BMO brings back the 2.99% mortgage

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On the Globe and Mail website is a story about the Bank of Montreal (BMO) lowering their 5 year fixed rate to 2.99%. From the article:

Bank of Montreal has once again lowered its five-year fixed mortgage rate to 2.99 per cent, from 3.29 per cent, a move that could cause more downward pressure on rates at a time when they’re already defying expectations.

BMO’s rate is not the lowest in the market, but it is the lowest that’s currently available from the country’s biggest banks. BMO sparked a mortgage price war among the banks when it first introduced its 2.99 per cent five-year-fixed rate in early 2012. That rate also earned the bank a lecture from then-Finance Minister Jim Flaherty, who had been taking steps to curb growth in the housing market amid fears that a bubble could be forming. BMO has repeatedly brought the rate back since then, most recently this March.

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Housing starts down in August – CMHC

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Housing starts dropped from July to August, according to CMHC. From CTV News:

he annual pace of housing starts in Canada slowed in August to 192,368 units, down from 199,813 in July, according to the Canada Mortgage and Housing Corp.

The pace fell short of the 195,000 units forecast by analysts.

“The Bank of Canada may be looking for a rotation away from housing and the consumer, but low rates continue to support residential investment,” CIBC economist Nick Exarhos said in a report.

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Mortgage broker practices score well – MBRCC

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The Mortgage Broker Regulators Council of Canada (MBRCC) which is an association made up of mortgage broker regulators across Canada, released a press release on their findings that mortgage brokers are doing a mostly good job in determining the right mortgage products to get for clients.

From the release:

The report indicates that most mortgage brokers work to direct their residential clients toward suitable mortgages. However, the report also notes that there is still room for improvement in a number of areas.

Canada’s mortgage broker regulators have identified mortgage suitability as a priority and a concern that is shared across the provinces. “Unsuitable mortgages can have a devastating financial impact on borrowers and their families,” MBRCC Chair Kirk Bacon said. “We’ve also seen national economies around the world suffer when too many households are stuck with unsuitable mortgages.” The report confirms that mortgage brokers have an important role in ensuring that the mortgages Canadians receive are suitable.

Mortgage brokers doing the “right thing”

The mortgage broker industry in Canada has at times been somewhat tainted by mortgage brokers in the United States and by implication of lenders in Canada that mortgage broker mortgages are riskier than bank mortgages. It is good to know that there is an independent report verifying that we, as mortgage brokers, generally try to do the “right thing” for our clients.

Although I am not a mortgage lender, I have personally always found assertions of broker mortgages having greater fraud rates unmerited. Compared to major banks, it seems that the major difference is that mortgage broker fraud gets reported more than bank mortgage fraud does, and according to one colleague, chartered banks keep such a great rating with mortgage insurers because these banks will pay the costs of mortgage fraud out-of-pocket instead of filing a claim with the insurer of the mortgage. From my experience, this has allowed chartered banks to approve mortgages when the mortgage is not even within their guidelines. It appears there is little outside review of these mortgages.

This should also help our mortgage lenders who are not large chartered banks to cement their reputation as reputable and solid institutions to arrange mortgages with, even if the public awareness of these brands is not strong. I am proud of the body of work I have done for clients in getting them solutions and I am pleased to have many excellent lending options to help my clients with.

Real estate gains not as healthy as they seem – Financial Post

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I came across an article on the Financial Post today that addressed the costs of buying and selling real estate, and how it can minimize what looks like substantial profits on a real estate transaction. From the article:

Add it up, using the 7% figure for the first three sales and 9% for the last two, and that house that sold for $1.15 million has had close to $300,000 sucked out of it over the past decade through taxes, realtor fees and other costs. And, it should be noted, the owner who sold for $1.05 million in 2012 put $100,000 worth of renovations into the home. As long as real estate prices rise 5% to 10% year over year, the fees seem tolerable if you hold for a decent stretch of time. But moving five times in a couple of decades can destroy your equity gains even in the best of times. (more…)

Jeff Evans joins the Mortgage Architects Broker Network

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Vancouver, British Columbia
Mortgage Architects is pleased to announce the recent addition of Jeff Evans and his Canada Innovative Financial Inc. team as Mortgage Architects’ newest Western Canada franchise in Vancouver, British Columbia. Jeff cites “industry leadership,” “vision” and “solution-based support” as key reasons for joining Mortgage Architects. (more…)

Mortgage rates improve housing affordability

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There is an interesting article in the CBC about affordability of homes improving despite values increasing across Canada. From the article:

Housing across Canada became more affordable in the second quarter of this year because mortgage rates dropped, according to a report from RBC.

