts to begin at the following meeting in June. The Canadian economy, though resilient, will suffer from rising mortgage costs as many mortgages come under renewal over the next two years. Delinquency rates have already risen. Moreover, the planned reduction in temporary residents will also slow economic activity.

With the US jobs market still booming, it is likely the BoC will begin cutting rates before the Fed.

Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

 

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

2024 Canada Housing Market Report: Homebuyers Get Thrifty to Move up the Property Ladder

General Angela Calla 3 Apr

If there’s one word that could describe the Canadian real estate market in the past few years, it’s “rollercoaster.” First, 2020 and 2021 brought record-breaking home prices as the pandemic spurred Canadians to find a place to call their own. This demand, coupled with a low supply of homes for sale, led to an unprecedented run-up in home prices across the country.

This wild west of home buying ended in 2022 when rising interest rates led to a cooling of home prices across Canada. While higher interest rates meant the cost of a mortgage was higher, 2023 was the first year since the beginning of the pandemic that Canadian homebuyers could hope to purchase their homes in a buyer’s market and get the upper hand in their purchases.

Read the full article here:  2024 Canada Housing Market Report: Trends in Homebuying | Zolo

 

 

 

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Celebrating 20 Years of Excellence!

General Angela Calla 2 Apr

A heartfelt thank you to all our amazing clients and referral partners! As we mark our 20th year in the mortgage planning business, we’re deeply honored to have had the privilege of assisting you alongside our incredible team.

Last year, amidst the challenges of high inflation and mortgage rates, we stood by your side, committed to finding the best solutions for your needs. It’s with immense pride that we share the news of receiving a Master Award, a testament to our dedication and your trust.

As the market evolves, we remain steadfast in our commitment to guiding you through different markets and life changes. Our goal is to ensure you always have the best mortgage solutions tailored to your needs.

Looking for the best mortgage? Look no further! Reach out to us directly for personalized assistance. Here’s to many more years of partnership and success!

 

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Great News On The Inflation Front

General Angela Calla 22 Mar

The Consumer Price Index (CPI) rose 2.8% year-over-year in February, down from the 2.9% January pace and much slower than the 3.1% expected rate. Gasoline prices rose in Canada for the first time in five months, which led many analysts to forecast a rise in February inflation as seen in the US. However, offsetting the increase in gas prices was a deceleration in the cost of cellular services, food purchased from stores, and Internet access services.

Excluding gasoline, the headline CPI slowed to a 2.9% year-over-year increase in February, down from 3.2% in January. Prices for rent and the mortgage interest cost index continued to apply upward pressure on the headline CPI.

On a monthly basis, the CPI rose 0.3% in February, the same as in January. The most significant contributors to the monthly increase were higher travel tours and gasoline prices.

On a seasonally adjusted monthly basis, the CPI rose 0.1% in February.

Prices for food purchased from stores continued to ease year over year in February (+2.4%) compared with January (+3.4%). Slower price growth was broad-based, with prices for fresh fruit (-2.6%), processed meat (-0.6%), and fish (-1.3%) declining. Other food preparations (+1.4%), preserved fruit and fruit preparations (+4.0%), cereal products (+1.7%), and dairy products (+0.6%) decelerated in February.

 

February was the first month since October 2021 that grocery prices increased slower than headline inflation. The slower price growth is partially attributable to a base-year effect, as food purchased from stores rose 0.7% month over month in February 2023 due to supply constraints amid unfavourable weather in growing regions and higher input costs.

While grocery price growth has been slowing, prices continue to increase and remain elevated. From February 2021 to February 2024, prices for food purchased from stores increased by 21.6%.

 

The Bank of Canada’s preferred core inflation measures, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trim slowed two ticks to 3.2% in February, and the median also declined two ticks to 3.1% from year-ago levels, as shown in the chart below.

Bottom Line

The next meeting of the Bank of Canada Governing Council is on April 10. Before then, we will see two more important data releases:

  1. The Bank of Canada Business Outlook Survey and Canadian Survey of Consumer Expectation and;
  2. The Labour Force Survey for March.

Neither of these reports will likely derail the central bank’s move to cut interest rates by the June 10 meeting. Indeed, they could begin to cut rates at the April meeting. This would no doubt trigger a whopping Spring housing market, which is likely to be strong. There is significant pent-up demand for housing, and the prospect of home price increases could well move buyers off the sidelines if a surge in new listings comes to fruition.

