Archive for the ‘mortgage’ Category

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.

RBC first to cut mortgage rate

Monday, January 26th, 2015

Last week when the Bank of Canada announced their surprise rate cut none of the big banks seemed to be in a rush to announce lower lending rates on mortgages.

We asked which will be the first lender to lower mortgage rates and now we have the answer:

RBC is the first to cut mortgage rates as bond yields plunge.

Royal Bank, the country’s second-biggest lender by assets, offered a five-year fixed rate of 2.84 per cent on Jan. 24, down from 2.94 per cent last week, according to rate-tracking website Ratespy.com. That’s below RBC’s posted rate of 4.84 per cent. The bank also trimmed its three-, seven-, and 10-year rates, according to CanadianMortgageTrends.com, an industry news website.

Race to the bottom or just a good time to renew?

Who will be the first lender to drop mortgage rates?

Thursday, January 22nd, 2015

After yesterdays Bank of Canada rate cut we’re seeing lots of articles about what this means for the housing market.

Reasonably enough economists are predicting a dip in mortgage rates after this cut, but so far the big banks don’t seem to be in a hurry.

However, TD Bank was quick to announce Wednesday it will maintain its prime interest rate at three per cent, noting that factors beyond the central bank influence its rates.

“Not only do we operate in a competitive environment, but our prime rate is influenced by the broader economic environment, and its impact on credit,” the bank said in a statement.

And the Royal Bank appeared in no hurry to drop rates either, saying in an email response to a query that “while we don’t have any product announcements to make at this time, we are considering the impact of today’s Bank of Canada decision.”

It was anticipated that the Bank of Canada would move to increase its overnight rate later this year due to an improving economy, until crude prices started to slide and dropped below US$50 a barrel.

Phil Soper, president of realtor Royal LePage, predicted Canadians could be shopping for cheaper mortgages within days.

“It doesn’t take long to react to a policy change like this,” Soper said. “That’s why it’s such a powerful tool.”

Read the full article over at Yahoo.

BOC chops rate in race for bottom

Wednesday, January 21st, 2015

If you’ll recall you’ve been warned many times by a number of government talking heads that rates could go up at any time.

Today the Bank of Canada finally took action and cut rates by a quarter from 1% to 0.75%.

Speaking to reporters, Mr. Poloz said the oil price drop is “unambiguously bad” for the Canadian economy, prompting the bank to take out what he called an “insurance policy” against future risks, such as weak inflation and a household debt squeeze. But he denied the move was calculated to send the Canadian dollar lower.

“Market consequences will be what they are,” he said.

The rate cut sent the loonie plummeting below 81 cents (U.S.).

Mr. Poloz, who acknowledged that oil dominated the bank’s discussions leading up to Wednesday’s rate decision, said he’s ready to cut rates again if prices fall further.

“The world changes fast and if it changes again, we have room to take out more insurance,” he said.

The rate move, which few analysts anticipated, is an attempt by Mr. Poloz to shield highly indebted Canadian households from an oil-induced hit to their jobs and incomes – signs of which are already evident in Alberta.

In the comments section here, Dave asked the question: How much of the BC economy is tied to Oil and Alberta?

I would like to know how much of a hit the damage to Alberta will be to BC. It seems to me that everybody underestimates the economic impact. I think our statistics don’t capture the role of Alberta in our economy. I think I read that Westjet estimated 5,000 people in the Okanagan work in the oil patch. And that’s just them trying to estimate things for their benefit (i.e. people who buy plane tickets). How many work from home on their computers? Or only make a few trips per year and don’t get picked up the radar? How many work in the Okanagan but for companies that service the oil patch? Add it all up and there is a LOT of employment related to Alberta.

 

Subprime lending in Canada ‘rockets’ to record high

Tuesday, December 16th, 2014

It’s a been a while since CMHC mortgage lending rules have been ramped back to more historical levels.

After dabbling in American style 40 year zero down mortgages we decided that might not be the best idea. Unfortunately we never did get the American style locked in interest rate for the full duration of the loan.

