Category Archives: mortgage

Chicken vs Egg: Retail Sales and Housing Bubbles

Southseacompany pointed out this article in the Globe and Mail about the connection between retail sales and household debt.

Falling interest rates between the fall of 2013 and mid-2016 made it easy for Canadians to add debt. The five-year Government of Canada bond yield, on which mortgage rates are based, fell from a high of 2.2 per cent in September, 2013, to a low of 0.49 per cent in February, 2016. This trend made monthly mortgage payments lower and helped spur the housing boom.”

“The reverse process – rising interest rates – is now evident and mortgage debt is getting more difficult to service. The five-year bond yield has climbed to 1.1 per cent and major lenders are slowly raising mortgage rates.

Read the full article here.

BMO offers cash back mortgages

Are you a first time buyer looking for a mortgage? BMO wants your business and will give you back $1000 of your own money if you choose them.

Under the new promotion, first-time home buyers taking out insured mortgages with terms of at least four years are eligible for $500 cash on mortgages of less than $250,000, and $1,000 on larger loans. Once the mortgage is booked, the cash is credited to the customer’s BMO chequing account.

In a statement, BMO called its new offer a “timely” companion to a new interest-free loan program British Columbia’s provincial government launched to help new buyers cobble together down payments amid soaring housing prices. 

Read the full article here.

BC teaser loans panned in media.

The new first time buyer teaser loan program announced by the BC government has met a suprisingly negative reaction in the media, but some online polls show voters approve.

This move seems designed to undo some of the federal ramp back of housing market fuel. Bearvancouverite points out this might help developers who are seeing people backing out of presales agreements.

This might be exactly why Christy did it. Developers were panicking that presales won’t close because mortgage qualifications would be so different in the next few years, they need to dangle a carrot to make sure speculators don’t just walk away and first time buyers can be convinced to take over presales from flippers.

Scoop points out why this program should be referred to as a “teaser loan” as made popular in the US housing bubble:

Definition of “teaser loan” from investopedia: An adjustable-rate mortgage loan in which the borrower pays a very low initial interest rate, which increases after a few years. Teaser loans try to entice borrowers by offering an artificially low rate and small down payments, claiming that borrowers should be able to refinance before the increases occur.

http://www.investopedia.com/terms/t/teaser-loan.asp

Let’s all call start calling this new program what it is: Christy’s Teaser Loan Program.

Non-bank mortgage lenders don’t like new rules

It’s looking like lending for real estate is going to get a bit more pricy as Ottawa tightens rules and seeks to offload some risk.  Many lenders in this Globe and Mail article feel blindsided by the change and complain that it’s unfair as they will not be able to compete with the banks:

Non-bank lenders left reeling by new federal mortgage rules

The new rules kick in November 30th after which lenders will not be able to insure mortgages with amortization beyond 25 years or on homes over $1million or rental properties. I guess we’re about to find out the price of risk in these no longer covered categories.

Gentleman says “It’s not if, but when bubble bursts.”

CCEC Credit Union is a vancouver-based lender.

Their CEO has the delightful name of “Ross Gentleman” and is interviewed over at BNN where he says that the Vancouver housing market is in a bubble and it’s not if, but when it bursts:

He says they are seeing a number of people ‘trolling’ lenders looking for financing on speculative purchases.

He calls the upper end of the market potentially more volatile and says that CCEC is committed to more conservative lending and tends to focus mainly on primary residences.