Because your mortgage broker sees something positive in COVID-19

COVID-19 has created challenges for nearly every industry, and the mortgage industry is no exception. However, low interest rates and increased use of technology have allowed mortgage companies to weather disruptions from COVID-19 with relative ease.

Lori MacDonald, a mortgage broker with The Mortgage Group in Charlottetown, PEI, noted the positive impact of lower interest rates before the restrictions began.

Lori MacDonald of The Mortgage Group in Charlottetown, PEI, says many people are taking advantage of the lower rates on renewals and are moving to other lenders to benefit from better rates. – Contributed

“Any drop in interest rates favors the real estate market and we usually see an increase in mortgage activity, especially purchases. Refinancing is usually an active part of the market and is stable. Many people are taking advantage of the lower rates on renewals and moving to other lenders to improve product features and / or rates, ”MacDonald said.

“Mortgage rates are really low and tended to fall even before COVID-19.”

There are two types of mortgage interest rates: fixed and variable rates, he explains. Fixed rates are based on the bond market and floating rates are based on the Bank of Canada’s overnight rate, which is the rate that banks and lenders pay to borrow money.

Simply put, the relationship between bonds and fixed mortgage rates changes with market conditions. Recent events have affected bond yields and fixed rates are now lower. As for floating rates, when the Bank of Canada lowers the rate, lenders usually follow suit.

“COVID has really impacted the economy and tariffs have gone down. Today, five-year fixed rates stand at 2.39%. The floating rates are between 2.2 and 2.6 percent, “MacDonald said.

Hot real estate market

PEI saw an increase in both properties sold and new listings earlier this year; however, MacDonald noticed the changes after the restrictions began.

“We have seen an immediate impact on housing purchases, but not as much as in the rest of Canada. The purchases and refinancing that were already underway when the restrictions on social distancing were implemented have been completed, “he says.

Sales of MLS have slowed, but other market activities have increased, such as refinancing for debt consolidation and home improvement, as well as relocations and transfers, all due to lower rates and better affordability.

“We don’t know the true impact of COVID-19 yet, but the upward trend is likely to continue, but at a slower pace. The main concerns for buyers here are the lack of supply and that our tourism sector will be negatively impacted this year, “he says.

On a positive note, the IEP ranks high in livability factors.

“Our communities are safe with a lifestyle that many envy. New industries are emerging in the field of alternative energy and we have excellent support for small businesses, which add to a stable economy, ”said MacDonald.

MacDonald noted that she adapted to the restrictions quite easily.

“I work from home, so it wasn’t too demanding. I reached out to my clients to keep them informed about the economy and what was going on with mortgages and COVID in our area. And I’ve continued to keep my networking as good as possible by reaching out to my partners to share information, “he said.

“It was also a good time for me to catch up on the new technology our company has just launched, which will make the mortgage process much smoother for clients as we move forward.”

“Historical low”

In Nova Scotia, particularly Annapolis Valley, the trend is up, according to Heather Schrader, a mortgage broker with Turner Mortgage Inc in New Minas, NS

“Despite the physical distancing, the Valley real estate market is hot,” he says. “A number of recent listings have sold at full asking price in the past week. This is an excellent sign for our local market ”.

Heather Schrader, left, is co-owner of Turner Mortgage Inc in New Minas, NS, with her brother Daniel Turner.
Heather Schrader, left, is co-owner of Turner Mortgage Inc in New Minas, NS, with her brother Daniel Turner.

Schrader also attributes the positive trend to low interest rates.

“Five-year fixed rates are close to an all-time low, currently under 2.5%. Also in May 2015 we had fantastic rates (2.69%). So, we’ve been in a low-rate environment for most of the past five to eight years, with some six-month periods of rates temporarily rising to 3.99%, ”said Schrader.

This has resulted in a large number of transfers going on right now from customers taking out a mortgage in 2018 and 2019 at a rate of 3.69%.

“They often save an astronomical sum by transferring the mortgage at today’s fixed rate. We have saved some customers over $ 15,000 and reduced their mortgage amortization period by over a year, ”said Schrader.

Schrader also sees a positive shift amidst the difficulties of COVID-19.

“We are blessed with technology in our business. We do mortgages all over the country, so we are used to doing business by email and telephone. As a silver lining, banks and lenders have had to catch up with the times in some way. They now accept electronic signatures and have had to streamline some of their processes. We are proud of how our industry has changed and made positive changes to help our customers, ”said Schrader.

Schrader expects the refinancing and mortgage transfers to continue.

“In less than 15 minutes, we can calculate the savings a customer can expect by transferring their mortgage and any fees to consider for breaking the term with the current lender,” said Schrader.

Both Schrader and MacDonald expressed optimism for the future.

“Those were difficult times, but we are holding up well as a community, we will make it and thrive once again,” said MacDonald. “When it comes to the housing market, low interest rates offer many opportunities.”

About Myra R.

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