The Mortgage Circle

May 31st Rate Date - No Change for Variable Rate Clients

2011-05-31T12:27:00.000-07:00

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is proceeding broadly as expected in the Bank's April Monetary Policy Report (MPR). The U.S. economy continues to grow at a modest pace, limited by the consolidation of household balance sheets. Growth in Europe is maintaining momentum, although the risks related to peripheral economies have increased. The disasters that struck Japan in March are severely affecting its economic activity and causing temporary supply chain disruptions in advanced economies. Commodity prices have declined recently but are expected to remain at elevated levels, supported by tight global supply and very strong demand from emerging markets. These high prices, combined with persistent excess demand conditions in major emerging-market economies, are contributing to broader global inflationary pressures. Despite the challenges that weigh on the global outlook, financial conditions remain very stimulative.

In Canada, the economic expansion is proceeding largely as expected in the April MPR. The economy grew at an annual rate of 3.9 per cent in the first quarter, reflecting continued strong business investment, smaller contributions from household and government spending, and a modest drag from net exports. Although temporary supply chain disruptions are expected to restrain growth sharply in the current quarter, this is expected to be unwound in subsequent quarters.

While underlying inflation is relatively subdued, the Bank expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3 per cent in the short term. Total CPI inflation is expected to converge with core inflation at 2 per cent by the middle of 2012 as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored.

The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation. On the other hand, the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn, consistent with achieving the 2 per cent inflation target. Such reduction would need to be carefully considered.

New Mortgage Rules to Take Effect in March

2011-02-02T11:38:00.000-08:00

Mortgage Changes were announced recently that will come into play March 18th, 2011. These are summarized here:

http://www.moneyville.ca/article/923422--roseman-what-mortgage-changes-mean-for-you

There were no changes to minimum down payment or condo debt servicing as was previously rumored.

Potential Change in Mortgage Rules to Affect Condo Buyers

2011-01-14T19:35:00.000-08:00

The government is currently discussing whether or not to change mortgage qualifications which would directly affect condo buyers. In short, as mortgage brokers we currently input 50% of the condo fees of a building when a condo is purchased. Therefore, only 50% of the condo fees need to be debt serviced into appropriate ratios established and accepted by banks & lenders, most commonly 32% GDS and 40% TDS. The proposed change would mean 100% of condo fees would need to be entered and the client would need to be able to debt service this higher amount. The government's thought process behind this is that the purchaser will be paying 100% of those fees anyhow so it should be built in to ensure they can afford the condo. Those against the move caution that people who purchase a home do not have to have repair estimates built into their debt servicing for financing.

There are also discussions on raising the minimum down payment from 5% to possibly 6 or 7%. Reports indicate that it would be unlikely to go as high as a minimum of 10%. There is also mention in the article about reducing amortization from the current maximum of 35 years to 30 years, however, they say that the effect here would be minimal so it may not be worthwhile to change.

Read below for the full story!

New Rules Would Hit Condo Buyers

The federal government's efforts to get tough on borrowing are now focused on the condominium sector, with new rules in the works to make it more difficult to qualify for a loan on a high-rise apartment, the National Post has learned.

Sources say rules now being discussed would add 100% of condominium fees to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage. Currently, only 50% of the fee is considered. The move has the potential to squeeze thousands of consumers out of the market.

"I know for a fact they are talking about it," said one source close to finance officials who asked not be identified, about the proposal which is part of series of a new rules that the government is described as "seriously considering."

It is almost a guarantee that the government will once again lower the maximum length of amortizations for a mortgage, down to 30 years from 35. Longer amortizations lower monthly mortgage fees making it easier for consumers to borrow more.

The Canadian Association of Accredited Mortgage Professionals says 30% of new mortgages last year were for amortizations of 35 years, so a considerable percentage of Canadians are taking advantage of the current rules.

About three years ago, amidst a battle for customers between federal Crown agency Canada and Mortgage and Housing Corp and private mortgage default insurers, amortizations lengths rose almost overnight from 25 years to 40 years before Ottawa cracked down. "Going from 35 years to 30 does almost nothing," said the source, adding that's why the government is looking at the changes to condominium qualifications.
Ottawa is also still considering a far more controversial proposal to increase the minimum downpayment required to buy a home but it is unlikely to go from the current 5% to 10%, as some have speculated. A 6% to 7% range seems more likely, said the source.

The proposals only affect those Canadians who require mortgage default insurance. Anyone borrowing from a financial institution covered by the Bank Act must get insurance if they have less than a 20% down payment.

"I'm concerned and disturbed if they are making changes, particularly to condos," said Stephen Dupuis, chief executive of the Toronto-based Building Industry and Land Development Association. "They have already imposed stricter rules and that was plenty."

In April, 2010 new mortgage rules went into affect that forced consumers to qualify based on a higher interest rate than was on their actual contract. It also required all housing investors, as opposed to people who use a home as principle residence, to have a 20% down payment which mostly affected the condo industry.

Mr. Dupuis said he can live with the amortization period being shrunk but any attempt to increase the minimum down payment will only hurt the market. "There seems to be a fatal obsession with real estate and engineering the real estate market which may be an unhealthy obsession."

But Ottawa has coming under increasing pressure from the financial industry to tighten mortgage rules. Ed Clark, chief executive of Toronto-Dominion Bank, has called on the federal government to take steps to curb consumer access to bank loans. The government is said to have looked into imposing new rules on lines of credit but that would be tougher to implement because it would require a change to the Bank Act, said a source.

The condominium proposal would have an immediate impact because the average condominium fee on an existing home is 55¢ a square foot in Toronto, according to research firm Urbanation Inc. which says the average condominium apartment in Toronto is 900 square feet. Currently only half that approximate $500 in monthly condo fees counts toward monthly expenses for qualifying purposes. To qualify for a mortgage only 32% of gross income can go towards housing, which also includes mortgage payments including principle and interest, taxes and utilities.

Vince Gaetano, a vice-president with Monster Mortgage, said he too has heard the discussion of condominium fees being included in debt calculations and figures it makes sense.
"Yeah, condos provide extracurricular activities like swimming pools, gyms tennis courts and all that stuff. But the reality is you are paying the fee so why make it 50% it should be 100%," says Mr. Gaetano. "This is going to put some pressure on people. The rules have not changed in ages and this is way before the proliferation of condos."

Brad Lamb, a real estate broker and developer, said the practice would discriminate against condominium owners. "When you buy a house you don't put any future maintenance costs [in your debt calculation]," says Mr. Lamb.

"All it is is a knee jerk reaction by idiot bankers pressuring idiot politicians that don't understand the nature of the condominium market in Canada. What is driving the condominium market in Ottawa, Vancouver, Toronto and Montreal is investors. This won't affect them. This just attacks the lowly first-time buyer."

Garry Marr, Financial Post · Thursday, Jan. 13, 2011

No Change to Prime Rate

2010-12-07T11:29:00.000-08:00

Prime Rate Remains at 3% - Article Below!

Bank of Canada maintains overnight rate target at 1 per cent OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent. The global economic recovery is proceeding largely as expected, although risks have increased. As anticipated, private domestic demand in the United States is picking up slowly, while growth in emerging-market economies has begun to ease to a more sustainable, but still robust, pace. In Europe, recent data have been consistent with a modest recovery. At the same time, there is an increased risk that sovereign debt concerns in several countries could trigger renewed strains in global financial markets. The recovery in Canada is proceeding at a moderate pace, although economic activity in the second half of 2010 appears slightly weaker than the Bank projected in its October Monetary Policy Report. In the third quarter, household spending was stronger than the Bank had anticipated and growth in business investment was robust. However, net exports were weaker than projected and continued to exert a significant drag on growth. This underlines a previously-identified risk that a combination of disappointing productivity performance and persistent strength in the Canadian dollar could dampen the expected recovery of net exports. Inflation dynamics in Canada have been broadly in line with the Bank's expectations and the underlying pressures affecting prices remain largely unchanged. Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered. Information note:The next scheduled date for announcing the overnight rate target is 18 January 2011. Copyright 2010 TMG The Mortgage Group Canada Inc. All rights reserved.

