Newsletter November

Here are the latest news.

1. Prime Rate has changed, when to expect next increase?
2. Changes in property value – forecasts for the next two years.
3. What to do when Prime Rate increases? What to choose — mortgage with fixed or variable rate? Stay with current bank or look for an alternative?
4. The buyers can now obtain information on previous sales history of the property they are looking at.
5. Results of another “Three Nights Cottage Vacation” draw under “Manage Your Mortgage” program.
6. Introduction of a new program, helping build good credit faster – Clever Credit.
7. My Mortgage Tools. Excellent mobile app that allows to search for the best rate on the market, comes with a very easy to use modern calculators and many other features.

Now in more detail:

1. Prime Rate has changed, when to expect next increase?

On October 24th, 2018, Central Bank of Canada increased the overnight lending rate which resulted in an increase in Prime Rate. The overnight lending rate is now at 1.75% and the Prime Rate is 3.95% for most of the lenders. Unemployment level remains record low. On October 25th, 2018, “Financial Post” published an article titled “Gradual Axed” in which the Chair of Central Bank stated that he hopes to bring the interest rates back to normal economic levels. He said that he considers 2.5%-3.5% to be the norm, meaning we should see another 2-3 increases over the next 1-1.5 years. Experts believe that there will be no increase in December of this year but there may be one in January of 2019. Bank representatives warned though that they will be very cautions and will completely rely on statistical data available immediately prior to decision on rate change.
One of the indicators that has a strong influence on Central Bank’s decision is inflation. Inflation in Canada has decreased to 2.1% in October 2018, so decrease in unemployment cannot be the main factor in making a decision on increasing the overnight lending rate. Let’s hope the increases will not come too fast.

2. Changes in property value – forecast for the coming two years.

On November 7th, 2018 “Financial Post” published an article “Moderation” seen coming to housing market” in which the CMHC (Canada Housing and Mortgage Corporation) has forecasted development of the market for the next two years. The opinion of the insurance company is that in the next two years the real estate market will cool down, as the increase in prices will slow down. The federal insurance company believes that there will also be less new constructions. CMHC forecasts that the tendency of buying less expensive alternatives will continue, for example, a condominium instead of a pricy detached home.

In a few years the prices will continue to go up after a minor slowdown.
The company believes that, based on the economic growth forecasts and continuing increase in interest rates, the current demand for houses will not continue to grow, resulting in a lower demand to supply ratio but that the market should stabilize by 2020.

3. What to do when Prime Rate increases? What to choose — mortgage with fixed or variable rate? Stay with current bank or look for an alternative?

Nobody is expecting a crazy increase in interest rates but for many even these extra 2-3 increases can be critical. Let’s look at some options.

First thought is to move to fixed rate. You have to keep in mind that fixed rate is not going to be your current variable rate. What you receive is the fixed rate that is currently offered by the bank, this is typically not be the best rate. On top of that it is important to remember that if you are planning to sell the property or make changes to your current mortgage, the penalties with the large banks can be much larger that with the smaller lenders.

We can offer lower fixed rates but it is important to calculate and see how beneficial it is for you to switch to a new bank. It may turn out that the better alternative is to change from a variable rate mortgage with a small discount on Prime Rate to a variable rate mortgage with a larger discount. The interest payments on such mortgage will decrease, and even if the Prime Rate increases 2 or 3 more times, your rate will still not increase above the fixed rate that is currently being offered by the banks.
We can assist you with making the right and economically viable decision — stay with current situation or make the necessary changes.
New bank will cover legal and appraisal expenses on the property, so we do not have to worry about that.
If you come see us we will analyze your situation and provide you with calculations which helps you to realize what you should do.

Half an hour meeting or even a scheduled phone conversation can potentially help you save some money. Yes you will have to provide some documents to switch but often it is worth it.
We are waiting for your calls and meetings.

4. The buyers can now obtain information on previous sales history of the property they are looking at.

On August 23rd The Supreme Court of Canada denied an appeal by TREB (Toronto Real Estate Board) to not disclose history of sold properties. Usually the realtor provides us with this information. The debates on whether this kind of information should be available to the public has been going on for seven years. TREB pointed out that this will violate privacy of the sellers but the claim could not be sustained and it appears that the Competition Tribunal has won the case which will allow potential buyers to see and compare sales data of a specific area. You can find more information in this article.
https://www.thestar.com/business/real_estate/2018/09/18/realtors-allowed-to-post-sold-prices-finally.html.

5. Results of another “Three Nights Cottage Vacation” draw under “Manage Your Mortgage” program.

In October we held another draw for the Three Nights Cottage Vacation. The draw is for five prizes, one of which will allow the winners to take a cottage trip with family or friends. Check our website for the details and conditions of this draw https://www.totrov.com/three-night-cottage-vacation/.
But the draw is not the most important part, the “Manage Your Mortgage” program https://www.totrov.com/mortgage/manage-your-mortgage/ is so interesting on its own that everybody should participate in it, especially now, when the rates on mortgages are constantly increasing. You cannot lose, you win in every scenario during your mortgage renewal. Rates offered by the banks can increase at a very fast rate, both fixed and variable. If you read this article, http://www.totrov.com/resources/articles/art-2018-01-3/, you will remember how mortgage rates changed and understand that participation in this program is absolutely with no loss.

6. Introduction of a new program, helping build good credit faster – Clever Credit.
Our website now has a section dedicated to credit history. Credit history is very important and I pay a lot of attention to it. If you read the information available at this link https://www.totrov.com/mortgage/credit-history/, you will get a general idea on how to improve your credit history. But just recently a program was developed allowing to increase you credit rating faster based on your specific scenario.
Example from this program: the computer will tell you how much you should pay and by what date to increase your credit rating. It will even indicate how much this will increase your score.
Another example: you only have $300 available. The program will recommend how to split this amount between different cards to gain the best result in increasing your score.

In a short time this program will be launched with a 3-moth free trial. After that If you like it you can obtain the program for a small monthly fee which will be significantly lower than subscribing to Equifax bureau.
The program will only be available through our brokerage “Dominion Lending Centres” and I am sending this information to everybody in our mailing list.

7. My Mortgage Tools. Excellent mobile app that allows to search for the best rate on the market, comes with a very easy to use modern calculators and many other features.

You can download the app at the following link https://www.dlcapp.ca/app/Serguei-Totrov using your phone, you will now be able to:

• find the best mortgage rates on the market,
• calculate value of your purchase with stress test consideration,
• use a variety of calculators (Closing cost, Land Transfer Tax, GDS/TDS, Stress Test и др), that offers a lot of useful information,
• improve your knowledge on mortgage terminology.

This app is developed by DLC (Dominion Lending Centres) that is a company of which our company (DLC – Your Mortgage Choice) is a franchise.
We are waiting for your calls and meetings.
Our office is open 9 a.m. to 9 p.m. and by appointments on Saturday.

Сергей Тотров
Financial Advisor, CLU
Mortgage Broker, AMP
416-222-0533

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