Archive for the ‘mortgage’ Category

$500 would push 16% of homeowners into default

Tuesday, October 6th, 2015

A recent Bank of Montreal poll finds that approximately 1 in 6 Canadian homeowners would be pushed into default if payments rose $500.

According to the bank, 16 per cent of respondents said they would not be able to afford such an increase, while more than a quarter, or roughly 27 per cent, would need to review their budget.

Another 26 per cent said they would be concerned, but could probably handle it.

Such an increase would be generated in the case of a three percentage point hike in interest rates — from 2.75 per cent to 5.75 per cent — on a $300,000 mortgage with a 25-year amortization period.

Given that interest rates are likely to increase in the foreseeable future, the bank said there was no better time to put together a detailed debt management plan.

Read the full article here.

Trapped in a starter home.

Monday, September 21st, 2015

A funny thing happened on the way to financial security and easy riches, the condo promise in Vancouver didn’t really pan out for many young families according to a recent Vancity study.

The idea of a starter home is to get on the property ladder, then trade up as your family grows. But this doesn’t work as well when condo prices stagnate and single family home prices grow, especially when there are very few options available for 3-4 bedroom attached or condos.

Across the region, families who wish to move from a one-bedroom apartment or condo to a three-bedroom home with an attached yard would have to increase their debt level by an average of 95%. In Vancouver’s west side, this jumps to 158%. In the city’s east side, it is a much lower 78%. The biggest jump is found in White Rock, where debt levels would increase by an average of 164%.

Read the full article here.

Eliminating Affordability

Monday, August 31st, 2015

Good news real-estate investors!

Metro Vancouver housing affordability is nearing the worst ever seen in Canada.

That’s according to RBCs housing affordability index:

The index, which captures the proportion of pre-tax household income needed to service the costs of owning a home, rose the most for B.C. among all provinces.

The measures increased by 2.1 percentage points to 71.4 per cent for bungalows, and by 0.4 percentage points to 33.3 per cent for condos.

“Poor housing affordability at the provincial level, particularly in the single-detached home segment, is a reflection of the extreme situation in Vancouver,” said Craig Wright, senior vice-president and chief economist, RBC.

This can only make our real estate more desirable as sales continue at a brisk pace.  Read the full article here.

Party like it’s 1981

Wednesday, July 1st, 2015

Remember the 80’s?

Big hair, jelly bracelets and 20% interest rates.

Homebuyers back then had a tough time, they had to save up for a big down payment and the cost of holding a mortgage was high.  All that hard work and sacrifice was well rewarded though as Rob Carrick points out in the Globe and Mail:

The high interest rates of the early 1980s must have felt unbearable for all Canadians buying homes and arranging mortgages (it was heaven for savers, but never mind). The reward for perseverance was a 30-year run in which resale house prices on a national basis surged by an average annual 5 per cent and were up in 28 of 34 years.

This rally was fed by falling interest rates. After the visit to high-rate hell in the early 1980s, home owners benefited from a long decline in rates that continued into 2015. House prices haven’t gone up because homes are a great investment, because of immigration, because of foreign money or because home ownership is awesome. It’s because we’ve had a 30-year sale on the cost of financing a home purchase, with ever-increasing deep discounts.

That sale may be ending. There’s a growing sense that the U.S. economy is on the upswing, and interest rates in the bond market have already started to creep higher. Mortgage rates take their cue from rates in the bond market, so we could see lenders increase fixed-rate mortgage costs at some point this year or next.

For the historical perspective read the full article here.

The thing that may surprise you is that despite a housing market that has provided magical returns for older buyers and cheaper and cheaper debt seniors are still going bankrupt in record numbers.

Canadians deep in debt and getting deeper

Monday, May 11th, 2015

The Globe and Mail nicely sums up the current Canadian obsession with taking on household debt. This infographic has all the pretty charts related to the current situation in which current debt totals a record $1.8 trillion. Just over a trillion of that is Mortgage debt, with the other big growth seen in lines of credit and car loans.

One Trillion is a big number and it can be hard to visualize.  Here’s one way to put it into perspective:

If you spent $1-million every day, it would take you 2,740 years to spend $1-trillion.

Albertans carry the largest debt to income ratio followed by BC. It seems the nation loves debt, but the west loves it best.

Read the full article here.

Should you walk away from your Alberta mortgage?

Monday, May 4th, 2015

southseacompany pointed out this article in the Financial Post:

You can walk away from your mortgage (if you live in Alberta) but should you?

“Francis, a 34-year-old welder from the mining town of Grande Cache, Alberta, says he wishes he could get out of the townhouse he bought four years ago.”

“He bought the home for $175,000 with a five per cent downpayment but still owes $150,000 on his mortgage. He says the market for his home has collapsed in his town and a realtor just told him the best price he could expect is $75,000.”