Canadian Mortgage Broker News - Housing starts expected to decline for 2011

2010-11-16T14:09:00.000-08:00

Canadian Mortgage Broker News - Housing starts expected to decline for 2011

Canadian Mortgage Broker News - Rate is higher but still historically low

2010-07-22T14:18:00.000-07:00

Canadian Mortgage Broker News - Rate is higher but still historically low

Prime Rate up 0.25% to 2.50%

2010-06-02T08:41:00.001-07:00

Bank of Canada increases overnight rate target to 1/2 per cent and re-establishes normal functioning of the overnight market

OTTAWA - The Bank of Canada today announced that it is raising its target for the overnight
rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly
raised to 3/4 per cent and the deposit rate is kept at 1/4 per cent, thus re-establishing the normal
operating band of 50 basis points for the overnight rate.

The global economic recovery is proceeding but is increasingly uneven across countries, with
strong momentum in emerging market economies, some consolidation of the recovery in the
United States, Japan and other industrialized economies, and the possibility of renewed weakness
in Europe. The required rebalancing of global growth has not yet materialized.
In most advanced economies, the recovery remains heavily dependent on monetary and fiscal
stimulus. In general, broad forces of household, bank, and sovereign deleveraging will add to the
variability, and temper the pace, of global growth. Recent tensions in Europe are likely to result
in higher borrowing costs and more rapid tightening of fiscal policy in some countries - an
important downside risk identified in the April Monetary Policy Report (MPR). Thus far, the
spillover into Canada from events in Europe has been limited to a modest fall in commodity
prices and some tightening of financial conditions.

Activity in Canada is unfolding largely as expected. The economy grew by a robust 6.1 per cent
in the first quarter, led by housing and consumer spending. Employment growth has resumed.
Going forward, household spending is expected to decelerate to a pace more consistent with
income growth. The anticipated pickup in business investment will be important for a more
balanced recovery.

CPI inflation has been in line with the Bank's April projections. The outlook for inflation reflects
the combined influences of strong domestic demand, slowing wage growth, and overall excess
supply.

In this context, the Bank has decided to raise the target for the overnight rate to 1/2 per cent and
to re-establish the normal functioning of the overnight market. This decision still leaves considerable
monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the
significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary
stimulus would have to be weighed carefully against domestic and global economic
developments.

Information note:
The next scheduled date for announcing the overnight rate target is 20 July 2010. A full update
of the Bank's outlook for the economy and inflation, including risks to the projection, will be
published in the MPR on 22 July 2010.

Should I lock in?

2010-05-12T10:18:00.000-07:00

Leah's Bottom Line: If you are debating whether to lock in or not, ask yourself: What was the prime rate at when I chose this product a few years ago? Let's assume it was 2007 and you chose a prime minus 0.6% variable rate mortgage. At that point in time, prime rate was 4.75% (meaning your rate was 4.15%) and you clearly qualified with respect to your financial situation at that point in time.

While most of us have gotten used to incredibly low interest rates, this isn't the norm. Prime rate has been at 2.25% for the last 11 months so when we hear that it will rise, we generally panic. However, you need to ask yourself "are you comfortable in your current financial situation to sustain an increase in prime back to where it normally is?" If prime rate has averaged roughly 4.81% over the last 5 years, and you have a built in discount of say, prime minus 0.6% - that means your rate would be 4.2% on average. Translated into a monthly payment via any mortgage calculator on the web and see if you are comfortable with that figure. This is roughly what your payments would have started out at back in 2007 if we use the above example. If something has changed in your life and you are no longer comfortable with that figure or you feel more secure in a fixed rate, you may want to lock in.

Leah

ARTICLE from Canadian Mortgage Trends:

With people banking on the main interest rate going up in June, it seems like a good time to for homeowners to lock in their fixed-rate mortgages.

About 12 percent of mortgage holders with fixed-rate mortgages "locked in," or switched from variable rate mortgages, in the past year, , according to a report this month by Will Dunning, chief economist at the CAAMP , and another 10 percent had already switched from variable more than a year ago.

The rate for conventional five-year mortgages was at 6.25 per cent at the end of April, nearing the 5.25 per cent rate at the end of May last year - the lowest since 1973 when the Bank of Canada data began.

"As interest rates rise, expect home buyers to increasingly opt for fixed-rate loans, in turn leaving banks with more fixed-rate assets to hedge in the swap market" said Mohammed Ahmed, a rates strategist at Canadian Imperial Bank of Commerce in Toronto.

Housing starts rose to a seasonally adjusted annual pace of 201,700 units last month.

Spring Fever Newsletter

2010-05-06T21:58:00.001-07:00

Now that we are into May, Calgary is in full spring fever mode, despite our current weather not being anything spring-like! First time home buyers are abound, seeking deals before their rate holds expire, while variable rates are becoming more enticing with steeper discounts for those ready to take on the added risk.

There have been a multitude of changes over the last several weeks which have come into effect and may affect you in an upcoming purchase. To fully clarify exactly what these changes are, I'll devote this newsletter to explaining the latest changes and how they may affect you.

Higher Interest Rate Used to Qualify Clients

*These rules affect Hi-Ratio Mortgage Holders (ie: those with less than 20% down payment)

Old Rules: Previously, if you signed on for a 3 year fixed rate term at 3.65%, I would have qualified you for the mortgage AT 3.65%. The only difference would have been a variable mortgage; those mortgages have always been qualified on higher rates to protect you again future rate increase and most commonly the 3 year POSTED bank rate would have been used to qualify you.

New Rules: In order to eliminate a surplus of clients in the next several years who are no longer able to afford their houses as their renewal rate in 3 years is much higher, the new rule is that all clients are qualified on the "benchmark qualifying rate" unless you are signing on for a 5 year or greater fixed rate term, in which case you are qualified at that rate. For fixed rate mortgages with terms of less than 5 years as well as all variable mortgages, you are qualified based on the benchmark qualifying rate.

What is the 'qualifying benchmark rate?'
As of today, the rate is 6.10%. CMHC defines the benchmark rate as the Chartered Bank - Conventional Mortgage 5-year rate that is the most recent interest rate published by the Bank of Canada in the series "V121764" each Monday.
Refer to the official link for the most up to date rate information.

Leah's BOTTOM LINE:
Based on a higher qualifying interest rate, borrowers will need approximately 25% more income in order to qualify for the same home compared to the old rules.

Rental Properties

Old Rules: Able to purchase a rental property with 5% down payment.

New Rules: Requires 20% down payment for rental properties.

As of April 19th, CMHC will also be implementing changes to the calculation of a borrower's Total Debt Service Ratio where rental income is generated from the subject property. 50% percent of the gross rental income from the subject property may be included into the borrower's gross annual income for the purposes of calculating the borrower's Total Debt Service Ratio.

Leah's BOTTOM LINE: This is a more complex matter to explain, so I invite you to contact me directly to review your situation or alternatively, please read the CMHC link for more specific information.

	Re-financing Your Home
Old Rules: Previously able to re-finance up to 95% of the value of your home. New Rules: May only re-finance up to 90% of the value of your home. Leah's BOTTOM LINE: This will keep an additional 5% worth of equity in the home than before.

Bank of Canada warns higher rates ahead

2010-04-20T11:20:00.000-07:00

From the Canadian Press:

The Canadian dollar rose sharply Tuesday as the Bank of Canada warned that it will be raising interest rates.

At midday, the dollar was up 1.63 cents to 100.17 cents US.

The Bank of Canada kept its key lending rate unchanged Tuesday, but warned that its low-rate policy has a limited future.

The bank held the overnight rate at 0.25 per cent, as economists had expected.

But with the economy recovering and inflation running above the bank's two per cent target, the need for rock-bottom lending rates "is now passing," it said in a statement.

The extent and timing of any change in the key rate "will depend on the outlook for economic activity and inflation," the bank said. The bank also noted growth is "proceeding somewhat more rapidly" than it expected earlier this year, increasing the chance of a rate rise in the early summer.

