A lot has changed in the last few weeks, much of it unsettling. The current COVID-19 health crisis has created some level of uncertainty among the population and a lot of unknowns. So, here’s a recap of what we do know with respect to mortgage financing.
On March 4, the Bank of Canada (BoC) lowered its overnight rate by 50 basis points to 1 ¼%, which surprised the markets. Many thought the drop would be 25 basis points.
While Canada’s economy had been operating close to potential with inflation on target, COVID-19 was causing a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities responded.
Then on Friday, March 13, The BoC lowered its overnight rate by another 50 basis points to ¾%. This unscheduled rate decision was a proactive measure against the negative impacts of COVID-19 to Canada’s economy.
These moves were made to stabilize Canada’s financial system and economy during a period of great uncertainty.
On March 18, Prime Minster Justin Trudeau announced strategies an $82 billion support plan that were split into two main categories: Direct financial support and tax deferrals.
Deferring deadlines. The deadline to file your tax returns will be extended to June 1. If you’ve already filed your taxes and owe the government money, you now have until Aug. 31 to pay. Businesses will also be able to defer income tax payments until Aug. 31. The CRA will also stop auditing businesses for the next four weeks.
Up to six-month deferrals. Banks and other mortgage lenders have agreed to defer up to six months of mortgage payments for those impacted by layoffs and closures. This may include situations such as pay disruption, childcare disruption, or illness. For uninsured mortgages, many lenders offer flexible payment options as well. There may also be relief for other credit products.
If you have an insured (high-ratio) mortgage, the three mortgage insurers – CMHC, Canada Guaranty and Genworth Canada offer tools to lenders that can assist homeowners who may be experiencing financial difficulty. These include payment deferral, loan re-amortization, capitalization of outstanding interest arrears and other eligible expenses, and special payment arrangements.
If you have been impacted by the health crisis, contact your mortgage lender to see what they can offer you. Each situation and each lender is unique.
Also, reach out to other creditors, such as your credit card companies, and car loan companies to see what they can offer.
As always, I am available to help you through this. If you have any questions or concerns, please contact me.