Buyers Market; Field widens as competition from banks fades away
Derek Sankey, Canwest News Service Published: Monday, March 30, 2009
More than a decade ago, Bob Alexander was working as a professional accountant when he walked into a bank to get a mortgage. When he got turned down, he was completely baffled.
"My friend told me I should go see a broker," Mr. Alexander says. It was a perception that was prevalent at the time: Mortgage brokers were seen as the place you went when the banks turned you down.
Mr. Alexander went to see a broker, secured a mortgage and bought a home. He was so intrigued by this often-misunderstood field that he decided to switch careers and become a broker himself.
"Ten or 15 years ago, mortgage brokers used to be the lenders of last resort," says Jim Murphy, president and chief executive of the Canadian Association of Accredited Mortgage Professionals (CAAMP), the organization that certifies the AMP designation.
"The mortgage broker channel has grown enormously," Mr. Murphy says. "I think the consumer sees it in a much more positive light."
In fact, about 30% of all mortgages in Canada today are secured through mortgage brokers, according to a study from CAAMP. There are 3,800 certified professionals with the AMP designation working across Canada.
When CAAMP introduced the certification four years ago, Mr. Alexander-- whose been a broker for eight years now -- decided to earn his designation.
Banks used to compete directly with brokers, using their own sales forces to go out and source new leads. The brokers, meanwhile, would charge their own clients a fee to find them a mortgage.
Now, most banks have chopped those sales forces and instead enjoy a more mutually beneficial deal with brokers, who no longer charge the client a fee.
Mr. Alexander, like other AMP brokers, provides his services free to the client. The lending institution pays him a finder's fee based on the size and type of the mortgage he secures for his clients.
"Lenders out there realize it was actually more efficient to get rid of their in-house sales force and use an independent person like myself to source their leads," says Mr. Alexander, who works for Canada Mortgage Direct in Calgary. "The finder's fee I'm paid is roughly the same across all lenders, so I'm not incented to take you to Lender A over Lender B."
No longer are brokers seen as the last resort, but just another player in the market working to find you a competitive mortgage. It's important for clients to know they're dealing with someone qualified and experienced.
The AMP designation requires two years of industry experience, an entry-level certification course plus 10 hours of continuing education every 12-month cycle to remain current.
"It's really important because a mortgage is the biggest financial investment most people will make in their lives, so they want to make sure the [broker] is knowledgeable, trained, knows the issues and the market and is able to give the consumer good advice," Mr. Murphy says.
Since brokers such as Mr. Alexander have access to 40 lenders offering upward of 400 different products, the field has evolved in recent years to become a viable option for anybody seeking a competitive mortgage. While he works with the big five banks in Canada, he also taps into other lending institutions such as First National Financial LP and Australian based lending giant Macquarie Financial (Canada) Ltd.
When anybody walks into Mr. Alexander's office, his job is to match your credit level -- A, B, C, or D-- with an appropriate lender that caters to the same type or types of customers.
What has changed in recent months, due to the economic recession, is there are fewer Dlevel lenders around, especially the U. S. banks that ventured north prior to the subprime market collapse last year.
"As a result of the U. S. subprime fallout, a lot of the Dlevel lenders have vanished," Mr. Alexander says. "A lot of fringe clients are finding it much more difficult to get a mortgage than [it was] two years ago."
Even some of the A-level lenders now require more documentation and verification than previously. "We've seen a general tightening [of credit] right across the board," he says.
Mr. Murphy says in any kind of economy, it's important for potential homebuyers to realize -- and utilize -- the new brand of mortgage professional.
Mr. Alexander agrees, but cautions people to do a little research, make sure they're comfortable with the person across the table and ask questions. "The first thing you should do is look for someone with that AMP designation," he says
Tuesday, March 31, 2009
Thursday, March 26, 2009
Payout Penalties and IRDs (interest rate differentials)
Lots of my conversations over the past week have been around IRDs and how they are affecting your deals, especially refinances. Some have said they have the deal set to go and then get the payout from the lender and the penalty is so high it kills the deal.
How do you work to avoid this (and help maintain your funding ratio)? Easy, do an “estimated IRD” calculation of your own. Here is how:
Calculate the difference in the rate your client is currently paying and their current lenders rate today. (I will give an example later.) Multiple that difference in rate by their current balance. Take that answer and divide it by 12 and multiple it by the number of months remaining on their current term. And there you have it, a “ballpark” simple interest IRD calculation that will help you.
Here is an example:
Client’s rate: 5.5% (original term 5 years)
Remaining term: 44 months
Current rate offering: 4.0% on 4 years
Current mortgage balance: $150,000
$150,000 x 1.5% (5.5% minus 4.0%) = 2250 divided by 12 = 187.50 x 44 (months left) = $8250 approximate penalty
But hold on…
…there are many factors to calculate into this.