"Simply put, this statement marks a dramatic change in tone by the bank, and doesn't rule out possible 50 basis point moves," said Douglas Porter, deputy chief economist with BMO Capital Markets, in a commentary.

Porter predicted a June rate hike is now "likely," adding that the central bank is clearly much more concerned about inflation than previously indicated.

The bank sets a target level for the overnight rate, which is often called the key interest rate or key policy rate because it indicates the bank's thinking about the economy.

The overnight rate is the interest rate major financial institutions charge each other for one-day loans.

The rate has been at a very low 0.25 per cent since April 2009, when it was cut from 0.50 per cent as the recession worsened. It was at a recent peak of 4.5 per cent in October 2007.

The bank's "extraordinary policy" of ultra-low rates was introduced to boost the recovery, the statement said.

The bank is forecasting growth of 3.7 per cent this year, reflecting stronger global activity, strong housing activity in Canada and the bank's conclusion that policy stimulus advanced some spending into late 2009 and early 2010.

It's forecasting that Canadian economic growth will slow to 3.1 per cent in 2011 and 1.9 per cent in 2012.

Competing pressures

Bank governor Mark Carney is juggling competing pressures: the need to control inflation with a higher rate; the need to keep the cost of loans low to encourage business and consumer borrowing; and the strong dollar.

A bank rate increase could push the dollar even higher, hurting exports and jobs. While recognizing that growth is strong, the bank warned Tuesday about economic negatives: "the persistent strength of the Canadian dollar, Canada's poor relative productivity performance and the low absolute level of U.S. demand."

Although Carney expressed concern about inflation in March, the bank said it is expecting the rate to ease slightly in the second quarter, and remain slightly above the target two per cent rate this year before easing in the second half of 2011.

With files from The Canadian Press

Overnight Interest Rate to Remain Low - For Now

2010-04-17T10:18:00.001-07:00

Group urges BoC to keep rate promise - for now

| Friday, 16 April 2010

The Bank of Canada should keep the overnight interest rate as is in April, but aim for a target interest rate of 1.25 per cent by October and 2.50 per cent by April 2011, the C.D. Howe Institute's Monetary Policy Council recommended.

Nine of the ten members of the Council - which provides an independent assessment of the Bank of Canada's strategy to reach a two per cent inflation target - recommended the Bank keep the key interest rate at 0.25 per cent for the time being.

But for the next announcement in June, the council was split on how the central bank should proceed. Six recommended the rate still be held at 0.25 per cent, while the four remaining members were split between wanting a 0.5 per cent and 0.75 per cent target rate. The Council's formal recommendations to the Bank of Canada are based on the group's median votes on rate changes.

In a report, the Council said members who favoured the Bank stay with its commitment tended to "highlight the role of emergency stimulus and inventory swings in recent growth numbers" while noting that the disappearance of one-time factors affecting prices will cause year-over-year inflation to moderate.

In contrast, members who wanted the Bank to raise the policy rate sooner and more steadily said domestic demand and inflation are running ahead of what was expected when the Bank's commitment to keep rates low was made, adding the yield curve and money growth rates are "consistent with continued expansion."

"In general, the strongest sentiment was that credibility in controlling inflation should be the Bank of Canada's paramount consideration," the report said. "There was strong sentiment in favour of the Bank's signaling clearly that monetary policy is likely to become much less accommodative as it exits its emergency stance."

Increase of 0.6% for 5 year fixed rates

2010-03-31T22:09:00.000-07:00

Banks start interest rate shake-up

| Tuesday, 30 March 2010

Four big banks have increased their posted rates on fixed mortgages, signaling the start of an upward move on record-low interest rates.

Royal Bank, TD Canada Trust and Laurentian all moved their posted rates on five-year fixed mortgages by 0.6 per cent yesterday, a move followed by CIBC today. Many non-banks have already followed, prompting a surge in requests from variable-rate clients to lock into fixed rates.

"The phones have been ringing off the hook since yesterday," said Donna Ramsay, a Mortgage Architects broker based in Orangeville, Ont. "We have several clients that we have committed to calling to see if they want to lock into a fixed. We tell them that we're not here to tell them what to do -- we'll give them the facts."

The interest rate increase will also mean higher qualifying criteria for new clients, who must meet the five-year posted fixed rate when the new mortgage insurance rules kick in on April 19.

CIBC economist Benjamin Tal told the Globe and Mail the rise in rates along with other factors means the booming housing market will slow down significantly after spring.

"Given where interest rates are now, I still think you'll see an extremely strong spring. However, after that I think the housing market will stagnate," Mr. Tal said. "We are in the ninth inning of this booming house market. We are not expecting a crash, but we will stagnate."

Interest Rates Set to Rise

2010-03-29T22:27:00.000-07:00

Interest rates are set to rise today with one major bank already announcing a 0.6% increase in their 5 year fixed rates. There are also moderate increases in the 3 & 4 year fixed rates.

If you are considering purchasing in the near future, it would be wise to secure a rate hold before all of the lenders have followed suit. Generally rate holds last anywhere from 90-120 days and as long as the client takes possession of the new home within that time frame, the original, low rate hold is honored.

Relief in sight?

2010-03-18T13:47:00.001-07:00

Consumer complaints about mortgage penalties pile up

| Tuesday, 16 March 2010

The Bank of Canada's record-low interest rates have been in place for almost a year and during that time, consumer complaints about mortgage prepayment penalties have been steadily rising.

A story in the Globe and Mail says the Ombudsman for Banking Services and Investments (OBSI) has opened 301 new consumer complaints in the quarter that ended in January, which is twice the number seen in the same quarter last year and almost triple the number seen in 2008.

Hein Moes, an Invis broker in Victoria, says lenders will not bend on interest rate differential (IRD) penalties when interest rates are so low, causing many clients to opt out of refinancing for a better rate.

"I don't know when we're going to see some release in that department," said Moes. "If you can't save your penalty before the original maturity date of the mortgage, then you really have to have a hard look at whether you want to do it or not. And even if you take the best discounted deal with the same lender, they're going to want to see compensation from that."

In the latest federal budget, Finance Minister Jim Flaherty said he will standardize how prepayment penalties are calculated and disclosed to consumers, but details have not yet been revealed.

Douglas Melville, the head of the OBSI, told the Globe in most cases the lender's disclosure is clear, but there are some instances when the customer's argument has legs.

"At the moment, we have about a dozen case files still open where some form of compensation is likely to result," Melville said. "We believe compensation is warranted due to a lack of clear disclosure by the firm of the prepayment penalty calculation."

Bank Maintains Overnight Rate

2010-03-02T08:24:00.000-08:00

Bank Maintains Overnight Rate - March 2, 2010

Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010

OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

The ongoing global economic recovery is being driven largely by strong domestic demand growth in many emerging-market economies and supported in advanced economies by exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.

The level of economic activity in Canada has been slightly higher than the Bank had projected in its January Monetary Policy Report (MPR). The economy grew at an annual rate of 5 per cent in the fourth quarter of 2009, spurred by vigorous domestic spending and further recovery in exports. The underlying factors supporting Canada's recovery are largely unchanged - policy stimulus, increased confidence, improved financial conditions, global growth, and higher terms of trade. At the same time, the persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada.

Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity. The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess supply.

Conditional on the current outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.

The risks to the outlook for inflation continue to be those outlined in the January MPR. On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength of the Canadian dollar. The Bank judges that the main macroeconomic risks to the inflation projection are roughly balanced.

The next scheduled date for announcing the overnight rate target is 20 April 2010.

Canadian Mortgage Broker News - From the Press: What people are saying about the new mortgage rules

2010-02-17T09:31:00.000-08:00

Canadian Mortgage Broker News - From the Press: What people are saying about the new mortgage rules

3 Major Changes to Mortgage Lending

2010-02-16T08:17:00.000-08:00

A summary of the new changes introduced this morning by Finance Minister Jim Flaherty, to come into effect April 19th, 2010 are as follows:

1. Borrowers must meet the standards for a 5 year fixed rate mortgage even if they are choosing to sign onto a mortgage with a shorter term and lower rate.