The Canadian economy is particularly interest rate sensitive because of the vast volumes of mortgages that will be renewed in the next two years. Mortgage delinquency rates are already rising, so a gradual decline in interest rates is welcome news.

As the chart below shows, the three-month rolling average growth rates for the CPI trim and median core measures averaged 2.2% in February–their lowest reading in three years.

According to the Royal Bank economists, “Building on the January CPI report that was already showing broad-based easing in price pressures in Canada, the February report today reaffirmed those trends. Different measures of core inflation decelerated, and the diffusion index that measures the scope of inflation pressures also improved. That measure, however, was still showing slightly broader price pressures than pre-pandemic “norms”, suggesting there’s still room for more improvement.”

With the economy’s slow growth trajectory, the central bank has every reason to begin cutting interest rates soon.

 

(Article Courtesy of Dr. Sherry Cooper, Chief Economist, DLC)

 

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

How To Give Your Kids a Living Inheritance

General Angela Calla 14 Mar

One of the main ways a Reverse Mortgage is used to create family legacy is through a living inheritance, which the recipient often uses for a down payment. Parents can pass along their wealth now, when their kids need it most and without impacting their cashflow in retirement.

 

Living Inheritance – Gifted Down Payment

A living inheritance is a great way to grow generational wealth. When the adult children use the funds to enter the housing market, the extended family now has two properties appreciating in the Lower Mainland instead of one.

Traditionally, clients who want to help their children while still alive have requested a withdrawal through their financial planner. This assumes that those clients have enough saved to provide the gift to their children and still maintain their standard of living for the rest of their retirement years. And obviously, for clients who hold the majority of their wealth in their property, this isn’t an option.

Even for those clients who do have sufficient investments to facilitate a gift of that size, using a reverse mortgage for the living inheritance means parents can gift the funds with:

  • no impact to their monthly cashflow
  • no capital gains or income tax trigger
  • no depreciation of investments
  • no pension claw back

Not only are the parents investments left untouched and continuing to grow, the family now has two properties growing in value.

A note about living inheritance… the title insurers have been requesting additional documentation on living inheritance files. The title insurers may ask for a copy of the will and confirmation of how many children are in the family.

 

Recent Client Story – Gifted Down Payment

Charles (80) and Donna (74) have a $2.8M clear title home in Vancouver. They want to help their grandchildren purchase their first home. They spoke to their financial planner about withdrawing the money from their investments but, given the tax implications, she referred them to her mortgage broker instead.

CHIP approved loan amount: $1,148,500

They advanced $600,000 and gifted their granddaughters $300,000 each to use as a down payment. They were able to help their grandkids purchase a home without affecting their own lifestyle, without incurring an additional tax burden and their investments are still continuing to grow in value.

 

Living Inheritance PDF  

In another example this week, we have a great pdf (HEB_WealthCaseStudy_Mike_FINAL and Reverse Mortgage Financial Illustration Mike) from our investment division that compares gifting funds from investments vs gifting funds through a reverse mortgage. This illustration shows that when the reverse mortgage is are used, adequate cashflow is maintained through retirement whereas gifting from investments leads to a shortfall later in retirement. This can includes a financial projection that shows net equity in the home is maintained throughout retirement as well.

 

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Spring Market Update: Bank of Canada Holds Rates, Fixed Rates Drop, Optimism Ahead

General Angela Calla 6 Mar

As we step into the vibrant season of spring, it’s time for a quick update on the latest in the housing market and economic landscape.

Bank of Canada Maintains Rates:

In a recent announcement, the Bank of Canada has decided to maintain its key interest rate. For detailed insights, you can read the full report here.

Spring Market Buzz:

The arrival of spring has brought a flurry of activity in the housing market, with both sellers and buyers eager to make their moves. Fixed rates have seen a dip from their previous highs, sparking optimism among homeowners and prospective buyers alike. This drop in fixed rates has added an extra layer of excitement to the already bustling market.