“Since the loan is “under water,” his bank would be left with a shortfall that CMHC would have to cover. The Crown corporation would likely sue him for any losses it has to cover, so if he has any assets, CMHC will go after him.”

“Handing over the keys to the house and walking away from your mortgage, called “jingle mail,” was a defining act of the American housing crisis and helped send the market south of the border into a deeper tailspin.”

Interesting theory, but as we actually saw in the US states with recourse loans (i.e. Nevada, Florida) saw just as much of a collapse as non-recourse states.

CMHC & Genworth increase mortgage insurance premiums.

Tuesday, April 7th, 2015

An article over at the Financial Post by Garry Marr asks if recent hikes in mortgage insurance fees are targeting first time buyers.

The move by Genworth Canada, which matches an increase announced Thursday by Canada Mortgage and Housing Corp. will raise insurance costs by 15% for those Canadians with the highest debt-value mortgages allowed by Ottawa.

Of course lets keep things in perspective here – that 15% increase may result in an extra cost of about $5 dollars a month.

You’d have to be really stretched for that to be an issue.

Rob McLister, founder of, said insurers are padding their margins and doing it for loans that usually result in the least amount of money recovered during defaults.

Read the full article here.

How to prepare for a housing bust

Tuesday, March 24th, 2015

Garry Marr writes about the situation in Alberta over in the Financial Post. The drop in oil prices has hit their economy first and hardest with sales down by 30-40% over a year ago and growing listings.

So how do you prepare for a surprise economic hit like that?

Simple. Save up to cover for job loss, keep your debts and bills manageable and  don’t get into a situation where you have to sell when everyone else is selling.

Unfortunately Canadians aren’t doing so well on the debt front:

Debt reached an all-time high in the fourth quarter, relative to income. Statistics Canada says the debt to disposable household income ratio is 163.3%, much of it attributable to housing costs.

Read the full article here.

Tiny lenders chop rates to grab mortgage customers

Tuesday, February 17th, 2015

Rates have dropped and that means better deals on mortgages. The big banks have dropped discount rates to an average of 2.79% on a 5 year mortgage.

Meanwhile the smaller lenders are hungry for more business so they’re cutting profits to compete on lower rates.

Mortgage Brokers are also taking cuts on commission to compete in the race to the lowest rate:

The rate war is even more intense among mortgage brokers, many of whom are shifting away from the traditional full-service model that saw brokers spending hours working with clients to select the best mortgage and earning hefty commissions. These days, more borrowers are turning to online and “self-service” brokerages that compete on volume, offering less personalized service and sacrificing some of the commissions they earn from lenders in order to discount rates even further.

Not everyone is a fan of the model. Some are worried that with interest rates already so low, brokers are having to dig deep into their commissions to offer meaningful discounts, a model that some brokers argue could threaten the industry as a whole.

“The majority of people don’t like what we’re doing and it’s a troublesome thing for us to digest because ultimately it’s the best for the consumer,” said Jeff Mark, co-founder of Spin Mortgage, an 18-month-old online brokerage that is advertising a five-year fixed rate at 2.49 per cent, well below the typical bank rate, by sacrificing some of its commissions. “We make less money per deal. I don’t know how that isn’t a good thing for the market.”

Read the full article here.

Are you ready for higher interest rates?

Tuesday, January 27th, 2015

That seems like a really weird question as rates continue to drop.

But over at the Vancouver Sun, Barbara Yaffe says ‘Prepare now for interest rate shock‘.

On top of the Bank of Canada recent surprise .25% rate cut there are a number of people predicting another cut coming this year, so why worry about interest rates at all?

The size of the average mortgage on a dwelling in Greater Vancouver is $400,000, reports Jeff Johnson, mortgage broker at Cloverdale-based Dominion Lending Centres Canadian Mortgage Experts, with offices in B.C. and Alberta.

That jumbo figure is based on the average 2014 value of a Vancouver property, $801,000, and a Canadian Association of Mortgage Professionals survey last year showing the average equity position assumed by borrowers is 50 per cent.

Johnson notes that if interest rates rise in 2015 by even just half a percentage point, monthly payments on a typical variable rate $400,000 mortgage could increase by $100 to $1,872.

“And this is the best case scenario, as rates could continue to slowly increase (thereafter).”

Elyea points out such increases would be coming on top of 2015 hikes imposed on B.C. residents for MSP premiums, car insurance and BC Hydro.

And it is worth remembering British Columbians have more modest employment earnings than elsewhere in Canada. The B.C. average weekly wage last year was about $890, compared to $940 across Canada.

Ok, sure. But we know all that already. How long have we been hearing the warnings about ‘being ready’ for rate increases while they just stay down at record lows or continue to drop?

It’s like that old story ‘The Boy who cried Wolf’.  Eventually the villagers get sick of hearing all the false warnings, learn to ignore them and live happily ever after.

VCI Network

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