Newsletter March 2020-3

The situation is changing rapidly.

1. Another decrease in Prime Rate and what will happen next?
2. Government support.
3. Mortgage payments – how we can assist you in getting help from the bank?
4. What can all of us do in these challenging times?

Now in a little more details:

1. Another decrease in Prime Rate and what will happen next?

Central Bank of Canada has again, outside of set schedule, lowered the overnight lending rate down to 0.25%. This kind of decrease has happened before, in years 2001 and 2008-2009, but we have never seen it at such rapid pace. In just one month, the rate was lowered from 1.75% to 0.25%.
Currently, the overnight lending rate is at the 0.25% mark. Prime Rate has also been lowered from 3.95% to 2.45%. People that have a variable rate mortgage should be happy as their interest on the mortgage has decreased with the Prime Rate. People with equity lines of credit (secured and unsecured), will also see a decrease in the interest rates in their monthly statements.

Next scheduled meeting for Central Bank of Canada is scheduled for April 15th, 2020.
Experts believe that, for now, there will not be any more rate drops as the government will attempt to implement other measures to support the situation in the country. As the overnight lending rate has been decreased to a very low level, the banks have changed the terms of their variable rate mortgages. Previously, the formula for the rate was: Prime Rate – 0.75% or even minus 1.00%. Unfortunately, the formula has now been changed and the banks are now giving mortgages with Prime plus, sometimes even + 0.20%.
The same situation has already happened in October of 2008, after market crush. Prime Rate was rapidly decreased and all banks have changed the terms of variable rate mortgages from minus 0.75% to plus 1.00%. This came as a shock as nobody expected it. The situation can repeat itself, the changes have already started. For some time, we may be having a variable rate mortgage at Prime + 1.00%.

What is happening with the fixed rate?
Fixed rate also increased, as the government bonds have higher yields and are now 3.00%.
Today, when the volatility of the rates is a daily occurrence, it would be very beneficial to read a section on our website talking about how you can lock in the best rate for when the time comes to renew your mortgage http://www.totrov.com/en/mortgage-en/manage-your-mortgage/.
I am certain you cannot lose and everybody benefits from participating in this program.

2. Government Support.

On our main page, in the top right corner, we have placed a banner – link to government initiatives, designed to support individuals and businesses, for the most part small and medium https://www.totrov.com/en/home-en/.
This link contains fairly detailed information on what support is available to individuals and businesses. Information on government websites is constantly updated. Application for Emergency Care Benefit will be available 6th of April.
Due to the fact that the tax filing and payment have been postponed, we would like to warn you that regular benefits, such as child benefits, pension supplements and other social benefits, that are sent out annually on July 1st, may not come in for people that have not completed their taxes for 2019 prior to May 1st, 2020. This is because social assistance is always based on the previous year’s income, it is a good idea to do your taxes on time, or otherwise it may delay receiving benefits that you are entitled to.

3. Mortgage payments – how we can assist you in getting help from the bank?

As has been mentioned, the banks are reviewing applications on mortgage payment deferrals. I was able to get a hold of my bank in just 5 minutes, this was Manulife Bank.
But our office has received a number of calls from our clients that were unable to get a hold of their banks.
We can help you in this situation.
Many banks have created a special web page that allows submission of an application on mortgage payment deferrals.
Banks that we work with have provided us with information on how clients should be submitting an application and we are of course ready to share that information with you.
You can send us a request and ask us to send you a link with explanation of the process of applying for payment deferrals with your bank. Of course you would have to indicate what bank you are with.
If we have this information we will gladly share it with you. If not, we will send a request to the bank and will let you know as soon as possible.
Banks continue to remind us that the decisions on approving deferrals are on case-by-case, individual cases, but anybody can apply.
I would like to clarify that, at the end of the 6-months period, you will not have to pay double payments on your mortgage. Some people are worried about this.

Here is an example on how it will work.
For example, a household has a mortgage of $400,000 and the monthly payments are $2,000 per month. $1,000 goes to the bank towards the interest and $1,000 goes towards the balance of your debt (principal).
Of course, if you are not paying your mortgage balance for 6 months, the amount of the debt remains unchanged. And the interest amount of $1,000 that you are also not paying to the bank will get added to your balance of $400,000 and in 6 months you will have a mortgage balance of $406,000. You continue to pay as usual after the fact and the interest is calculated on the new balance of $406,000. It will not have much effect on your further payments.

4. What can all of us do in these challenging times?

We are all extremely worried about the serious situation in the world, in the economy, in our everyday lives, we are worried about our close ones, but we will not fall into panic.
The world and us will deal with it. Maybe not right away but we will.
Let’s try to focus on the positives in every situation, regardless of how hard it is.
I will share our experience.
When we were in the middle of our immigration, our family ended up in Hungary and we spent 11 months there back in year 1996. For the first 9 months we had no money for food, TV, radio, and only one bed for all four of us. Internet was just a dream back then. You could lose hope in times like these but I told my wife:
– When does it happen that the family is all together all day? – Only on vacations. Let’s pretend we are on vacation. Let’s use the moment. Maybe we will never get such long vacation again…
And we spent our time together with our kids and embraced it.
What is happening today? Many of us are forced to stay home.
We are definitely not going hungry, we have TVs and internet. This is an opportunity to spend more time with kids and your significant others, socialize, watch a kind movie together.
Do something around the house, that was being put off before. Do something you love, that was just waiting for its time – something as simple as making snowflakes from napkins, this can open a world of creativity for your child…
Help is on the way!!! It will come and will definitely reach each one of us. It will surely be there for those of us in dire need.
We just have to wait!!!

For that reason, let’s not worry too much, let’s not get upset that something isn’t going our way today… We will get to do everything that is needed in our life.
Just try to do your part and the other side will come through as well.
By the way, I recently came across an advice from a doctor, if you have bought a lot of food, you can leave a portion of it in your garage for now. If there is virus, it will just die off.
I liked it, didn’t think about it. But it is interesting…
Do not read negative articles online!!!
Enjoy the interesting videos and phrases that you may receive on your phone.

For those that do not use smartphones, here are some sample phrases:

• We are traveling again! Visited our capital again – kitchen.
• After spending a few days at home, I realized why my cat always asks for food!!!
• Third time buying groceries this week, two weeks supply each time…
• One more week of quarantine and I am going to need a bigger mask!!!
• If the schools are closed for too long, the parents will find vaccines before the scientists do…

Stay HEALTHY!!!

Serguei Totrov
Financial Advisor, CFP, CLU, EPC
Mortgage Broker, AMP
TOP – 75 Broker in Canada
in 2015, 2016, 2017, 2018
416-222-0533
www.totrov.com

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