Mortgage rates can go low again this year, just like it did last year when it was not supposed to; but is this all we’re to expect for 2016? Obviously not! Below are 2016 mortgage trends you’ll have to watch out for.
A Private Lending Rebirth?
Call it a mini renaissance if you will but it is clear that 2016 is the year for private lenders. Banks are getting pickier regarding who they lend money to since government mortgage has been tightening but things are going the opposite direction for private lenders. It will be easier for private mortgage investments corporations to get their hands on some capital with new regulations, thereby giving them more money to lend. There will be more competition for borrowers who can’t qualify for a bank loan so private lending rates are bound to drop while the amount available for lending increases. This can encourage bundling (essentially getting a second mortgage), leading to shadow lending activity that policy-makers will surely monitor closely.
Possible Increase in Missed Payments?
New Rules in the mortgage market leads to tighter lending rules and a safer housing market, but with world economy slowing down and oil plunging down, quite a number of Canadians might be facing unemployment this year. Losing jobs means lost income and not making enough to cover mortgage payments. The number of people who are behind their mortgage is at only around 27 out of every 10,000 borrowers but that might change to a higher ratio in 2016.
Cold and Hot Housing Markets
Oh yes, they will definitely persist this year! Numbers might be a little bit skewed with the national home price average hitting another record. However, it should be noted that prices are actually 4.7% lower in 2015 as compared to 2014 if we’re to take British Columbia and Ontario out of the mix.
Hot and cold housing markets largely depends on geography. Even with higher required down payments, Vancouver’s and Toronto’s housing markets will still be piping hot while the weaker markets will surely be showing a noticeable dip in sales of higher-end homes. Needless to say, a more conservative appraisal is to be expected for homes costing more than $500,000 if you’re refinancing in the weaker markets.
All Time Mortgage Rate Lows
Unless the economy surprises us with a rebound, we can expect mortgage rates to be at their all-time low this year (at least in recent history). However, rates may not go as low as they could go because government guarantee fees are being raised in some places like Ottawa, making banks more careful and thereby holding on to more capital as a security measure if mortgages go bad.
Perceived risks will make investors try to compensate by demanding higher returns, making borrowing from banks a more expensive process for the borrower. Perhaps we really are going to witness private lending renaissance; making this year as the best time to invest as a private mortgage lender!
Interested in being a private mortgage lender or perhaps looking for one? Contact the best mortgage brokers in Toronto! Call us at 1-866-820-1818 and we’ll answer all your mortgage questions the best we can.