2. When re-financing your home, you may only take out up to 90% of the equity instead of 95%.

3. A minimum down payment of 20% required for non-owner occupied properties.

Surprisingly to some, there were actually no changes to the minimum down payment as was previously hinted at. The current minimum down payment remains at 5%. The maximum amortization has remained at 35 years, also with no change.

Breaking News: New Changes to Mortgage Lending

2010-02-16T08:16:00.000-08:00

Tougher mortgage rules to cut down default risks

16/02/2010 10:52:18 AM

CTV.ca News Staff
Ottawa has tightened the rules for obtaining a government-backed mortgage, as it casts an eye towards expected future interest rate increases and the risks those pose for Canadian homeowners.

Finance Minister Jim Flaherty announced Tuesday morning that prospective homeowners will soon have to meet the requirements for a five-year, fixed rate mortgage -- as opposed to the three-year standard in place right now. The rule will apply even if they choose a mortgage with a lower interest rate and shorter term.

Flaherty told reporters gathered at an Ottawa news conference that the change will "help Canadians prepare for higher interest rates in the future."

"One must always guard against the temptation to take on more financial risk simply because interest rates are low. Our government is acting to help prevent Canadian households from getting overextended and acting to help prevent some lenders from facilitating it," he said.

Flaherty also announced Ottawa will also limit the amount of mortgage refinancing that homeowners can undertake.

"We will lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes," he said.

"This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up," he added.

"We are encouraging people to build equity over time, using homeownership as an effective way to save, rather than as a vehicle for quick cash."

The finance minister also announced that housing speculators will now have to put down a 20 per cent down payment on properties they will not be living in, to qualify for a government-backed mortgage.

But he said the government is not trying to crack down on investment properties such as rental units.

"What we're getting at is the speculation in multiple-condo markets, in particular," he said, making reference to incidents in the Vancouver and Toronto markets as examples.

Preventative measures

Flaherty said the changes, which are expected to come into force on April 19, were necessary to prevent future problems and he insisted they would not make it harder for Canadians to buy houses.

"The only restriction would be qualifying at a five-year, fixed-term basis, which is a credit qualification that a number of our chartered banks have already gone to," Flaherty said.

"I think that most prudent Canadians would want to have that level of ‘credit-worthiness,' of credit qualification, so that they could rest assured that their house would remain affordable -- and the mortgage remain affordable -- when interest rates rise, as they inevitably will."

Pointing to mortgage changes the Conservative government instituted two years ago -- including a minimum five per cent down payment for new mortgages and a maximum 35-year amortization period -- Flaherty said they also helped Canadians avert the kind of housing crisis seen in the United States in the current recession.

Economists had previously called for the minister to be stricter about who can get new mortgages, but warned the government not to put on the brakes to strongly, in order to preserve the fragile economic recovery. On Tuesday, several said they favoured the new rules brought forward by the government.

"Given the prospect of higher interest rates and the recent run-up in housing prices in some markets across Canada, the measures announced today are prudent," Frank Techar, president, personal and commercial banking, BMO Bank of Montreal said in a statement.

Carleton University professor Ian Lee said he supported the changes, but said he would also like to see the required mortgage housing down payment doubled from five to 10 per cent.

"In my judgment, the most important predictor of risk in home ownership is the amount of down payment," Lee told CTV News Channel from Ottawa on Tuesday morning.

Lee said he was hoping the finance minister would increase the required down payment "to really take out that additional risk that is there, which is caused by the fact that interest rates are going to go up."

"And when they go up, some of these people will not be able to keep their house, because they will not be able to afford the payments," he said.

BNN's Michael Kane said Flaherty's position is that while there may not be a housing bubble immediately on the horizon, he wants to be proactive in preventing one from forming.

"What Mr. Flaherty is saying here, is that even though he doesn't see the bubble really forming at all, to put certain measures in place so one does not get the chance to build is the prudent thing to do," Kane said Tuesday morning from Toronto.

Overall, Flaherty said the Canadian housing market is "healthy and stable," with about two-thirds of Canadians owning their own homes.

"Our housing market… has been a source of strength for our country and a source of growing wealth for hardworking Canadians themselves," Flaherty said.

With files from The Canadian Press

Speaking out against tighter lending requirements

2010-02-10T07:39:00.000-08:00

ING president speaks out against tighter mortgage rules

| Tuesday, 9 February 2010

After providing several comments on the potential housing bubble in Canada, ING Direct Canada president Peter Aceto told the Globe and Mail that Ottawa shouldn't tighten mortgage rules.

"High level, one-stroke fixes are too simple, and can have a very large impact," Aceto told the newspaper. "I worry about government-based tightening of the mortgage rules creating a much worse reaction - too fast of a cooling, which is not really good for anyone."

Aceto went on to say that banks can tighten rules themselves and do not need Finance Minister Jim Flaherty to "make the decision for them."

The comments come alongside a warning from Scotia Capital economists Derek Holt and Karen Cordes, who predicted a housing bubble forming in a report released late last year.

"You can't go from 100 km/h to zero in a nanosecond without suffering harsh consequences," they wrote, according to the Globe. "Newton's third law is the best caution that can be served up with respect to abruptly altering Canadian mortgage rules as per some of the whisper talk leading up to the March 4 federal budget after the currently government sharply liberalized the mortgage market in early 2007."

Will 10% down payment be the new minimum requirement?

2010-02-08T17:33:00.000-08:00

Welcome back! How time flies. Christmas 2009 has come and gone and we're already into February of the new year.

Several people have mentioned the reference to increasing the minimum 5% down payment to 10% while also discussing a decrease in amortization. The last major change with this regard was in October of 2008 when 40 year amortization alongside zero percent down payments were removed. At present time, a client may qualify for a 35 year amortization with a 5% down payment, which in this market, is a very decent sized down payment. Since the infamous "boom" in the Calgary housing market, 5% is no longer what it used to be. On a 300K house this is a 15K down payment which is a significant amount of money. Certainly many people would be forced out of the possibility of home ownership should the minimum requirement be moved up to 10%.

At present time this is strictly a rumor but I will post the link with supplemental information on this topic.

Flaherty has no plans to tighten mortgage rules: Globe and Mail

| Monday, 8 February 2010

Following a report in Saturday's Globe and Mail that banking officials have called for tighter mortgage rules to stave off a housing collapse, Finance Minister Jim Flaherty told reporters he does not see signs of a housing bubble in Canada.

According to the paper, Flaherty made the comments following the weekend's finance summit. Although he said there were some "signals in the market that are concerning," he added there is no "compelling evidence" of a housing bubble. He did, however, remind the Globe and Mail that he has policy tools available to "take action to counter negative trends."

"I have used some of them before and can use some or all of them again," Flaherty said, making reference to the government's decision to disallow zero-down mortgages and 40-year amortizations in 2008.

The discussion of tightening mortgage rules surfaced in December when Flaherty mentioned the possibility of increasing down payment and amortization periods to cool off the housing market. The Globe said the Department of Finance has canvassed the mortgage industry for ideas on whether tighter mortgage rules are needed.

CAAMP's Jim Murphy told the newspaper that it would have "serious concerns" with ten per cent down payments, while Canadian Mortgage Trends' Robert McLister said the CMHC has already "increased its vigilance" on mortgage insurance approvals.

Canadian Mortgage Broker News - Low rates should come with warning, experts say

2009-11-23T10:09:00.000-08:00

Canadian Mortgage Broker News - Low rates should come with warning, experts say

This article discusses the perceived risk of locking into a variable rate mortgage since rates are currently at historically low levels. However, can you sustain your mortgage payment when rates go up? Lender's typically qualify clients on a posted, 3 year fixed rate to ensure that if rates are to climb, the client should still be able to maintain that client. For example, with prime rate being at 2.25%, the client is not being qualified for the loan at an interest rate of 2.25%. Instead, they are typically using the bank's, 3 year posted rate which is currently at 4.50%. In addition, in order to qualify for a variable rate mortgage, a client's debt service ratios follow stricter guidelines than those locking into a fixed rate mortgage.

