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.
The CEO of the CMHC is saying that although some Canadian house prices are certainly too high, they aren’t worried about a market collapse at this point.
One option they are considering as a way to help cool an overheated market is sharing mortgage loan risk with the banks that are handing out loans.
The mortgage insurance that CMHC and its two competitors sell repays banks when consumers default on their mortgages. At the moment it makes the banks whole. The OECD has called for changes to the system to ensure that lenders take on more of the risk. In other countries with mortgage insurance, the product tends to only cover 10 to 30 per cent of the losses. In his speech, Mr. Siddall said that CMHC is evaluating “risk-sharing with lenders to further confront moral hazard” and is advising the government about its thoughts.
Read the full article here.
Hat-tip to southseacompany.
Yes, yes, I know you’re not a racist.
But see the thing is it’s easy to get worked up over perceived issues of unfairness and drift into blaming entire cultures for your woes. Are there wealthy Chinese assholes buying real estate in Vancouver? Well yeah. Are there wealthy assholes from other countries buying real estate? What about wealthy asshole Canadians? Uh huh. check and check.
But what does this have to do with the price of that leaky house in east van you’ve got your eye on? Do you really think the global elite are competing for that unit and pricing you out and that the insane growth in Canadian debt loads and bubble prices across the country is not a factor? If so you’re the ideal sucker for a real estate marketer.
The fact is that even if you’re on welfare in Canada you’re probably better off than most people in China. Heck, you’re better off than the majority of people in the world. But it’s a lot easier to notice that teenager in a Lamborghini than to be thankful for what you’ve got.
Now clearly not everyone agrees that an endless discussion over ‘HAM’ is mind-boggling boring, but if you do please consider down-voting repetitive blame comments and trolls but up voting informative fact filled comments.
For a site without active moderation we’ve been remarkably lucky to have interesting conversations and generous people sharing information and data that is hard to find anywhere else. Lets try to keep that way. Our hope is that the community comment rating system can be used by you the reader to shape the discussion away from blaming cultures and down to blaming the real drivers of a housing bubble: speculators, buyers, government and lenders.
When the US real estate bubble burst it uncovered a problem:
It turns out that some realtors, mortgage brokers and lawyers were pushing through real estate deals that weren’t entirely ethical. Some groups would use straw buyers purchase property at a price far above what it was worth and then take out a loan for the excessive amount.
Some of that is still being uncovered, here’s a recent instance:
Yeboah admitted participating in the scheme by creating fake W-2 forms, pay stubs, and other records for straw buyers so that her fellow conspirators could collect millions of dollars in kickbacks from fraudulently-obtained mortgage loans. In entering her guilty plea, Yeboah admitted reviewing payment records that showed over $14.5 million in kickbacks were collected from the fraudulent purchase of $100 million in properties.
Now it looks like the problem has spread to Toronto:
Earlier this year, the Star reported a pattern of house flips and price jumps as much as 60 per cent in less than a day involving Hatcher. Most of the deals didn’t include deposits. Purchasers got money back. Mortgages exceeded the value of homes. The same buyers and private lenders popped up in many sales.