· Does the current lender use the rate on the mortgage (5.5% as above) of the posted rate/bond rate/ceiling rate at the time the mortgage closed?
· Do they use the fully discounted current rate on remaining term or the original tem (most use remaining term, so if your client had a 5 year rate, but on has 44 months remaining, the lender might use the 3 year or 4 year rate to calculate the IRD)?
· Do they make the client prepay their privilege payment prior to calculating the penalty, or automatically deduct it?
Each of these factors and change that penalty greatly and knowing the original lender’s policy does help with these variable. Also, if you get a penalty today, and rates go down tomorrow, the penalty will likely be recalculated based on the lower rate.
Most important, this is only a estimated guess. Always get your client to verify the penalty with the current lender. But it is a good practice to do this prior to sending a deal out to the lender, getting an approval, only to have your client cancel the deal once they see the penalty, and having your funding ratio affected by this.
How do you work to avoid this (and help maintain your funding ratio)? Easy, do an “estimated IRD” calculation of your own. Here is how:
Calculate the difference in the rate your client is currently paying and their current lenders rate today. (I will give an example later.) Multiple that difference in rate by their current balance. Take that answer and divide it by 12 and multiple it by the number of months remaining on their current term. And there you have it, a “ballpark” simple interest IRD calculation that will help you.
Here is an example:
Client’s rate: 5.5% (original term 5 years)
Remaining term: 44 months
Current rate offering: 4.0% on 4 years
Current mortgage balance: $150,000
$150,000 x 1.5% (5.5% minus 4.0%) = 2250 divided by 12 = 187.50 x 44 (months left) = $8250 approximate penalty
But hold on…
…there are many factors to calculate into this.
· Does the current lender use the rate on the mortgage (5.5% as above) of the posted rate/bond rate/ceiling rate at the time the mortgage closed?
· Do they use the fully discounted current rate on remaining term or the original tem (most use remaining term, so if your client had a 5 year rate, but on has 44 months remaining, the lender might use the 3 year or 4 year rate to calculate the IRD)?
· Do they make the client prepay their privilege payment prior to calculating the penalty, or automatically deduct it?
Each of these factors and change that penalty greatly and knowing the original lender’s policy does help with these variable. Also, if you get a penalty today, and rates go down tomorrow, the penalty will likely be recalculated based on the lower rate.
Most important, this is only a estimated guess. Always get your client to verify the penalty with the current lender. But it is a good practice to do this prior to sending a deal out to the lender, getting an approval, only to have your client cancel the deal once they see the penalty, and having your funding ratio affected by this.
Thursday, March 19, 2009
Massive Decline in Bond Yields
March 18, 2009
Massive Decline in Bond Yields (from www.canadianmortgagetrends.com)
Canada’s 5-year bond yield had a huge drop today—it’s largest 1-day fall since September.
The yield on the 5-year Canada now stands at 1.70%, a 2-month low.
The unusual move came after the U.S. Fed announced it would buy over $1 trillion of fixed-income securities in the open market. Analysts say that is tantamount to the Fed admitting there is no bottom in sight for the American economy. (More on this at CEP)
Bond traders--who put their money where their mouth is when predicting rates--never saw this coming.
Many were caught short and had to cover in panic fashion. Yields dropped like a rock as a result.
This, of course, is great news for people on the hunt for a good fixed mortgage rate. (Bond yields generally lead fixed rates.) So far we’ve heard of two lenders talk of lowering their rates. We’ll have to wait and see what happens over the next 3-4 days.
Posted at 03:43 PM in Mortgage Rate Trends Permalink
Massive Decline in Bond Yields (from www.canadianmortgagetrends.com)
Canada’s 5-year bond yield had a huge drop today—it’s largest 1-day fall since September.
The yield on the 5-year Canada now stands at 1.70%, a 2-month low.
The unusual move came after the U.S. Fed announced it would buy over $1 trillion of fixed-income securities in the open market. Analysts say that is tantamount to the Fed admitting there is no bottom in sight for the American economy. (More on this at CEP)
Bond traders--who put their money where their mouth is when predicting rates--never saw this coming.
Many were caught short and had to cover in panic fashion. Yields dropped like a rock as a result.
This, of course, is great news for people on the hunt for a good fixed mortgage rate. (Bond yields generally lead fixed rates.) So far we’ve heard of two lenders talk of lowering their rates. We’ll have to wait and see what happens over the next 3-4 days.
Posted at 03:43 PM in Mortgage Rate Trends Permalink
Monday, March 16, 2009
Resale housing market up
Resale housing market up 8.6% in February
John Morrissy, Financial Post Published: Monday, March 16, 2009
OTTAWA -- Canada's housing industry showed signs of life in February after several months of declines, with resales rising 8.6% from January thanks to lower mortgage rates and prices, the Canadian Real Estate Association reported Monday.
