As predicted, January was a slow month, but as of the last few days, that’s changed.
According to Mortgageoutlet.ca Principal Broker Shawn Stillman, buyers were kicking tires until last week when all of a sudden the dam burst.
“I’ve had seven purchase agreements over the past two days, but it is mostly small stuff under $1mln,” he said. “First-time buyers are also buying condos and townhouses in the GTA. People were waiting for the right time to buy and the stress test didn’t impact them much because of the dollar amount they’re spending.”
That said, buyers in the $1mln range are having trouble qualifying under the new B-20 guidelines. “It’s tough to say based on a period of one month, but the quality of supply isn’t there on bigger homes, but for condos it is because there are so many more of them,” added Stillman.
Stillman says that the 200 basis points have brought rates up to 5.49% and purchasers just aren’t squeezing through. However, he says that, in many cases, a little creativity goes a long way.
“There’s the obvious credit union option,” he said. “A lot of credit unions are willing to lend at the contract rate without the 200 basis points. We have to restructure debt and debts on other properties to make it more palatable to lenders. For example, if you have another property with a 10-year amortization left on it, we’ll refinance that property and stretch the amortization out to make the carrying costs on it lower.”
Creativity is crucial but so is knowing one’s lenders, he added.
But Stillman maintains that it’s become difficult to get deals done in ways that it wasn’t a couple of months ago. Clients don’t care about interest rates as much as they used to; now they’re primarily concerned by whether or not they qualify.
“It’s harder and harder to get deals done, and people don’t understand what the stress test means,” he said. “They know they can borrow less, but they don’t think it impacts them. People read about it in the news, but they think they’re fine until it hits them in the face.”
Stillman added that experienced brokers have become invaluable in the latest B-20 era.
Mark Cashin, principal broker and owner of Verico
Cashin Mortgages, says the year started slowly but he’s noticed business rise lately, especially debt consolidation on first and second loans.
“For us, every deal we’ve done has been a private deal,” said Cashin. “We kind of focus on that market a little more, but it was a late start to the year. People are back in the swing of things. Everybody is starting to think about refinancing and cleaning up debt, and we predict a strong year moving forward.”
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