Even with prices moving higher, homes became more affordable in nearly every market across Canada, according to RBC’s Housing Trends and Affordability Report.

The least affordable markets were Toronto and Vancouver, where hot competition for properties kept home ownership out of reach for most buyers, despite a marginal improvement in the quarter. Vancouver is the least affordable market with sky-high prices, especially for single family homes.

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Mortgage insurers keep self-employed mortgage product

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Canada’s two private mortgage insurance companies, Genworth Canada and Canada Guaranty have informed Canadian mortgage lenders that they will continue to offer self-employed insured mortgages as well as second home mortgages, and not follow in the steps of CMHC which last week announced that they would be continuing their similar programs.

I stated a few days ago that I was not particularly worried about the CMHC decision from a professional standpoint as the programs they were eliminating were not used very much and would not impact my ability much as a mortgage broker to get mortgages approved. I was more concerned about Genworth and/or Canada Guaranty discontinuing their programs, as particularly the Genworth self-employed mortgage offering is a better product and is more popular than the CMHC product was.

Self-employed mortgage insurance good for real estate market

Thankfully for the market and for self-employed mortgage borrowers, we can continue to obtain mortgage approvals for self employed borrowers with less than 35 percent down-payment, and with as little as 10 percent down-payment. It would have created a significant void in mortgage lending if none of the insurers had continued with the program.

I also think it is beneficial for the insurers to keep this program, as the premiums charged for it are higher than fully qualified insured mortgages, and with Genworth reporting lower claims and improved revenues recently, it seems that their operations are strong just as they are. The main protection they will need is strong adjudication of individual loan applications to make sure that they minimalize riskier mortgages within their insured portfolio.

Overall, it is also worth noting that lending options are starting to open up a little more over the past year, which is a positive sign that confidence is being restored to the economy and the housing market for the first time since the 2008 U.S. housing collapse. It can only serve as positive news to homeowners that the market will continue to stay strong and home prices will continue to increase steadily.

CMHC eliminates mortgage programs – mortgage broker thoughts

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Last week, we received the news that CMHC has decided to eliminate two of their mortgage lending programs, specifically the self-employed simplified (also more gengerally known as self-employed mortgage) and their second home program. At this time, the other two mortgage insurers in Canada, Genworth and Canada Guaranty, have not announced any similar measures.

CMHC has claimed that they made this decision, along with their decision to increase mortgage insurance premiums, to help reduce taxpayer exposure and contribute to the stability of the real estate market. (CMHC is a government corporation); The changes are due to come into effect on May 30th. They also state that eliminating these programs only affects less than 3% of their funded mortgage units.

How will CMHC’s decision impact the housing market and economy?

As a mortgage broker, I am often somewhat disappointed to hear of lender options, or lending programs disappear or be altered in a way that makes it more difficult for me to help my clients. Although sometimes I can understand the reasons behind it, and sometimes it may be for the best, it makes my job more difficult. When I read this news, I met it with an ironic laugh. CMHC says it all; the two programs only accounted for less than 3% of their lending. CMHC’s stated income program was poor, to put it politely. There are better options for such a program.

The second home program is only for the purchase of mortgaging vacation and recreational properties with less than 20% down-payment. This program is also seldom used, and I don’t think anyone is going to lament its loss, especially in light of other insurers continuing to offer similar programs. Many people looking at buying recreational properties will often have 20% down or more anyway.

Is eliminating this program really protecting taxpayers?

