RATE CHANGE - LOWEST IN HISTORY 

The Bank of Canada lowers the overnight rate by.25% to a rate of .25%. Mark Carney,  the Governor of the Bank of Canada, stated that this cut is due to the intensified Global Recession of all major world economies. He stated that he does not see Canada's economy start to recover until the last ¼  of 2009 but the full recovery will take until 2011. The overnight rate is said to remain stable until 2010.  

In total the Bank of Canada has reduced its overnight rate by 425 basis points since Dec 2007.  When the economy does start to return to full production the Bank of Canada will have to remove the stimulus that it has injected into the market place, telling us that we can expect a rather significant jump in the rates 2012 onward; the 425 put in will have to be removed once we are in a normal to growing economy.

So much for the good news.

BUT IF YOU ARE A BUYER?

While it is true that there is ample money to lend once again, the lenders and insures have made some changes to underwriting guidelines that are important for you to be aware of.

• Currently most lenders are only using CMHC for high ratio mortgages. Genworth and AIG are not being used by most lenders because of the concern that they will not be able to payout on future claims due to financial viability.
• CMHC and Genworth have changed their underwriting guidelines from using up to 44% of gross income to be used for qualification to 35% of gross income for housing costs and 42% for housing plus additional fixed debt payments. This will mean that people pre approved may no longer be approved once the file goes live. I would suggest that you speak with your purchasers and have them talk to their mortgage broker to confirm that they are still looking at the correct price range
• Lenders and CMHC are taking several days to process applications. When the purchaser presents us with the purchase agreement, their file is finally reviewed in detail by the lender and is sent to the insurer to obtain an approval. CMHC is taking up to 1-2 days to review applications in certain cases ( those where the EMILI system is not granting an auto approval - which is 50% of the applications currently). Lenders have taken up to 7 days to process applications due to volume.
• CMHC has essentially dropped the Self Employed program which may effect any pre approvals in the pipeline. Deals approved 2-3 weeks ago can no longer get approved.

I have noticed that CMHC is now questioning value... which is unfortunate as they are about 3 months behind schedule. The real estate market is starting to heat up in certain market areas with competing offers on good, well priced properties; and CMHC is finally questioning the value. This is resulting in them scrutinizing over any offer going above the list price.

Realtors feel the need to tighten up their offers to ensure success for their buyers and vendors, but the lenders and CMHC are taking more time to process the files.

As you can see, there is a disconnect within the total process.. please keep these changes in mind when dealing with your purchasers and your negotiation of contracts so that we can ensure that the clients experience remains a positive experience.

THese comments courtesy of;

Paula Siemens -AMP
INVIS - SIEMENS GROUP

 If you are looking to Buy or to Sell real estate in Vancouver area, give me a call. My consultations are FREE. The benefits to You, may be worth a lot of money.
Call Jeff Stark at 604-506-8481 or email me at jeff@jeffreystark.net