Financing Trends to Watch for in 2010 and How They Might Affect You
What Will Make Mortgage News in 2010?
1. Rates will move up.
As much as we consumers have enjoyed the all-time low borrowing rates of 2008 and 2009, inevitably, when it comes to rates “what comes down must go back up again”.
Fixed rates will likely play a boomerang game, with small changes up and down until early Summer. At this time it is predicted that rates will start making their charge uphill, closing 0.75-1.25% higher by year-end.
Prime rate (or what variable rate mortgages are based on) is predicted to be increased .25% in June, with 2-3 subsequent increases by year-end.
What does this mean for you? If you have adjusted to low mortgage payments (always an easy adjustment to pay less), prepare to adjust to higher payments NOW. Start budgeting for payments 15-20% higher and do not take on any new debt unless you are absolutely certain that you could make all your payments easily, even if they were all increased by 20%. If you have equity in your home (10% or more), consider consolidating all of your outstanding debt into your mortgage, resulting in one combined lower payment.
2. 30/10 may be on its way.
Just a mention of lower amortizations (from 35 to 30 years) and higher down payment (from 5% to 10%) requirements by Canada’s Finance Minister indicate that it is much more than a consideration – probably already in the works. A possible deterrent from the change? If the real estate market cools on its own, the government will likely hold off on any intervention.
3. New variable rate mortgages will return to better discounts.
Rates for new variable mortgages have been on quite the roller coaster over the past 18 months. From a discount as great as Prime - 1.00% to as much as Prime + 1.00%, not all variable mortgages have been equal. If your currently have a variable mortgage with a discount greater than 0.50%, you will probably want to continue with this mortgage for at least the next 12 months. If you are in the market for a new variable mortgage, you may be better off taking a short-term fixed or open variable and convert to the variable at a better discount.
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