Mortgage 101 – “we are in a rising rate environment” | April 2022 Part 2

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7 and CityNews 101.1, the guys talk about the Bank of Canada and what rate changes mean for your mortgage. Learn what key indicators will influence rate increases and get an update on Nova Scotia’s housing stock.

Mortgage 101 with Clinton Wilkins & Todd Veinotte: “We are in a rising rate environment”

Don’t feel like watching the video? Check out the transcript below.

Transcript:

Todd refinanced and invested the money back into the home

Todd Veinotte: [00:00:00:05] Alright, so I’m a client of yours.

Clinton Wilkins: [00:00:02:17] Yes, of course.

Todd Veinotte: [00:00:03:11] A high end client.

Clinton Wilkins: [00:00:04:22] High value client.

Todd Veinotte: [00:00:07:19] High value client.

Clinton Wilkins: [00:00:08:16] And he laughs.

Todd Veinotte: [00:00:09:08] So this is my second mortgage with you. And this one we did we did a refi. And I put quite a bit of money back into my home, which is a huge investment. And I showed you some pictures of progress.

Clinton Wilkins: [00:00:21:09] And I loved seeing the progress photos like that’s what I, you know, really kind of excites me. I’ll be curious to know what the value is once the work is done.

Todd Veinotte: [00:00:28:09] Once work’s done, exactly. So to that I received, because I’m a valued client, your Homeownership Guide. I receive it electronically and hard copy in the mail and I opened it up and my goodness gracious, what did I see on the very first page was a photo of me.

Clinton Wilkins: [00:00:44:22] Your mug is right in there.

Todd Veinotte: [00:00:45:26] I know.

Clinton Wilkins: [00:00:46:28] Right on the inside cover. Like, that’s the money shot, really.

Todd Veinotte: [00:00:49:28] That’s pretty good. I mean, if I were trying to pay for that type of publicity, I wouldn’t be able to afford that.

Clinton Wilkins: [00:00:53:24] I mean, you know what? That’s why we’re here on the radio.

Check out our new 2022 Spring/Summer Guide to Homeownership

Todd Veinotte: [00:00:57:09] Exactly. So this Guide to Homeownership, for those who want to access this, they can get it online?

Clinton Wilkins: [00:01:02:17] Yeah, it’s right on our website. Like if you go on TeamClinton.ca/Radio, it’ll be right there. You can download electronic copy like in a PDF, but if you want a hard copy, Todd, we’ll mail it out to you. There’s a form right on there and you can fill it out. And you know what? You’ll get it right in the mail.

Todd Veinotte: [00:01:19:23] What type of things, I mean, I’ve gone through it a few times, but what are some of the things that people can get out of this?

Clinton Wilkins: [00:01:24:28] So, you know, the guide is really structured for everyone. So we talk about obviously people when they’re becoming first-time home buyers, but we also talk to people who are existing home owners. So, you know, we try to make it for everyone and there’s lots of Halifaxy things in there. And you want to know what the real cool thing is about this guide? This is our 10th one, so I’m kind of proud of this one. Yeah, the photos are all from Halifax. They’re all Halifax photos. I’m being given the a little thumbs and fingers over there I guess it’s nine. Nine is the correct number, but whatever 9/10.

Todd Veinotte: [00:02:06:01] Why wouldn’t they be from Halifax?

Clinton Wilkins: [00:02:07:13] Well, we used to use a lot of stock images, but believe it or not.

Todd Veinotte: [00:02:10:09] Oh, is that right?

Clinton Wilkins Mortgage Team investing in local content and news

Clinton Wilkins: [00:02:11:07] Yeah, but now the last year or so, like, we’ve really invested in doing a lot of photos that are all around HRM and around Halifax. And if you go on our website, like all our blog posts are all Halifax photos. And it was one thing that we really kind of wanted to invest into because all our content, we do all our content local, it’s all, you know, my thoughts and all these things, but we were using stock images. So it’s like, you know, it almost looks like this is kind of like out of the box content where we write it very specifically.

Like today we actually put out a blog post about what has happened since the Bank of Canada increased the overnight rate. And just a couple of thoughts on what’s going on in the rate environment, what’s going on in the economy. And this is content that we did, you know, specifically for our blog and our customers got an email today too. So you may or may not have an email from me in your inbox.

Let’s talk about the Bank of Canada

Todd Veinotte: [00:03:07:08] Oh, there you go. So to that Bank of Canada, was there something you wanted to mention or anything valuable to talk about?

Clinton Wilkins: [00:03:14:06] In early March, as you know, they increased the key overnight rate by 25 basis points. So by 0.25. The next Bank of Canada meeting is actually going to be next week, next Wednesday. So obviously we are going to be watching. Many economists are predicting that the key overnight rate is going to increase.