Canadian Mortgage Broker News - Big 5 banks cut fixed mortgage rates

2009-11-23T09:59:00.000-08:00

Canadian Mortgage Broker News - Big 5 banks cut fixed mortgage rates

After a quick increase in rates last October, the major banks have lowered fixed rate mortgages. The article speaks to the bank's posted rates while brokers have access to further discounted rates. Broker discounted 5 year fixed rates are currently 4.19%.

Please email me if you are interested in further discounts with regards to TD bank.

Leah

leah@mortgagegrp.com

Low Mortgage Rates Encourage Home Buyers

2009-11-09T20:32:00.000-08:00

Housing market to improve in 2010: CMHC forecast

OTTAWA - Canada's national housing agency has upgraded its forecast for the new-housing market next year on the grounds that low mortgage rates will continue to make home ownership affordable, the economy will be better that previously thought and there will be a spillover effect from the surging resale market.

Housing starts are forecast to reach 141,900 in 2009 and rise to 164,900 next year, the Canada Mortgage and Housing Corp. said Monday in its quarterly outlook. This year's forecast is unchanged from the previous one issued in September, but expectations for next year's numbers increased from about 150,000.

Such levels still pale to 2008's final tally of 211,056, which marked the seventh straight year of more than 200,000 housing starts.

Bob Dugan, chief economist at CMHC, said the earlier part of this decade was an "exceptional period," that is unlikely to be matched in the foreseeable future

He explained that average new-household creation in Canada runs at about 175,00 annually, and the elevated rate of housing starts seen between 2002 and 2008 was not sustainable for the long term given that reality.

Dugan said by 2011 or 2012, housing starts should be close to equal with the household-creation rate.

To show how far the new-housing market has come this year, Dugan pointed out how the annual rate of housing starts went as low as 118,500 in February and rose to about 150,000 in recent months.

"That's a pretty good improvement (but) not as good, though, as the improvement we've seen on the existing-home market," Dugan said.

He said between January and September of this year, the rate of monthly existing-home sales has increased about 63 per cent on a seasonally adjusted basis.

As the resale market turned from a buyer's market to a seller's market, Dugan said home builders got some of the buyers who couldn't find what they wanted among existing homes.

Listed home resales are expected to reach 441,300 units this year and increase to 445,150 units in 2010, CMHC said in its report. Both figures are up from 2008's result of 433,900.

The average price for existing homes is forecast to be $312,950 this year and $324,500 in 2010, the agency said, up from $303,607 in 2008.

Regionally, British Columbia, Alberta, Saskatchewan and Ontario are expected to post the sharpest year-to-year declines in housing starts this year. Dugan said these provinces have more volatile housing markets, and their gains in other recent years were more pronounced than elsewhere in the country.

But Dugan added that these places are also anticipated to recover more strongly in 2010 than regions such as Quebec and Atlantic Canada, where the housing market was less damaged by the economic downturn this past year.

Foreign Banks Beginning to Raise Rates

2009-10-29T07:28:00.000-07:00

Following Australia's example from earlier this month, Norway follows and raises it's overnight lending rate by 0.25%. Mark Carney of the Bank of Canada has 'commited' to maintaining Canada's overnight lending rate at 0.25%, although many are skeptical that this will indeed be raised before the previously set date of end of second quarter, 2010. Read below for more information on what other countries are currently experiencing~

Leah

Norway becomes 1st in Europe to raise rates

28/10/2009 10:53:41 AM

CBC News
Norway's central bank has decided to raise its key interest rate by a quarter percentage point to 1.5 per cent, making the oil-rich country the first European economy to boost rates since the height of the global financial crisis.

Norges Bank announced the hike Wednesday, citing "signs of new growth" in the economy.

On Tuesday, the central bank of India elected to hold rates steady, but gave a strong indication it plans to hike rates in the near future due to runaway inflation - expected to reach 6.5 per cent by March, well ahead of the three per cent target.

In August, the Israeli central bank boosted its benchmark lending rate.

And earlier this month, Australia became the first major world economy to raise its lending rate. Australia is one of the few developed economies in the world to have avoided a recession.

Since October 2008, Norway's central bank has cut rates by a total of 4.5 percentage points due to the financial and economic crunch, but rates have held steady since June.

The Nordic country of 4.8 million, which is not a member of the European Union, escaped the financial crisis largely unscathed thanks to its vast oil revenues, which it invests in a sovereign wealth fund worth $420 billion US.

Still, Norway's economy is predicted to shrink one per cent this year.

In its latest policy decision last week, the Bank of Canada held its benchmark lending rate steady at 0.25 per cent. It reiterated its "conditional commitment" to keep rates there until late 2010 at least.

With files from The Associated Press

Bank of Canada Remains Unchanged

2009-10-20T10:57:00.001-07:00

Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010

OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

Recent indicators point to the start of a global recovery from a deep, synchronous recession. Global economic and financial developments have been somewhat more favourable than expected at the time of the July Monetary Policy Report (MPR), although significant fragilities remain.

A recovery in economic activity is also under way in Canada. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.

Given all of these factors, the Bank now projects that, relative to the July MPR, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. Growth is expected to be slightly higher in the second half of this year than previously projected but to average slightly lower over the balance of the projection period. The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year. This is a somewhat more modest recovery in Canada than the average of previous economic cycles.

The Bank now expects that the output gap will be closed in the third quarter of 2011, one quarter later than it had projected in July. Correspondingly, inflation is also expected to return to the 2 per cent target in the third quarter of 2011, one quarter later than in July's projection.

While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.

Financial Update - Talking to BMO

2009-09-30T07:49:00.001-07:00

One on one with BMO economist John Turner

By CMP | Wednesday, 30 September 2009

Some economists are claiming the worst of the recession is behind us. BMO expert John Turner recently spoke with CMP's sister publication, CRE, about what this could mean for the real estate market and interest rates going forward.

There have been whispers that we may be nearing the end of the recession. Can you comment on this?

John Turner: According to BMO's Economics Department, the whispers are turning to shouts. Canadian consumer spending has turned upwards, while the housing market has seen an astonishingly fast recovery. Financial conditions are much improved and confidence is on the mend. BMO Economics estimates that Canada's recession ended in the third quarter, following three consecutive quarterly contractions. Aggressive monetary stimulus and hefty fiscal spending appear to have turned the economy around a little sooner than previously thought.

Do you think the Bank of Canada, by making the announcement on July 23, 2009 that the recession is over, is preparing Canadians for a rate increase (even though it said it wouldn't for 12 months)?

JT: BMO's economists think not. They think the Bank truly believes it won't need to raise rates until mid-2010. The recovery, at least initially, is expected to be soft due to weak U.S. demand. The unemployment rate is expected to climb moderately further, and inflation should remain below target for a couple of years until the slack is absorbed.

It was recently reported that home sales have jumped 40 per cent between January and May 2009. Aside from low interest rates, what other factors could have contributed to buyers getting off the fence and purchasing?

JT: There are a number of contributing factors, including pent-up demand accumulated during last year's downturn, the federal government's tax credit incentive for first-time home buyers, a growing sense that the worst of the global economic crisis is behind us and the government's insured mortgage purchase program which kept the credit taps flowing.

Of course, with interest rates being relatively low, this means lower mortgage payments for both first-time homebuyers as well as others. In some areas, prices have been holding steady and/or decreasing with recent market compression; this has led to better access to homeownership, which is a great investment. Everyone needs a place to live, and buying a home not only fulfils that need but also acts as an important component of a wealth accumulation strategy.

How might the forecasted increase in housing starts affect the real estate market from a buyer's perspective?

JT: BMO's economists expect housing starts to trend higher as the economy recovers, but remain soft for a while as a result of some overbuilding during the previous boom. The rising starts will help to keep the market balanced, since it now risks shifting back to a sellers' market if demand remains strong. The current four-month supply of resale listings is in line with, if somewhat below, historic norms.

