POLICIES, PROCEDURES & PRECAUTIONS
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Below are some updates from local Guelph mortgage professionals. Select each tab to expand the information.
INCREASE IN FIXED + VARIABLE RATES
There is a lot going on with the evolution of the COVID-19 virus. In the beginning of the month, the Bank of Canada announced they were dropping their prime rate by 0.5%. This was the first drop the BoC has done in 5 years. Once the BoC dropped rates all of the major banks followed suit by dropping their fixed and variable rate mortgages significantly. As the spread of COVID-19 ramped up many of the banks began slightly raising rates even though it has been announced that the BoC had dropped their prime rate an additional 0.5%. There has been a lot of speculation as normally a prime drop would entail a rate drop. In this case, the opposite has happened over the weekend we saw an increase in fixed and variable rates which in this environment is likely the banks fearing liquidity drying up. At the moment there is a sense of risk in the air, even with the Bank of Canada lowering rates and adding to bank’s balance sheets.
When consumers buy bonds, the yield on the bonds goes down, When consumers are not buying bonds the yields on them goes up. Therefore, for the bond yields to be going down and the banks raising their fixed rates, it tells us that something is wrong. This likely means that the banks have stopped lending to each other and are starting to tighten up.
MORTGAGE PAYMENT DEFERRAL PROGRAM
As of March 17th, the government along with CMHC announced a mortgage payment deferral program that would allow borrowers with insured mortgages to temporarily reduce or defer mortgage payments which would stretch out the mortgage term and amortization as well as adding missed payments back on the mortgage.
Although there is some help that the government and the 6 major banks are extending to borrowers, we should not feel as though we are getting to entirely miss, and not pay mortgage payments for an extended period of time. The banks will definitely ensure they get the money that is owed to them and are just looking to provide short term relief for borrowers. On the uninsured side, we see many lenders that offer mortgages with skip-a-payment options which would allow a borrower to avoid making a regularly scheduled payment without affecting their credit rating.
In this case, the borrower will also eventually end up making the skipped payment. Flexible payment options will highly vary based on your lender and the current mortgage you are in so it will be best to call your bank or mortgage broker for details. It is important to note that many changes being made to help borrowers are going to be done so on a case-by-case basis so there may be some variance on what can happen for each individual borrower.
To be clear on the deferral program, it will be approved on a case by case basis by a program that the lenders have developed internally. They will look at the borrower and assess if they really need the program (i.e they have been laid off, no savings, etc). One thing a deferred to skipped payment will not do is hurt a borrower’s credit.
THE NEXT FEW MONTHS
Looking at the next few months through the scope of an investor it is definitely going to be as good a time as any to start acquiring assets and growing portfolios. We will see how the housing market is affected (there will certainly be some effect) and can act accordingly. As with many turns in the market, it is evident that those with access to credit and capital will be able to come out of this downturn ahead.
LORENZO PODDA | Mortgage Agent
RBC announced this week that we will be offering relief to mortgages and personal lending products including loans, credit cards and automotive financing for up to 6 months deferred payments for those impacted by COVID-19(conditions apply).
While we are experiencing unprecedented circumstances, it does not change the fact that Millions of dollars of real estate will be closing in 2020 and beyond. While we cannot predict the future for lending guidelines and peoples ability to qualify, one thing is certain, the RBC Firm Approval is needed today more than ever.
It is fair to say, buyers, developers and realtors are all asking the tough questions about their respective businesses and how it will be impacted by Covid-19. As you all know, nothing can protect your businessand our clients,like the RBC FIRM Approval.
As we have no way of predicting a buyers ability to qualify for financing in the future, today, we can protect a buyer with a FIRM approval for up to 48 months in some cases.Credit check completed, appraisal and guaranteed financing come close.Too often I see clients scrambling last minuteon both the re-sale and new construction sidewhen they thought they were approved but were not and maybe dont qualify come closing because of higher debt load, or a new job, or became self-employedas a lender decided to do a further check closer to their closing date. RBCs Firm Approvalwill protect our clients, ourselves and our partners in the industry.
RBC CAN LOOK AT OFFERING(Conditions Apply):
- Up to 6 months mortgage payments to be deferred
- Up to 6 months credit card payments deferred
- Up to 6 months personal lending payments deferred (ie: loans)
- Up to 6 months automotive finance payments deferred
If you are concerned about your ability to close due to financing, please feel free to email me or reach out to an RBC Specialist you work with we are here to help!
STEFANIE KNIGHT | Mortgage Specialist
RBC Royal Bank
Paul Gazzola shares what you need to know about the latest interest rate cut here:
Paul Gazzola | Mortgage Broker
Paul Gazzola-Guelph Mortgage Architects
- Solution 2 month Skip a Pay (cannot be offered if credit card is Charged Off Bad Debt (COBD) or if client has filed for bankruptcy)
- Solution 2 month Skip a Pay (cannot be offered if loan is NPNA or if client has filed for bankruptcy)
- Transfer call to Emergency Line 1-877-454-9030
SeanReynolds| Financial AdvisorCFP
CIBC – 374 Stone Rd. W