I don’t think it’s going to be ring the alarm and press the panic button, quite yet. But they’re thinking this increase might be 25 or 50 basis points. So we’re going to be watching. I’ll be watching the Bank of Canada live when the announcement is released. And I’ll be back on CityNews here in Halifax. We’re going to talk about the Bank of Canada, obviously, next Wednesday. So if you want to hear my perspective, you can certainly tune back in on Wednesday, the 13th of April.

Todd Veinotte: [00:03:58:05] Alright. So if it does go up the 0.25 per cent, which had matching the last one. We’re talking, what, potentially hundreds more dollars a month for people? Less than that? What are you what are you talking about?

Clinton Wilkins: [00:04:12:03] You know what? It really depends on somebody’s mortgage. Our average mortgage amount is somewhere around $330,000, $350,000. On a mortgage like that, you’re going to see a payment increase somewhere in the $34 a month.

Todd Veinotte: [00:04:26:16] Right.

Is now the time to switch to a fixed rate?

Clinton Wilkins: [00:04:26:27] So not a significant increase. And that would be for clients that have an adjustable rate mortgage or adjustable payment. And that is basically a lender that the payment goes up and down depending on what happens. So there’s also a standard variable mortgage. So, many lenders offer a standard variable where the amortization changes if the prime rate changes.

Sometimes I find those variable mortgages that don’t have the payment changing are not quite as popular. The reason being is in a rising rate environment, people’s amortization is going to get longer when there’s a rate increase. And not everybody likes that, Todd. I think some people would rather have a small increase that will basically prepare them for the future and it’s a very small increase in the grand scheme of things. And we’re going to keep an eye on it.

Many customers today are really asking us, does it make sense to convert into a fixed rate? And I will say it and I will say it again: Friends don’t let friends take a fixed rate. Right now, the fixed rates today are somewhere around four per cent. And you know what? Good variable rate today is somewhere in that two per cent range or less. But yeah, it could be definitely less. And what would happen if you did convert your rate would literally double.

Rates would need to go up eight points before variable was as expensive as fixed

Todd Veinotte: [00:05:47:14] So how many, if you’re paying, let’s say you’re paying 2 per cent. So how many point two fives would it take to get so that you’re paying what you’d be paying at four per cent?

Clinton Wilkins: [00:05:54:26] So it would be, I guess like eight, or 8.25 increases?

Todd Veinotte: [00:05:59:02] Right. Which is going to happen over a number of months. If not more than that.

Clinton Wilkins: [00:06:05:27] Historically, borrowers do better in a variable. There’s a couple of things that are going to be that we’re going to be watching obviously very closely. One is inflation. That is really a key indicator. Some economists think that we’re going to be at the target inflation by the end of the year. So that could be good news. The other thing that we really don’t know about, obviously, is what’s going on in the Ukraine. So that has a big impact on maybe supply chain issues. It has a big impact on global markets.

What impacts the rates?

And we’re going to be watching these things and obviously will report to you on the radio and we’ll obviously have it on our social media and our website. We keep a close eye on this all day every day. We watch and listen to reports that economists put out every day and certainly keep an eye.

We are in a rising rate environment. You know, fixed rates are certainly going up. And I think the spreads, even on some variable rate mortgages, are not as good as they have been for the last couple of years with COVID. And I don’t think it’s necessarily a bad thing. Yes, it might make the cost of borrowing a little bit more expensive for you and I.

But I think for some people who might have been in the, you know, the market first-time home buyers, it might get them off the fence or it might kind of put them on the bench. You know, some people will choose to be like, you know what? The supply is low, the rates are up. Maybe now’s not the right time for me. And, you know, I think we’re definitely seeing more and more supply come on the market. It was pretty grim here, Todd. You know, December, January, February, March, even like there were not a lot of listings. But now we’re getting up to more, I’m not going to say it’s a normal supply amount, but like we’re definitely getting more and more listening.

Todd Veinotte: [00:07:53:26] What’s happening, do you think?

More housing stock is coming online in Nova Scotia

Clinton Wilkins: [00:07:56:09] I think it’s a variety of things that are happening. I think obviously the word is out that the values have gone up. So I think know people owned maybe a second home or if they owned a rental property, you know, maybe they’re going to capitalize. They’re going to get it listed. I think the little old lady and the little old man, you know, say maybe this is the time for me.

Todd Veinotte: [00:08:16:19] Yeah.

Clinton Wilkins: [00:08:17:05] And if they’re able to line up, you know, an apartment or something like that, then maybe they want to sell their home to a first-time home buyer. And let me tell you, we are seeing some love letters get written to sellers. And I’ve seen these love letters saying “You know what? We’re first-time homebuyer. You know, we’re young.” And, you know, sometimes that is the maker or breaker for a vendor to sell to someone.

Todd Veinotte: [00:08:43:28] Okay, so we are going to get to refinance no matter what in our next segment. I’m going to hold you to that.

Clinton Wilkins: [00:08:49:19] One hundred per cent. And I know obviously and if you’re existing home owner, refinance, you definitely want to hear about it. So keep on listening.

Todd Veinotte: [00:08:55:10] Okay. We’ll be right back.

If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.

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