29 April 2011

Another financially risky problem is that many borrowers do not keep their VRM for five years. They want to pay off their mortgages as fast as they can, so the average duration is only about three years.
In addition to it, there’s a relatively new phenomenon in the mortgage industry called the IFRS (International Financial Reporting Standards). According to the IFRS, lenders have to increase the capital they set aside. It means their expenses are growing again. And, of course, borrowers will notice it in their mortgage contracts.  
Some economists consider the IFRS implementation to be the most significant change in the mortgage business for the last ten years. They believe it will influence the lenders’ willingness to lend at deeply discounted rates.
According to some economists, banks have kept variables almost unchanged for a long period of time. In their opinion, the reduction of VRM discounts “should have happened a year ago”, so prime -0.50% might become more typical in the nearest future.
And when the prime rate starts rising, the pressure on variable discounts will increase as well.
Meanwhile, it’s quite possible that more and more lenders will follow the reduction trend.
But, of course, we can still offer prime – 0.90%. In this case it’s better to consult a professional mortgage broker in order to find the best rate and the best mortgage product for you and your family.

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