This year’s year in review pretty much started in the month of September of 2008; this year is still feeling the effects from the collapse of the economy back then and its credit crunch. Because of that we still have the government tightening mortgage rules and regulations; rates are still extremely low, first-time buyers own the market and we are just plain lucky to be in Alberta.
Last January, Federal Finance Minister Jim Flaherty announced some game changers once again which has essentially taken out a large portion of the mortgage market. Firstly, he lowered the total amortization time down from 35 years to 30. At the same time he lowered the percentage level one can refinance their house too; it went from 90% of its value to 85% taking with it a third of the refinance market and leaving many Canadians without an option to save their financial problems.
The best part is you can still buy a house with zero down payment, the lender simply borrows you the 5% and you pay it back with a higher interest rate as long as your credit bureau score is above 650 and you some of the closing costs.
And lastly, and without sizzle CMHC is unable to finance home equity lines of credit.
Because of the sweeping changes made to the mortgage rules, first-time buyers came out in hoards snapping up the 35-year amortization and super low interest rates, but that all ended in March. The next couple of months created some confusion in the market whereas the consumer was trying to understand the changes, and even some real estate professionals were trying to come to terms the changes, some even hearing rumors that you needed 10% down to buy a house.
Needless to say, April and May were slow in the housing industry.
June came along, and with it some rays of sunshine and the sloppiness of spring had all but left, leaving the consumer happy to get out shopping.
Stats Canada had reported that the first quarter of the year in the housing industry showed modest growth and this created a more confident consumer, which the market needs to turn itself around.
Five-year fixed interest rates throughout most of the year were below the 4% level and in August ATB came out with a heart stopping 3.09%. While it only lasted two weeks before they shut down operations for three weeks, that rate still has yet to be beat.
But the biggest story of the year when it comes to rates has to be the variable rate. It slid back down to prime minus .85%, meaning one was able to get a rate as low as 2.15%, and with the world economy slipping Canadians were actually confident that the government wasn’t going to be increasing prime anytime soon.
Due to the overwhelming response of those jumping on the variable band wagon, lenders soon found out that this product isn’t as profitable as it should be and quickly closed the doors on the variable discount as we are currently sitting at between prime minus .10 to prime plus .10, meaning 2.90 – 3.10% taking away the incentive almost overnight as consumers quickly clamored to the safety of the four or five-year fixed.
If you are a first-time buyer and live in western Canada, this is your time!
It has been and will still be a buyers’ market for a few more months, my best estimate based on data coming from Alberta Finance & Enterprise is that it will last until late spring/early summer as the oilfields have had a few great seasons and the boys are flush with cash.
With strong gains in employment along with interprovincial and international migration flowing to Alberta and Saskatchewan we’ll be moving into a balanced housing market soon enough and housing values will start increasing at a regular pace.
So if you are in the market to buy a home we’ve had and will continue to have extremely low interest rates for a little while yet mostly because of global economic uncertainty, which is of huge benefit if you are buying a house in Alberta as our energy is sought after the world over creating a solid economy.
But if you are in financial trouble and need access to the 15% equity in your home, don’t count on CMHC changing their tune anytime soon. Your best bet is to sell your home, pay off your bills with the cash and you can still get into the market with a government-backed zero down payment product. Some things make sense, others don’t, but that’s government right?
Jean-Guy Turcotte is an Accredited Mortgage Professional with DLC- Regional Mortgage Group and can be contacted for appointments at 403-343-1125, texted to 403-391-2552 or emailed to firstname.lastname@example.org.