Time-Sensitive Updates:

Also included on our social media @angelacallamortgageteam – give us a follow

First-Time Homebuyer Incentive:

Act fast! First-time homebuyers have a golden opportunity to save up to $8,000 if they have a purchase in place and can change to complete their purchase on or after April 1st 2024 if possible. Learn more about this time-sensitive offer here.  We have already viewed all of our existing clients with purchases in place to see who can benefit

Maximize Your Savings:

If you’re currently renting and dreaming of homeownership, don’t miss out on our blog post detailing how you can claim up to a $400 tax credit by filling out the form with your income tax filing. Check out the full details here.

Looking Ahead:

With fixed rates on the decline and optimism brewing about the possibility of even lower rates in the near future, it’s an exciting time for those considering entering the housing market. Additionally, with approximately 3 million mortgage renewals upcoming, it’s crucial not to settle for the wrong terms. Choosing the right mortgage terms can save you thousands and impact future cash flow.  If you or a loved one have a mortgage renewal upcoming, contact us directly to start planning today.

 

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

B.C. Renter’s Tax Credit

General Angela Calla 5 Mar

Are you getting prepared to do your income taxes? If you are a renter and make under $80,000 there is a tax credit waiting for you.

The nitty gritty is that if you make less than $60,000 you will get a $400 tax credit by filling out Form BC479 2023. This is the same form that you use for UCCB, UCCB, the Renovation Tax Credit for Seniors and Disabilities, training tax and renter’s tax credit.

If you (you being the entire family) make between $60,000 to $80,000 you will receive a reduced amount. Still, it is worth filling out a form!

Criteria are:

  • You occupied an eligible rental unit in BC under a tenancy agreement, license, sublease or similar arrangement for at least 6 one-month periods.
  • Rent was paid for the unit.
  • You are 19 year or older, a parent or cohabitating with a spouse or common law partner.

Eligible Rental units are house, apartment, condo, townhouse, basement suite, detached suite, carriage house, co-housing, dormitories, long-term care facility, shared housing (roommates), subsidized and employer-owned housing.

https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/credits/renters-tax-credit

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Essential Tips to Avoid Common Mistakes When Buying a Presale Property in BC

General Angela Calla 25 Jan

As a valued member of our community, we want to ensure that you make informed decisions when it comes to purchasing presale properties in British Columbia. Buying a presale property can be an exciting investment opportunity, but it’s crucial to navigate the process wisely to avoid potential pitfalls. In this article, we’ll outline some common mistakes to steer clear of when entering the presale market in BC.

 

Neglecting Due Diligence:

One of the most significant mistakes buyers make is not conducting thorough research. Before committing to a presale property, investigate the developer’s reputation, project timeline, and financial stability. Verify their past projects, reviews, and track record to gain confidence in your investment. You absolutely need to use your own realtor (independent of the developer and its associates) speak with your mortgage broker, financial planner, and lawyer Consideration for what will happen and what the back up plan is in the event of

– income change

-relationship or health status change

-potential resale restrictions,

-where the deposit and closing costs are coming from, there cost and risk in value for when the closing date is or can be delayed.

Its essential to not only look at your personal life circumstances, but what you will do if the market changes and more money is demanded due to shift in market conditions or time for completion.

 

Ignoring Market Trends:

Keep a close eye on the current real estate market trends in BC. Failing to understand market conditions can lead to overpaying for a property or investing in an area that may not yield the expected returns. Consult with real estate experts, review market reports, and stay informed about economic factors influencing property values. The costliest mistake we see if clients going to a developer directly, who is biased to sell there product they are NOT there to give unbiased advise.

 

Underestimating Costs:

Presale prices may seem attractive, but it’s crucial to account for additional costs such as closing fees, GST, Property Transfer Tax,  Property Taxes, and Strata Fees. Ensure you have a comprehensive understanding of all associated costs to avoid financial surprises down the line.

 

Overlooking Contract Details:

The presale contract is a legally binding document, and overlooking its details can lead to complications. Pay close attention to clauses related to completion dates, potential delays, and warranty information. Consult with a legal professional to ensure you fully comprehend the terms and conditions. While the presale market is regulated by the provincial government, contracts for presales or preconstructed units are not. He also said they can be sticky to negotiate, and the wording is weighted in favour of developers. Not only can the developer refuse to consider an “assignment” option, it’s also not required to deliver exactly what the buyer saw in a showroom.

