In many ways, 2010 was the start of a return to normalcy. Interest rates began their slow march back to sustainable levels, non-insured mortgage options returned to the marketplace, and private default insurers re-asserted themselves (Genworth and Canada Guaranty).
In other ways, 2010 was atypical. The government enacted sweeping new mortgage rules and mortgage rates yo-yo’d back to all-time lows despite widespread predictions otherwise. Among these developments came three of the year’s top mortgage trends.
1. New Mortgage Guidelines: In an effort to pre-empt excessive borrowing, the government imposed far-reaching new mortgage rules. That made it harder to qualify for a variable-rate mortgage, harder to consolidate debt, harder to get a rental property mortgage, and harder for self-employed homeowners to qualify for high-ratio financing.
2. Astonishing Rates: Mortgage rates made historic lows in 2010. In turn, rock-bottom rates and extended amortizations stoked home demand (some say over-stoked) with monthly payments as much as 30% below long-term averages for the same mortgage amount. Giveaway rates had to end sometime, however.
3. Changing Nature of Posted Rates: Instead of raising posted and discounted rates simultaneously, banks (led by RBC) deviated from tradition in late 2010. As client rates rose, banks held down posted rates. The banks’ stated objective was to appear more competitive, but the sub-plots were more interesting. Suppressing posted rates had major implications for:
• Qualification rates (making 1-4 year terms and variables easier to get)
• IRD penalties (which, at some lenders, would have decreased if posted rates had risen)
• Cash-back down payment mortgages (which are sold at posted rates and got relatively cheaper)
In other ways, 2010 was atypical. The government enacted sweeping new mortgage rules and mortgage rates yo-yo’d back to all-time lows despite widespread predictions otherwise. Among these developments came three of the year’s top mortgage trends.
1. New Mortgage Guidelines: In an effort to pre-empt excessive borrowing, the government imposed far-reaching new mortgage rules. That made it harder to qualify for a variable-rate mortgage, harder to consolidate debt, harder to get a rental property mortgage, and harder for self-employed homeowners to qualify for high-ratio financing.
2. Astonishing Rates: Mortgage rates made historic lows in 2010. In turn, rock-bottom rates and extended amortizations stoked home demand (some say over-stoked) with monthly payments as much as 30% below long-term averages for the same mortgage amount. Giveaway rates had to end sometime, however.
3. Changing Nature of Posted Rates: Instead of raising posted and discounted rates simultaneously, banks (led by RBC) deviated from tradition in late 2010. As client rates rose, banks held down posted rates. The banks’ stated objective was to appear more competitive, but the sub-plots were more interesting. Suppressing posted rates had major implications for:
• Qualification rates (making 1-4 year terms and variables easier to get)
• IRD penalties (which, at some lenders, would have decreased if posted rates had risen)
• Cash-back down payment mortgages (which are sold at posted rates and got relatively cheaper)
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