The age old debate of fixed vs. variable is alive now more than ever. What should buyers take into consideration when deciding?

JT: It all depends on what the buyer is comfortable with and what they're looking for. Fixed rate mortgages are great for Canadians who are concerned about upward pressure on rates and who are looking for peace mind. With a fixed rate mortgage they get the peace of mind of knowing what their payments are going to be and how much of their mortgage they will have paid down at the end of their term.

On the other hand, variable rate mortgages - when taken over the long-term - have proven to be a winning strategy for Canadians over the last 25 years. Each buyer's circumstances are different and we invite Canadians to speak to a BMO Bank of Montreal mortgage specialist for the best individual advice.

For the rest of the interview, see October's issue of CRE, on newstands now.

Insurance = Lifesavor

2009-09-24T13:23:00.000-07:00

Mortgage Life Insurance is a form of protection that will pay off the balance of your mortgage should you or your partner happen to pass away, leaving the other with the remaining mortgage balance to pay down on their own. However, adding on yet another cost when you already feel as though you may be stretched to the limit with your monthly mortgage payments make it fairly undesirable to obtain for most people.

One of the main benefits to this type of insurance is that if it is tied to your mortgage and not to your bank, you are free to move your mortgage as you see fit and not re-apply with higher premiums. Many items on a mortgage application may change once you move into your house - you may choose to have a family and one partner may stay at home to care for the child. If you are down to one income and you lose that income, the mortgage company will still anticipate their monthly payments to be made.

Many people will say that they already have some form of Life or Disability insurance through their employers. These types of insurance are only as good for as long as you are employed through that specific company and may not be enough to cover the balance if they only cover a percentage of your payment.

My personal preference: I always like to put myself in the shoes of the borrower to see what I would do if it were me. Having recently gone through the process myself of obtaining Personal Life Insurance I do see value in Mortgage Life Insurance as a 'bare minimum' but would recommend a slightly different strategy.

We all know that if you decline the insurance now under the assumption that "you'll do it later, once things settle down around your new home" you won't be surprised to find out that you will simply never get around to it.

I accepted the Mortgage Life Insurance when I first moved into my home thinking that I would do the research on my own and if I found a better product I would immediately switch. Two years later and I am finally beginning to do so. Am I a procrastinator you ask? No...

Most of these products offered by Mortgage Brokers have a 30 day free trial. Feel free to sign up for that and if you have all of your ducks lined up in a row, you are covered for one month and then can move elsewhere if you so desire.

The main reason that you would move your insurance elsewhere after the 30 day free trial is up is because personal life insurance is quite often a less expensive alternative and offers more flexibility. For example: 50% pay down mortgage, 25% for children's education fund, 25% savings as opposed to 100% pay off your full mortgage balance with mortgage life insurance.

Moving is a big commitment and even if you aren't sure as to when you'll get around to the insurance side of it all, you should definitely commit to researching all the alternatives and finding the policy appropriate for you.

If you are looking to speak with a licensed insurance broker, I would highly recommend the services of the broker I myself have used in the past.

Enjoying Your Home in the Summer

2009-07-15T11:57:00.000-07:00

After a brief absence, I am back and ready to flood your inbox with new blog posts from The Mortgage Circle.

Even though we are currently in the middle of July, it feels as though summer hasn't even begun in Calgary what with all the rain we've been having and all. The search for my new 'summer duvet' has proven to be not necessary, at least not in the immediate near future. Today, however, has been a pleasant surprise. As I'm writing this blog entry, I'm sitting in my backyard, content in the sunshine and squinting to read what I've just writen on my laptop screen. The flowers that I have planted are so far behind it looks like it may as well be May in my yard, but my grass is looking green, and this is a huge accomplishment.

This is an area that no one really seems to educate you on - you've gotten yourself a new mortgage, you've made a few payments on it and everything seems to be in order. Heck, you've even set yourself up on the City of Calgary TIPPS program. You are GOOD!

Your first summer in your new home rolls around and you take a trip to Sunnyside to load up on new plants to beautify your home and prove to your neighbours that you will be taking care of your place, in case they ever doubted you. You buy a few new items to speed the process along - Miracle Grow and Bloom Blaster top your list but you also have a few pesky weeds. Not a problem - just pick up a bottle of Round-Up on your next trip to the store. Right? Wrong.

I'll agree to share this excerpt with you knowing that as silly as it may all sound, I know that I am not alone here. When I cautiously ventured out to see if this had happened to other people before, it had - with results far worse than mine.

You see, as I sit here typing looking out at my yard, there are loads of shiny new circles of green grass. No, I do not have a dog, and nor did the previous owners. Rather, in my overzealousness to stamp out an impending Weed Problem, I took it to a whole new extreme. I grabbed that bottle of Round-Up and conquered those weeds. Squirt. Squirt. Squirt Squirt Squirt. I wasn't alone here either. My boyfriend 'helped' and squirted the dandelions in our backyard. We felt pretty pleased with ourselves and settled down to enjoy a nice, cold beverage on our new patio set.

A few days later we began to see the error of our ways. Large, circular patches of our once green grass lay like the hide of a Dalmation dog. Quickly, after the damage had already been done, friends and family began to weigh in on our dilemma.

"ROUND-UP? You never use Round-Up on weeds." Or- "I'm surprised you didn't kill your whole damn yard-" that jewel came from my Father. Okay, okay! We get it! So now what? Well, I spent the better part of the summer digging out the dead circles of grass and sprinkling a mixture of what looked like newspaper and lint, but promised fresh glades of new grass within two weeks. To our surprise and relief, it worked! We still have spotty grass but I like to think that the varying shades of green offer up a nicely textured palette of grass, so to speak.

The long and short of it? Ask around - and don't be afraid of silly questions, especially if they prevent natural disasters such as ours. Just because you're a new home owner and you've mastered the financing portion of it doesn't mean you're expected to know all there is to know about home ownership!

How your Credit Affects your Ability to Qualify for a Mortgage

2009-04-14T10:51:00.000-07:00

Is your credit in order?

Client's often get caught up in the excitement of searching for a new home before ensuring that their finances are in order. Occasionally it can go so far as to putting in an offer and not realizing until quite late on in the game that something that occurred recently or even a few years back is still showing up on their credit bureau and impeding their chance at securing a mortgage.

Credit scores are broken down as follows:

1. Previous Credit Performance: 35%

Pay your bills on time. If you pay your bill 3 days early, they receive it 3 days early and this can increase your credit score by 3 points.

2. Current Level of Indebtedness: 30%

Keep your credit card at 75% of the maximum by making minimum payments. (ie: 10K limit keep at or below 7,500). This shows that you are managing your credit.

3. Length of Time Credit Has Been in Use: 15%

Most lenders want to see "2 active trade lines for 2 years or more" when applying for a mortgage as they are reviewing your past history and willingness to repay when deciding to fund your mortgage or not.
A credit card from a major bank has much more merit than a Capital One card that anyone can get.

4. Pursuit of New Credit: 10%

A major advantage to using a Mortgage Broker is that when we access your credit bureau report we have options to bring your application to many different lenders. If you were to negotiate your own mortgage rate by visiting each local bank branch yourself, each bank would then in turn access your credit bureau. Over time, multiple "hits" on your credit lower your score.

5. Types of Credit Available: 10%

Revolving credit (credit cards & lines of credit) affect your score more on a bureau than an Installment credit (monthly car payment) which has a fixed monthly amount. The "danger" in revolving credit is that when we determine your "debt service ratio" to determine your mortgage pre-approval amount we are only looking at outstanding credit balances and not the limit. A lender sees this access to unused credit as a possible risk factor.
A variety of credit is desirable, ie: a credit card (revolving credit) and a car payment (installment credit) display a good combination of credit.

General Tips

- If you do not have any established credit, the Home Trust Secured Visa is an excellent option to begin building or re-establishing your credit.