Although I am not that worried about these programs demise with CMHC, particularly if the programs continue to be offered through other insurers, I can’t help but feel that CMHC contradicts themselves in their reasoning about this decision. I feel this way for the following reasons:

  1. The self-employed program was CMHC’s most expensive program, with insurance premiums almost double a regular mortgage premium at the same down-payment level, so they did price the program to compensate for a higher level of risk.
  2. Less than 3% of their mortgage insurance policies issued were these two programs. This hardly seems like a looming threat that could destabilize the housing market, and has already been compensated for in the risk premiums charged.
  3. CMHC is not a charity case. They are not in business to lose money. The other insurers are not in business to lose money. Genworth Canada just announced earnings were up and insurance claims were down by over 36% from a year ago, despite having the same insurance premiums as CMHC. CMHC is profitable, and the program is profitable if two private enterprises offer a similar product.

Previously CMHC would say that their mandate as a crown corporation was to help Canadians in home ownership. Now, they seem to say that their mandate is to contribute to the stability of the real estate market. Although it is not a significant difference to me as a mortgage broker in this instance, they appear to me to be primarily depriving themselves of income. It is ironic considering most government enterprises lose money, and one that makes money is effectively trying to remove themselves from the business.

 

 

 

Tips For The Best Mortgage Rates

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When mortgaging a property, everyone is looking for the best mortgage rates they can find. It is understandable, as no one wants to give more to the bank than they have to. But the search for the best mortgage rates raise some questions that are important questions to consider.

How Do You Determine Who Has The Best Mortgage Rates?

This is a fairly simple question, and chances are you have already been doing this. There are many resources online that give you an idea what the best mortgage rates are. Personally, I put some of these rates on my website, but I prefer not to make them the main focus of my service. There is a lot more to arranging a mortgage than just having the best mortgage rate.

What Are The Terms And Conditions Required To Get The Best Mortgage Rates?

Sometimes, the best mortgage rates also come with fairly acceptable, or good sets of conditions. Other times, not so much. Having a wide choice of mortgage lenders, I have many options, and some of which I are excellent rates with good conditions with a lender I am comfortable with. There are some lenders out there who do not give great conditions on the deal, and in my opinion are not worth getting the best mortgage rate on. For example, if the lender requires punitive mortgage penalties for early payout, the $30 a month you save on the best mortgage rates will become much more expensive in the long run. The chartered banks in particular are reputed for the way they will calculate penalties on fixed rate mortgages. Have a look at this Globe and Mail article for more information.

mortgage penalty comparison

What Other Important Factors Are There Besides The Best Mortgage Rates?

Beyond just the best mortgage rates, and beyond the terms and conditions like outlined above, there are other factors that are important to you that a good mortgage broker will work with you to decide and arrange for you. Determining the right loan amount could be a factor if you need extra funds to grow or improve your business, or to start your own business. Or you could find a HELOC mortgage helpful where you can borrow equity in your home as a line of credit. Sometimes, my client is looking for a fixed rate, and if it makes sense for them, I will suggest they consider a variable rate mortgage, which will often be better than the best fixed mortgage rates available.

Currently, a variable rate mortgage is more difficult to arrange than a traditional 5 year fixed rate, but a creative and hard-working mortgage broker will look at your entire situation and all your needs and arrange a mortgage customized for your needs.

Trusting your mortgage professional is a crucial factor to have when arranging your mortgage. For most people, a mortgage is the single largest debt that someone will have in their lifetime. Yet, most people boil all of their decision-making on mortgages down to the simplest factor of who has the best mortgage rates. As a mortgage broker, do I want to offer you less than the best mortgage rates? I always try to do my best for my clients, but I will not do it to the detriment of something that is better for you as my client.

I want to earn your trust as much as I want to earn your business. It is always great to have someone you can trust in your corner, especially on such a large financial decision as a mortgage. It is important to me that you are as comfortable as possible through the process and that you understand your options. If, after reviewing your circumstances with you, the best mortgage for you is the best mortgage rate available, then that is what I will get you. Call me today.