My Mortgage Blog

COVID-19 is impacting everything, not just the stock market and mortgage rates. Like me, you've probably received an endless stream of emails from companies stating their policy on COVID-19. This is unprecedented and I think we can expect more emails, and a constantly changing environment, as the situation continues to evolve.

Mortgage Rates and COVID-19

On March 4, the Bank of Canada announced a 50 basis point drop in the overnight rate. They lowered it from 1.75% to 1.25%. This was directly related to the market's response to COVID-19 and the US Fed dropping their rates. Lenders follower suit and passed on that full savings to variable rate customers decreasing their Prime Rate to 3.45%.

We also saw the bond market spiral downward resulting in corresponding decreases to fixed rates.

Then, on Friday, March 13 the Bank of Canada announced a second, emergency, 50 basis point drop. The overnight rate dropped to 0.75%. We're still waiting to see what the major banks do with their Prime Rate as a result of Friday's announcement.

Mortgage rates are changing daily because of COVID-19. It's been a crazy time and it's not ending anytime soon.

If you're currently in a variable rate mortgage, this could be great news for you. We MAY see Prime Rate return to 2017 levels.

If you're in a fixed rate mortgage, you may want to look at a refinance to decrease your current rate. Depending on the lender, and the time left to maturity, you may find that any penalty you would have to pay is offset by the rate savings.

What are the Government and lenders doing?

On Saturday CMHC announced that they are working with the other two insurers in Canada to help homeowners financially impacted by COVID-19. Here is what they announce on Twitter:

"We're working with Genworth and Canada Guaranty to help homeowners financially impacted by the COVID-19 outbreak. We’ve increased our flexibilities to allow payment deferral of up to 6 months starting now.

"Tools available include:

  • Deferral of payment
  • Re-amortization of the loan
  • Capitalization of outstanding interest arrears and other eligible expenses
  • Special payment arrangements "

They have instructed lenders to get in touch with their CMHC rep to find out more.

In addition, the Government announced yesterday (March 16) that they are launching a revised Insured Mortgage Purchase Program. More details on this program to be provided later this week.

We've also seen two major lenders, RMG and MCAP, highlighted that, under the terms of their mortgages, homeowners holding RMG or MCAP mortgages can skip a payment or hold a payment at any time subject to certain conditions. They will also waive any applicable fees if borrowers access either of these options.

If you are with another lender, there may be options as well. Keep this in mind if you employment situation changes and you are feeling financially strained.

Stress Test Changes Suspended

OSFI announced Friday that it is suspending all consultations, including those regarding changes to the proposed B-20 benchmark rate. The Minister of Finance also postponed the announced April 6th qualification change for insured mortgages. In short, until further notice, the Bank of Canada posted 5-year rate will continue to be used for mortgage qualification.

Due to the rapidly evolving economic situation due to COVID-19, consultations are no longer a priority. Understandably, Finance, the Bank of Canada, and OSFI are fully occupied given the circumstances.

What next?

We have no idea what the future brings and there is no need to stress about it. The duration and depth of this pandemic, is unknown. All we can do is be part of the solution, not part of the problem.

Be proactive, be smart and think about the impact to your fellow Canadians and the economy as a whole. Be careful what you read on the internet. Trust only known sources and try not to add to the hysteria (ie. the TP situation!). We will lengthen the curve and this too shall pass.

Here is the link to the Alberta Government's information page on COVID-19.

In the meantime, if you have any questions, or would like to revisit your existing mortgage rate, please don't hesitate to reach out. Everything can be done virtually, including "face-to-face" meetings!