The State of Mortgage Financing during Covid-19

While there have been many changes to our world over the last three months, one of the relatively surprising consistencies has been mortgage qualification.

2020 was primed to be an incredible year for real estate in the Lower Mainland. Buyers and sellers alike had been sitting on the sidelines carefully observing the market ever since the mortgage rule changes in 2018, in conjunction with new taxation policies introduced by the NDP. The first quarter of 2020 saw homes selling for the first time again within multiple offers and over the asking price.

The introduction of Covid-19 put a slight pause on the market while we all adjusted to the new norms of physical distancing and potentially viewing property safely from a distance. Lenders were forced to adopt safer signing policies and get on board with e-signatures much faster than they had initially planned. Everything moves much slower in the banking world!

Qualification guidelines have remained the same throughout the pandemic, with a wide variety of products available to assist clients with achieving their goals of home ownership. While qualification is largely driven by household income, there are still net worth and self-employed products available within the AAA financing realm at the best rates.

Alternative lending is also still incredibly competitive for clients who will not fall into your standard qualification, with rates on the alternate side starting in the high 3% range up to private financing rates within the 6 –9% realm.

Lenders have tightened up on their documentation requirements and require recently dated documentation regarding employment. This could mean having a copy of your most recent pay stub or recent bank statements if you are self-employed to show that your business is still operational.

Individuals who were in the midst of buying property and already had a firm financing approval in place were protected by the banks even though they may have been laid off. However, individuals who have been laid off or had their income impacted without a firm financing approval in place for a purchase are now having to wait until they return to their regular employment.

Covid-19 has created an incredible opportunity for home buyers and investors alike to get into the market now before everyone returns to work and the competition for property increases significantly.

Interest rates are lower today than they were back in 2008. 5-year fixed rates are ranging from 1.99% to 2.49% – and 5-year variables are ranging from P-0.45% to P-0.25% with Prime currently at 2.45%.

These low interest rates have also introduced a significant opportunity for clients to review their existing mortgage terms to see if they could potentially benefit from refinancing for one of the low rates available today.

Given the impact to the Canadian and global economies due to Covid-19, we expect interest rates to remain low for at least the next 18 months, which will continue to drive the housing market forward and assist with the recovery of housing prices in the Lower Mainland. ■