First of all, my warmest wishes for a very Happy New Year, wishing you a year full of happiness, good health and prosperity.

I hope 2008 was a good year for you, in the mortgage industry we saw major changes in 2008…

1. The U.S. sub-prime fiasco made lenders and mortgage investors run for cover. Canada lost some good lenders
2. Rate Premiums. Bond yields and the Bank of Canada’s key interest rates fell substantially in 2008.  Yet, heightened credit risk forced lenders to pay more for the money they lent out.  That led to record-high mortgage spreads, high fixed rates, and for the first time in a very long time we saw prime plus for variable rate mortgages and secured lines of credit.
3. Amortizations. 2008 saw the government eliminate the popular 40-year amortizations.
4. Minimum down payment The government brought back the 5% minimum down payment
5. Government Support of the Market. Canada Mortgage Bonds program is the main source and for non-bank lenders, sometimes the only source of capital.  In October, the Finance Department again came to the rescue with its mortgage buyback initiative.

2009

The Big 5 banks have forecasted that they expect further rate cuts by the Bank of Canada in 2009.  They are expecting between 1/2 % to 1%.

Here is what the big banks are forecasting for interest rates:

• TD Economics – TD expects a rate cut of 50 basis points in January 2009
• BMO expects 1/2 percent rate cut in January 2009 –
• RBC forecasts 1/2 percent drop in January 2009 –
• CIBC Wood Gundy expects a 3/4% rate reduction by February/March 2009
• Scotia is forecasting a 1% drop for 2009

The big question is, will the banks pass on the rate cuts made by the Bank of Canada!

Do you think the banks will pass on the full reductions!  What rate are you currently paying!

Next Bank of Canada announcement is January 20th