jan-mortgageExpect a fair amount of volatility in the financial markets for the first quarter of 2014. Many investors are uncertain about how the equity markets will perform and profit taking has been common over the last few weeks. The US Federal Reserve’s new Chairperson Janet Yellen will take over in January, it is expected that she will continue to taper the US Fed’s bond purchases at 10 billion per meeting; this tapering will cause a slow but stable increase in bond yields as the bond purchases resulted in artificial rates over the past 5 years. The overall consensus is that the bond yields will climb from here on causing borrowing rates to increase. We do not expect to see the US Federal Reserve or The Bank of Canada to increase the prime rate for some time, perhaps not until the third quarter or not at all in 2014.

Mortgage rules in Canada continue to tighten. The latest area to be targeted are properties that involve rental income. More and more lenders are only considering a portion of the rental income in qualifying the borrower. The current standard used  is 50% of the rental income. There are exceptions to this rule, however, it is becoming increasingly difficult to place mortgages where there is a strong reliance on rental income. If you own rental properties it is a good idea to review how these new rules might impact your qualification for financing.