Mortgage Update – August 2018

I hope that everyone is having (and has had) a good summer. September is approaching far too quickly and the memories of heading back to school are still fresh in my mind. This was never a fun time of year as a child, knowing that summer was winding down and the return to routine, learning and homework was near. As an adult, I’m happy to be past the “back to school” phase of my life. Now, I get to sit in an office and try to think of ways to make mortgage news sound exciting!

Lucky for me, it has been a relatively interesting year to be working in the real estate/mortgage industry. The Kingston real estate market is hot, rates are on the move, and the new stress tests are making things interesting (i.e. challenging) for homeowners, prospective homebuyers and, of course, myself. Here is what you need to know:

Kingston Market

– The Kingston real estate market remains a seller’s market (low inventory, high demand).
– Most homes are receiving multiple offers and are selling for over asking price.
– We are seeing a large influx of people from Toronto and other cities moving to Kingston where real estate is more affordable, creating greater demand.
– House sales were down 18% this June compared to last June. Less inventory = Less sales.
– On the flip side, the average sale price in June is up 7% compared to last year. Average sale price was $360,811.
– If you are currently looking to buy, it’s important to not get discouraged. The best advice I can offer is to be prepared, know what you can afford, and consult a good realtor who can help you navigate the market.

Stress Test

– In January of this year, the government introduced the stress test for conventional mortgages.
The new stress test would require that applicants qualify at a rate that is 2% greater than the rate they are actually receiving.
– This is similar to the stress test that was introduced for insured mortgages in October 2016.
– All mortgage applications are now being stress-tested.
– We are seeing applicants qualifying for about 20% less than they did before the stress testing began.
– The biggest impact, in my opinion, has been on first time buyers who are being forced to put off buying to save more or they are turning to their parents for help.

Interest Rates

– The Bank of Canada increased the overnight rate in July for the fourth time in the past year. The prime lending rate is now at 3.70%. When the prime rate changes, only variable rate mortgages and lines of credit are affected (not fixed rate mortgages).
– Prior to these four increases, the prime rate had not increased for seven years.
– It is possible that we may see one more increase to the prime rate this year but expect the pace of increases to slow down, as the government needs to be cautious about how quickly rates rise.
– Fixed rates are up .50% to 1.0% since 2017. A standard 5 year fixed rate can range any where from 3.44% – 3.89% at the moment.
– Fixed rates have been fairly stable over the past few months, with only some minor fluctuations here and there.
– Fixed rates remain below 4%, which is still very good historically.

I hope this information is helpful. Please feel free to contact me if you have any questions or concerns about your own mortgage. Of course, if you have friends or family that need mortgage advice, I would be more than happy to help them out.

Take care,

Mitch