This is the preferred card to re-build your credit as Home Trust regularly reports to the credit bureau, whereas a Capital One card does not (not even after 1 year - you would be no further ahead).

Please contact myself at leah@mortgagegrp.com for more information as I can send you the required form to help you get started.

- Consider seeing a credit councilor for advice. I would recommend Credifix Inc - Riley Wight - rileyw@shaw.ca or 403.277.4357 (HELP)

They can multiple resources availabe to them to work in your benefit (ie: can remove old collections so that they do not appear on your bureau for 7 years, which is the normal length of time).

Tip from Riley: do not cancel an old credit card as it will lower your score. Simply renew it and don't use it if that is the case.

Bank of Canada: Prime Rate 2.50%

2009-03-05T18:34:00.001-08:00

As predicted, the Bank of Canada lowered their overnight rate to 0.5% on March 3rd, which brings prime rate down to 2.50% from 3.00%. Based on a recent article from TD Bank, one of the main reasons for the cut was due to tight credit. A proposed framework for easing future credit is expected to be released in April. However, a new policy alone will not be the only solution. The report indicates that external factors affecting Canada, such as the US recession (in particular, mention of the auto and housing industry) will plague us and until there is a form of "stabilization of global financial markets around the world" we will take time to recover.

On the rate front: a further 25bps decrease making the overnight rate 0.25% is anticipated (prime rate = 2.25%) and these rates wouldn't be expected to rise again until the latter half of 2010.

How does this information affect you if you are currently looking into a mortgage?

Banks continue to offer variable products at prime plus 0.8%/5 years. One particular credit union associated with TMG The Mortgage Group is offering the full savings at prime rate (2.50%) although payments are based on 5.4%. The good news is that you are instantly building equity and paying down a large portion of your principal while enjoying the added benefit of being capped at 5.4%. Should prime rate increase to 7,8,9% (it's anyone's guess these days) your payments would be capped at 5.4%. Alternatively, 5 year fixed rates are historically low (4.39%/5 years) and for comfort and peace of mind, this is a guaranteed low rate.

Understanding your Credit Score

2009-02-08T12:28:00.000-08:00

Credit scores aren't generally something we really and truly think about until we're applying for a mortgage. Sure we all know that it bodes best for us if we make our payments on time and don't carry a balance on our credit cards, but after that how many of you know what you can do specifically to improve your credit score? I'm going to break it down for you into several different blog posts as I'm sure you'll find this to be captivating information!

Part 1:

What is the purpose of a credit report and what type of information can you expect to see on the report?

As per the www.equifax.ca Canadian credit website, you can expect to find the below information on your report:

Personal Identification - Includes key identification information, such as your name, address, date of birth and Social Insurance Number (SIN)
Consumer Statement - Allows you, the consumer, to add a brief comment about any information in your report
Credit Information - Provides details of your credit accounts and transactions and shows if payments are being made on time
Banking Information - Includes information on your bank account and NSF cheque history
Public Record Information - Contains information about secured loans, bankruptcies and/or judgments
Third-Party Collections - Contains information about any involvement with a collection agency trying to collect on a debt
Inquiries - Includes all organizations or individuals that have requested a copy of your credit report in the past three years

*Note re: the above bullet on inquiries. Unless you really, really, really require that 'free baseball hat' or 'free t-shirt' that they are promising you at the Flames game when you sign up for a Mastercard, do not go through with this. This will be a "hard hit inquiry" on your credit bureau and will lower your credit score needlessly!

The credit report exists to provide lenders a glimpse of your financial history at any given point in time. When you being to establish credit or receive a loan from a bank, all of this information is documented on your credit report. If you were to miss a payment or go into collection over an unpaid bill - this too is documented on your credit report.

All of this information produces a FICO or Beacon score, which ranges from 300-900 and is known as a credit risk scoring system. Someone with a credit score of 720 is much more likely to pay their monthly mortgage payments each month and on time than someone who has a 545 and has in the past gone to collections for unpaid bills.

The credit report also highlights all active and inactive trade lines, providing the lender with a snapshot of your financial history as well as your willingness to repay the debt. It is most beneficial to have no more than 5 trade lines at a time. If you have numerous credit cards with a balance of zero, simply because you qualified for them but do not utilize them, why not cancel them and clean up your bureau?

Next post in the credit series will explain how the credit score relates to your ability to 'qualify' for a mortgage. Keep reading for more exciting information!

Horoscope for 2009

2009-01-07T20:36:00.000-08:00

Sydney, Australia: Ringing in 2007

It's that time of year when radio stations begin playing their "top 100" songs of the year and horoscope predictions for the upcoming year are printed out and scoured over. For a different spin on the Real Estate outlook, I thought I would format it in the style of a horoscope. These are my predictions for the market this year:

Where's my luck this year?

If you are a first time home buyer looking to buy, this is a great year to buy. You've patiently waited out the storm (subtle metaphor for the more commonly used term "boom") and now the pouring rain has slowed to a mere drizzle. This is the time to secure a pre-approval and take advantage of low interest rates, 4.79% for a 5 year fixed.

Home Sweet Home

No need to lament over perceived lost income due to buying at the so-called "wrong time." Truly, there is no wrong time. The way I see it is this: you need a place to live. Yes, the value of your home has likely decreased on your annual property statement this year but what would you have paid were you to have continued on living in your rental? Perhaps those numbers balance each other out. Enjoy your home and make it your own - have fun this year with some new paint with a funky name like sulfur yellow or black raspberry. With names like these, what's not to enjoy? (disclaimer: the two listed above do not match each other).

Mantra for 2009

"Focus on what you do best and let go of the rest" - Les Hewitt

The Insider's Scoop

2008-12-18T11:15:00.000-08:00

No one can ever know for certain when it is the best time to buy a house or if it is better to lock into a fixed rate versus a variable mortgage rate. What we do know is that prime rate (currently 3.50%) has been rapidly dropping and this leads many of us to think "should we have gone with a variable?" Maybe, maybe not. Returning from a recent lender presentation, a leading bank gave their opinions about the market and here is what they had to share:

the Bank of Canada will likely further decrease prime rate in January on their next 'rate date ' - January 20th, 2009.

this will likely be the last rate decrease for sometime at which point prime rate will begin to rise. When it does rise, it will do so at a speed much faster than it has taken for it to lower to the rate it is currently at.

fixed rates will likely be at their lowest in February 2009. Keep in mind that most financial institutions have a 90-120 day rate hold so if you are looking to purchase a home or renew your mortgage within that time frame, February will be the time to lock that rate in.

Ultimately it is up to the individual consumer to determine whether or not they would be able to sleep at night (determining their own, personal risk-tolerance) if prime rate were to drastically increase or would you prefer a certain level of peace-of-mind with a fixed rate?

Crunching Statistics

2008-12-04T18:33:00.000-08:00

For those of you interested in these mortgage statistics (and who wouldn't be?) I've highlighted the one's I've found to be especially enlightening in bold red. Now, correct me if I'm wrong but with an average of 1.59% off of posted bank rates, I think we should see the number of people using mortgage broker's these days increase from 35% onwards!

Leah Plaizier

CAAMP has released its annual mortgage report and it's chock full of mortgage stats. Here's a rundown on the more notable ones:

5,250,000: The number of Canadian home owners with mortgages.
29%: The percentage of Canadian homeowners who got a new mortgage in the last 12 months.
86%: The percentage of people renewing or refinancing that stayed with their existing lender.
$136,000: The average mortgagor's equity. This equity equals 51.7% of their home value on average.
22%: The percentage of mortgagors who took equity out of their homes in the past 12 months. People are spending more because last year it was 17%.
$41,000: The average equity that borrowers took out of their homes this year. That's up 16% from last year. The most common reason for borrowing this equity? Debt consolidation.
50%: The ratio of new mortgages taken out in the last year with amortizations greater than 25 years.
5.41%: The average Canadian's mortgage rate. Last year it was 5.56%.
0.40%: The average interest rate improvement realized by people who refinanced in the past year.
1.59%: The average discount off of bank-posted rates.
1.96: The average number of quotes people get when shopping for a mortgage.
0.28%: The percentage of Canadians who are 90 days or more past due on their mortgage. That's up just slightly from last year.
10%: The approximate decline in mortgage approvals that CAAMP foresees in 2009.
36%: The percentage of Canadians who are aware that insured 40-year and 100% LTV mortgages have disappeared.

