The Canadian mortgage market experienced a number of changes this past year. There were some ups and there were certainly some downs. The following are some of the biggest trends from the past year, and how we expect the market to unfold in 2012.
Trend #1 – Better Broker Services
Federal regulations have long been in place that allowed banks and their mortgage representatives to operate on a nationwide scale. Unfortunately, mortgage brokers faced sticky provincial regulations thats restricted their ability to do business on a cross-country basis. This all changed back in July, when the Agreement for Internal Trade was revised to permit interprovincal brokering. The following are some of the key changes that were made to the Agreement:
- Duly licensed mortgage brokers can now gain authorization to do business in other provinces without having to complete any additional training or take any additional testing.
- The brokerage where the broker plans to work must be licensed in all of the provinces where business will be conducted.
Steps have also been taken to equalize errors and omissions insurance. Ontario, Alberta, Saskatchewan and Manitoba are now all following similar models.
Trend #2 – Historically Low Rates
Last year was a good year to get pre-approved for a mortgage. Economists from coast-to-coast pushed back what many thought was a guaranteed rate hike, saving home hunters from an increase until at least mid 2012 (possibly not until 2013). The European debt crisis continued to funnel investment anxiety overseas, which helped fuel bond sales in Canada, causing fixed rate mortgages to plummet to unprecedented lows. If you purchased a home last year, you may have been lucky enough to secure a 2.49% fixed rate for two-years, or a 2.89% rate locked for four years.
The crazy thing is, rates could have been even lower! Funding costs permitted it, but as always, the desire to reap higher profits caused lenders’ to keep fixed rates slightly higher.
Economists feel that housing sales will remain high during the early part of 2012, as borrowers look to lock in rates before an expected increase. Market conditions are expected to remain stable, with a slight advantage to sellers. With that being said, downside risk is being forecasted for later in the year.
Trend #3 – The Disappearing Variable Rate
Variable rate mortgages have always been a bit of a risk. It takes a strong stomach to weather fluctuating interest rates, but often the reward is well worth it. But that only works if the discounts are sizeable. Variable rate savings dwindled in August of 2011, thanks in part to the U.S. debt downgrade.
Don’t expect this to remain a trend in 2012. Variable rates will likely make a comeback, albeit not for a few quarters.
Trend #4 – A World of Restrictions
Increased consumer debt was just one of the reasons behind the introduction of increased mortgage rules last year. The biggest kick? The death of 35-year amortizations and refinances over an 85% loan to value ratio. This quickly sparked a dominon effect of changes, including a significant drop in insured refinances and an increased interest in 5% cash-back refinance mortgages.
Changes also made it difficult for non-traditional lenders to offer HELOCs, thanks to the removal of government insurance on secured lines of credit.
Mortgage rates remain at extremely low levels. And while most experts expect these rates to remain level, some foresee the Bank of Canada reducing its interest rates even further to accommodate employment uncertainty, and rising consumer debt.
Only time will tell what happens in 2012. Stay tuned to MortgageTalkCanada.ca for all the latest mortgage news and priceless financial advice.