So now we’re back to 25 year terms and it’s more difficult to get a loan if you’re self employed.  A lot of loan applications that would have been approved a year or two ago are now being rejected.

So what affect has this had on the market so far?

Well apparently the sub-prime lending market in Canada has rocketed to a record level for one.

Capital Corp is a non-bank lender that has been operating since 1988. Their chief executive Eli Dadouch says there’s a lot of money out there for non-bank loans to higher risk borrowers.

He said there is no question it’s the top of the real estate cycle, so anybody lending out money has to be more careful today.

“People always want to deal with a bank, it’s the cheapest form of money,” he said. “When they come to us and people like us, it is because there is some type of story [behind why they can’t get credit]. It’s easy  to lend money, the talent in this business is getting it back.”

Read the full article in the Financial Post.

 

CMHC cutting jobs, laying off employees

Monday, December 15th, 2014

Joining in that venerable tradition of holiday season layoffs, the Canadian Mortgage and Housing Corporation has announced that it is cutting 215 jobs which is close to 10% of it’s workforce.

But of course this is government, so they will also be adding jobs, resulting in only a small net loss of positions:

The federal agency said Friday the employees have been declared surplus and will see their jobs disappear at both CMHC’s head office in Ottawa and its regional operations.

However, CMHC says it is adding to its staff in risk management and information technology, so the organization will only see a “small net reduction” in its overall staffing levels.

Read the full article here.

New Record $1.513 TRILLION in Canadian consumer debt

Thursday, December 4th, 2014

Just how fat can this debt pig get before it’s stomach explodes?

You thought this nation had impressive debt levels before? It’s now topped One and half trillion dollars and an astounding 65% of that is mortgage debt.

In one report, Equifax Canada said that “Canadian consumers have yet again tipped the scales setting a new benchmark of over $1.513-trillion in debt.”

That third-quarter figure marked an increase from $1.448-trillion in the second quarter and $1.409-trillion a year earlier, according to Equifax, whose numbers are based on more than 25 million unique consumer files.

Excluding mortgages, average debt held by Canadians has increased 2.7 per cent to $20,891.

The good news is that 27% of Canadians apparently don’t believe that a mortgage is debt, so we shouldn’t really even count that part.

Poloz: higher rates for housing a bad idea

Thursday, November 6th, 2014

Bank of Canada Governor Stephen Poloz says it’s a ‘bad idea‘ to raise interest rates to combat imbalances in housing and consumer debt as that would only hurt manufacturers and the general economy.

“Housing activity is showing renewed momentum and consumer debt levels are high, so household imbalances appear to be edging higher,” he said. “But it is our judgment that our policy of aiming to close the output gap and ensuring inflation remains on target will be consistent with an eventual easing in those household imbalances.”

Changes in Canada’s population justify growth in the housing market, and Toronto, Vancouver and Calgary are the only three cities showing signs of overbuilding, Poloz said at a press conference.

Canada’s dollar extended declines after the speech and as crude oil, one of the nation’s main exports, fell below $80 a barrel. The currency fell 0.9 percent to C$1.1357 against the U.S. dollar at 3:15 p.m. in Toronto.

It may be just a crazy idea, but if the government actually wanted to do something about house prices and consumer debt, wouldn’t eliminating mortgage insurance do that without any change in rates?

Should banks take on more risk?

Wednesday, October 22nd, 2014

There’s an article over at the CBC on the CMHC and CEO Evan Siddall.

Mr. Siddall is of the opinion that the CMHC should not be privatized as it acted as a ‘shock absorber’ during the last correction, but does think the banks should take on a share of the risk for insured mortgages.

“That ultimately will be a decision for government to make and we’re in the process of looking at different options that will take a few years to evaluate, but the idea is that people should have skin in the game,”

“In the insured mortgage businesses, the banks offload all that risk to the government through CMHC, The government’s interested in taking a reduced role in the housing market … so we’ll look at different ways to share risks with lenders.

What do you think, should the CMHC force banks to take on more responsibility for the insured loans they hand out or would the banks just use that as an excuse to charge more?

Read the full article here.

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