Peoples' favourite mortgage terms:

1-3 years: 29% of borrowers
4-5 year: 61% of borrowers
Over 5 years: 10% of borrowers

CAAMP says there's a noticeable trend in borrowers taking shorter terms when compared to last year.

There's also a big trend towards variable rates. 40% of mortgages were variable in the past year. In CAAMP's 2007 report the number was just 21%. CAAMP says that's because "consumers may be expecting interest rate reductions." We'd also like to think they're becoming more educated about the long-term advantage of variable rates.

Where did people get their new mortgages this year?

Major banks: 47%
Mortgage brokers: 35%
Credit Unions: 11%
Other: 6%

Facts gathered by The Mortgage Group Ontario

Fraud Alert! What you need to know...

2008-11-27T12:57:00.000-08:00

As I'm typing this post on mortgage fraud, I can't help but hear Oprah's voice in my head. No, she hasn't recently done any shows on mortgage fraud but the "what you need to know" starts off seemingly every show aired that plans on informing the general public of something you weren't previously aware of but most definitely should be. The second most famous line she uses is "all new..."

For this weeks all new post, I'll be enlightening you on what you need to know about mortgage fraud. Having recently sat in on a presentation from First Canadian Title, I'm confident that the majority of us brokers in attendance promptly went home and signed up for title insurance.

What is title insurance?

Title insurance covers you if someone fraudulently obtains a mortgage on your home. It also protects you from a myriad of other potential issues, such as errors in surveys, incomplete/out of date real property reports at the time of purchase, legal fees required to resolve title issues, problems if the previous owner completed renovations without a permit, etc.

An example that was shared with us was of someone who had moved into a property whereby the garage extended by several feet onto the city-owned back lane. My details are likely to be somewhat limited here as this is from memory but the gist of it is this: the property was in this condition when it was bought. A City of Calgary encroachment agreement was obtained from the City of Calgary at a cost of $500, basically stating that the garage is, indeed on city owned property by a margin of several feet. When they wanted to develop the back lane, the garage needed to be moved. However, if it was moved the other way it was then situated too close to the home and deemed a fire hazard.

Luckily the owner of the property had title insurance so they stepped in and valued the home's worth with/without the garage, found the garage to be worth an estimated 15K and reimbursed the homeowner in that amount. The $500 City of Calgary easement essentially served no purpose and for that cost (and technically much less) the owner could have bought title insurance as a one-time fee, for the duration of time that they live in the home.

See the below link for an eye-opening, first hand account of a BC elderly man who was the unfortunate victim of mortgage fraud. His home, valued at 600K had a fraudulent mortgage of 400K taken out on it and this story is currently being fought out in court.

http://www.househunting.ca/buying-homes/story.html?id=9664ef04-9afd-4561-83de-fdaabf6a907f

Also:

http://www.protectyourtitle.com/reallifefraudstories.htm

How much does it cost?

Compared to the majority of insurance premiums, it is relatively inexpensive as it is a one time cost for the duration that you live in that home.

If your home is under 500K, the cost is $299 (with a mortgage; $200 without an existing mortgage)
For homes valued over 500K, add an additional $1/per $1000 over the 500K.

Identity Theft

Might as well cover yourself from identity theft while you're at it. For lifetime coverage it will cost you $40. This way, no one can ever impersonate you and take out a mortgage in your name.

Contact me at leah@mortgagegrp.com or 403.630.9534 for more information on how to sign up.

Habitat for Humanity

2008-11-27T12:53:00.001-08:00

Habitat for Humanity

2008-11-19T18:17:00.000-08:00

Are you one of those people who are savvy with their flea-market finds? Love a good bargain? Did you know that there is a Habitat for Humanity store right here in Calgary where you can spend an afternoon looking through new and used furniture, appliances and building products? This is a great place for someone like myself, who devours HGTV and dreams of spray painting 1950's ornate silver chandelier with a color called "pearly pebble" and declaring it brand new. Generally those of us who have envisioned what our homes might look like if we were to declare our own personal 'home heist' a la Justin and Colin style, it would be an impressive feat. Sadly time, energy and plain skill are often lacking and we resort to maintaining the status quo.

There are places in Calgary such as the one listed above that won't break your wallet but will help you indulge your inner design diva. Another store recommended to me but which I have not as yet visited is the Consignment Gallery, located at 533 - 58th Ave SE. The information I received is that this is a great place to shop for pieces that were previously used to decorate show homes and we all know how gorgeous those homes are decorated. Their stock is thus constantly changing so it is certainly worth popping in from time to time.

Lastly, Fine Furniture Outlet off of Edmonton Trail is great for quality furniture (think kitchen tables, bedroom sets and sofas). When I was last there over a year ago they had scads of thick catalogs from various furniture stores in Calgary and should you be after a particular piece, they may be able to order one for you at a discounted price. Worth looking into.

I should mention that I have a personal soft-spot for Habitat for Humanity as in the upcoming week I'll personally spend a day volunteering with a group of mortgage broker's and lender's that I work with on a home in Evanston, in northwest Calgary. I'll be sure to post a few pictures alongside a story about that experience in a future post.

October Ratios...2008

2008-11-04T12:36:00.000-08:00

Many people are discussing the slowing down of the Real Estate Market in Calgary right now, whether they are in the market for a home or simply chatting in the grocery store line-up. A recent article published by the Calgary Herald on November 4th, 2008 listed several statistics comparing this past month with that of May 2007 and the results are clear.

Currently single family homes are selling at a ratio of 1 home for every 6.74 on the market. Back in the mayhem of May 2007 this same comparison was 1 home for every 1.86 on the market.

Realtors have said that October is historically a slower month in terms of sales although certainly the ever changing economy and uncertainty in the marketplace have put many home buyer's on edge.

The bright side to all of this is that for people looking to enter the market they would be doing so at a great time. Selection is abundant, buyer's are in control, and mortgage interest rates have remained relatively stable. Having said that, while the Bank of Canada has certainly lowered their "prime rate" to all-time lows recently, financial institutions have responded by removing any product which offers a variable rate at a discount. Rather, a 1-2% increase will be tacked onto prime rate.

I would caution new buyer's on trying to 'time the cycle' which could be compared to trying to catch a falling knife - next to impossible. Buyer's need to realize that saving 5-10K on a home by waiting may mean a 0.2% increase on their mortgage rate which could be significant when looked at over the term of a mortgage.

Nifty new product for your home

2008-11-04T12:26:00.000-08:00

I noticed these interesting teardrop I.Pod speakers on www.mollaspace.com recently and thought that they might appeal to more people than just myself. It's likely that we all have a central speaker system set-up in our homes but not many of our homes are outfitted with speakers in every room. The next time you're getting ready to have a nice night out, you could place this water resistant, compact speaker on your sink edge, take it with you to the beach (depending on where you're from) or simply into the great outdoors while camping. Not all I.Pod/MP3 players will fit though, so please check the website for size restrictions. Happy shopping!

The Launch

2008-10-10T12:21:00.000-07:00

As is the case with everything in life, the current topsy-turvy economic outlook is cyclical, hence the launch of my new blog titled "The Mortgage Circle." Covering a variety of topics real estate related, I aim to share my candid opinions in an attempt to enlighten and inform the typical layperson of what the mortgage process entails.

I hail from a health-care background and prior to my current career as a Mortgage Broker found that the attempt to describe medical procedures in common terms to be mere suggestions and most certainly not the norm. Rather than have you suffer through the fine print and illegible terms, I'll be breaking it down for you in a variety of topics to be covered throughout the year. I'll try to stay on-topic although no promises can be made should I drift off onto another tangent such as this ridiculous head cold I'm currently battling...