What’s new in mortgage financing?
BY SCOTT MOORE, RealtorThere’s so much chatter in real estate right now online and in the news — interest rates and purchase prices and multiple offers — I thought it was time to connect with someone with real hands-on knowledge about what’s actually happening out there, today.
Marc Rouire is a really experienced mortgage broker and partner at Castle Mortgage that has worked with hundreds of our clients over the years (including my own personal mortgages)— so I reached out to him to pick his brain about what’s really going on in the world of mortgage financing.
Of course my first question was about what’s going to come with interest rates.
Scott: When do you anticipate rates will come down?
Marc: The Bank of Canada made it’s announcement last week. They still stress that inflation is still too high at the moment to start lowering rates immediately. But lower rates are on the horizon eventually.
The Bank of Canada forecast for rates can always be taken with a grain of salt. The bond market has a much better track record on predicting the Bank of Canada’s next move. The bond futures market had been predicting the first Bank of Canada rate cut to come in April 2024. But that forecast seems to have been pushed out until June 2024.
Scott: What’s your read on the vibe out there with buyers? Are people waiting til rates lower? Have you noticed any trends among sellers?
Marc: I have had people mention to me that they may consider waiting to purchase a home until rates come down this year. The issue I have with that is that if you’re waiting for a rate drop of 0.25% or 0.50% but prices increase by 2 or 3% over the same period, you’ve done yourself a disservice. You would end up paying more in purchase price than you would in interest saved by the decreasing rates. Over my many years of lending I find that one saying always holds true: when asked “when is it a good time to buy real estate?” I always answer: “Yesterday.” Values will always eventually go up getting in the market is key to taking advantage of that.
Scott: If you bought a house today with a fixed mortgage, what does that look like once rates come down? How about a variable mortgage?
Marc: Buyers and borrowers are mostly opting for 3 or 5 year fixed rates which are the most aggressively priced at the moment. They also qualify for more mortgage because the lower the actual rate the lower the qualifying stress test rate. Variable is also becoming more attractive but until the prime rate starts coming down I prefer a three year fixed term.
If you do sign for a higher rate now there will possibly be an opportunity to lower your rate with a refinance down the road. This should only be recommended to you if the interest savings is more than the penalty to break the existing term. If rates have come down significantly and you’re signed at a higher rate it could make sense to break your term and choose the new lower rate. This is determined on a case by case basis because not all mortgages are created equal. Some Lenders may also allow you to blend your higher rate with the new lower rate.
Scott: What if you bought a home a few years ago and are locked in at a good rate for a few more years- are you stuck with that house or is there a way to keep the rate?
Marc: If you do have an attractive rate and want to sell your home there is a solution for you. Your current rate should be portable to your next home without penalty.If you do require additional funds the Lender normally blends the existing rate with the new rate for the corresponding term.
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And that’s a wrap! If you want to contact Marc directly, please feel free:
Marc Rouire, Castle Mortgage Group – Partner
204-474-1277 - Ext 205