 

Ignoring the Fine Print:

Developers often provide disclosure statements outlining important information about the project. Ignoring these documents can result in misunderstandings or unmet expectations. Take the time to read and understand all the fine print, seeking clarification on any points that may seem unclear. “That’s why the Real Estate Development Marketing Act requires developers to provide a disclosure statement and gives purchasers the right to cancel presale contracts within the first seven days, so consumers have time to think through their decision

 

Skipping Inspections:

Even though you’re purchasing a property that hasn’t been built yet, it’s crucial to hire a qualified inspector to assess the developer’s reputation and the quality of their previous constructions. An inspection can reveal potential issues and help you make an informed decision.

 

Overlooking Financing Options:

Buyers sometimes make the mistake of not exploring various financing options. Shop around for mortgage options with a mortgage broker, consider pre-approval, and be aware of the potential impact of interest rate changes on your financial situation. Always ensure you have a worst case scenario back up plan.

 

Neglecting Resale Potential:

Consider the long-term prospects of the property, including its resale potential. A presale property should not only meet your current needs but also be a sound investment for the future. Evaluate the neighborhood’s growth potential and amenities that contribute to long-term value. .”  When a developer allows a contract to be re-assigned then a fee of one to three per cent of the sale price is usually charged to the original buyer and they remain legally liable to complete the purchase if the new buyer fails to do so.

By avoiding these common mistakes, you can approach the presale property market in BC with confidence and make decisions that align with your financial goals. If you have any questions or concerns, don’t hesitate to reach out to us directly for an introduction to experienced professionals to assist in guiding you through all aspects to ensure you understand the pros and cons tailored to your specific situation.

Happy house hunting!

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Understanding Adjustable-Rate Mortgages: A Comparative Analysis

General Angela Calla 23 Jan

As part of our commitment to keeping you informed about mortgage options, we wanted to share important insights on Adjustable-Rate Mortgages (ARMs) and how they compare to other mortgage types.

Below is a summary of key points for your consideration:

  1. What You Should Know:

ARMs have an interest rate and payment amount that can change.

If prime rates rise, your monthly ARM payment will increase.

If prime DECREASES your monthly payment would Decrease ( improving cashflow)

The principal payment is fixed, ensuring your amortization stays on schedule.

A 0.50% increase in interest rates would raise the monthly payment of a $500,000 mortgage by roughly $100, this works the same way for a decrease.

 

  1. How Do Adjustable-Rate Mortgages Work?

ARM rates change based on the prime rate.

An increase in interest rates results in immediate higher interest payments.

Monthly payments increase, OR decrease impacting budgeting and planning.

 

  1. Comparing Variable Rate vs. Adjustable Rate Mortgages:

Variable rate mortgages have a fixed monthly payment, leading to potential challenges if interest rates rise. ( think Trigger Rates reached in 2022)

Adjustable rate mortgages allow for changes in the interest payment while keeping the principal payment fixed.

 

  1. Mortgage Trigger Rate: read here

A trigger rate can cause a sudden increase in payments for variable-rate mortgages.

Adjustable-rate mortgages adjust payments to maintain consistent principal payments.

See the videos here from CBC and Global news https://angelacalla.ca/general/interest-rates-still-on-the-rise-global-and-cbc-coverage/

 

Example of an Adjustable Mortgage Rate:

A $500,000 mortgage with a 0.50% increase in the prime rate can raise monthly payments by $100.

 

  1. 2022 Scenario:

Bank of Canada’s rate hikes in 2022 increased prime rates from 2.45% to 6.45%.

For a $500,000 mortgage, monthly payments could rise by approximately $1,107.

Prime Jan 2024 is sitting at 7.2% making that monthly payment now approx. $ 1,220.00

 

  1. Why Choose an Adjustable Mortgage Rate?

Gradual payment changes. OR declines

Convertibility to a fixed rate.

Lower mortgage penalties (3 months’ interest).

 

  1. Is an Adjustable Mortgage Rate Right For Me?

Consider your financial situation and ability to cover potential payment increases.

Assess your tolerance for risk and willingness to adapt to changing interest rates.

These insights aim to provide clarity as you evaluate mortgage options.

 

If you have any questions or would like to discuss your specific situation further, please don’t hesitate to reach out. We are here to assist you in making informed decisions tailored to your needs.

Angela Calla is an 19-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 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 hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

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