New Mortgage Stress Test Announcement Lacks Clarity and Protection for Consumers!
The problem with this new stress test is that the central bank is still allowing the 6 central banks to dictate the average interest rate that will be used as the benchmark stress test. This is unfair to those that know they get better rates and products from monoline lenders. This continues to ensure banks can try to keep a stranglehold on the mortgage market and leave the consumer as the one who loses. Monolines have posted fixed rates at 2.69% this week likely soon to drop again to 2.59% compared to the banks at 2.89 and 2.99%.
What will happen with pre-approvals? Will the preapproval benchmark rate that was used to apply when they finally find a home and have a live offer to purchase? This was not addressed in the Federal Governments press release.
In addition, since the banks do not post their actual 5-year contract rates, how will these new posted rates be obtained from the banks by the Central Bank? Will the banks have to post on their website what their actual 5-year contract rate is? If so how will this impact the outrageous interest rate differential penalty calculations that the big banks use on their mortgages for early payouts? The banks use their high 5 year posted rate so that they can use a calculation that greatly increases the early payout penalties. This forces mortgage holders to stay in the relationship and that mortgage even if the service is horrible, or there are much better rates elsewhere or they need to refinance for any reason.
When you dig deeper into this there are many questions left unanswered for the consumer.