Despite February's gains, sales are still down 31% year over year, as are prices, which have fallen 9.2% in the past 12 months, CREA said.
Still, a total of 28,669 homes changed hands in February on a seasonally adjusted basis via the industry group's Multiple Listing Service. It is the first month-to-month uptick in home-resale activity since September 2008.
"Typically, the spring market we're moving into generates more activity, and this year there are the benefits from historically low mortgage rates and improved affordability in most markets," said CREA president Calvin Lindberg.
CREA cautioned that listings remain high, although the number is trending lower, with 65,060 units listed for sale in February, down 10.9% from the same month a year ago.
"The housing supply is expected to continue easing, but it will take time before it realigns with lower demand," said CREA chief economist Gregory Klump.
"Economic uncertainty is keeping home buyers in a cautious mood, so homes are taking longer to sell than in recent years. Lower sales activity at the higher end of the price spectrum will keep the national MLS residential average price under downward pressure."
The national average price for home sales via the MLS was $281,972. Mortgage rates, meanwhile, are near historic lows. On Friday, for instance, TD Canada Trust lowered its seven-year fixed mortgage rate by 0.2 points to 6.8%.
CREA said February's 9.2% annualized price decline is smaller than year-over-year drops posted in the past four months and is the first time the pace of decline decelerated since turning negative in July 2008.
"The report does offer some hope that the decline in Canadian home prices may have stabilized somewhat in February after appearing to have accelerated in the latter months of 2008," said TD Securities economics strategist Millan Mulraine.
"Not surprisingly, the biggest decline in prices were in Calgary (down 10.8% year over year), Greater Vancouver (down 13%), and Windsor (down 15.7%). However, prices in Toronto (down 5.4%) were also lower, while prices in Montreal (up 2.2%) and Quebec City (up 9.3%) continue to rise, albeit at a more modest clip," Mr. Mulraine said.
Canwest News Service
John Morrissy, Financial Post Published: Monday, March 16, 2009
OTTAWA -- Canada's housing industry showed signs of life in February after several months of declines, with resales rising 8.6% from January thanks to lower mortgage rates and prices, the Canadian Real Estate Association reported Monday.
Despite February's gains, sales are still down 31% year over year, as are prices, which have fallen 9.2% in the past 12 months, CREA said.
Still, a total of 28,669 homes changed hands in February on a seasonally adjusted basis via the industry group's Multiple Listing Service. It is the first month-to-month uptick in home-resale activity since September 2008.
"Typically, the spring market we're moving into generates more activity, and this year there are the benefits from historically low mortgage rates and improved affordability in most markets," said CREA president Calvin Lindberg.
CREA cautioned that listings remain high, although the number is trending lower, with 65,060 units listed for sale in February, down 10.9% from the same month a year ago.
"The housing supply is expected to continue easing, but it will take time before it realigns with lower demand," said CREA chief economist Gregory Klump.
"Economic uncertainty is keeping home buyers in a cautious mood, so homes are taking longer to sell than in recent years. Lower sales activity at the higher end of the price spectrum will keep the national MLS residential average price under downward pressure."
The national average price for home sales via the MLS was $281,972. Mortgage rates, meanwhile, are near historic lows. On Friday, for instance, TD Canada Trust lowered its seven-year fixed mortgage rate by 0.2 points to 6.8%.
CREA said February's 9.2% annualized price decline is smaller than year-over-year drops posted in the past four months and is the first time the pace of decline decelerated since turning negative in July 2008.
"The report does offer some hope that the decline in Canadian home prices may have stabilized somewhat in February after appearing to have accelerated in the latter months of 2008," said TD Securities economics strategist Millan Mulraine.
"Not surprisingly, the biggest decline in prices were in Calgary (down 10.8% year over year), Greater Vancouver (down 13%), and Windsor (down 15.7%). However, prices in Toronto (down 5.4%) were also lower, while prices in Montreal (up 2.2%) and Quebec City (up 9.3%) continue to rise, albeit at a more modest clip," Mr. Mulraine said.
Canwest News Service
Thursday, March 12, 2009
Home Prices in Atlantic Canada Expected to Rise
Got this off of www.economicnews.ca. Nice to see we are better than the rest of the country.
Home Prices in Atlantic Canada Expected to Rise, Report Shows
Thu Feb 19, 2009 12:51pm
(CEP News) - Atlantic Canada seems to be a good place to buy a home as prices in the region are expected to increase in the next two years.According to a report released by the Canada Mortgage and Housing Corporation (CMHC), average existing home prices in Nova Scotia, PEI, New Brunswick and Newfoundland are all expected to rise, although at a much slower pace than in previous years.Finding a region where home prices are rising seems to be a luxury during troubling economic times, especially as the average nationwide price for an existing home in Canada is expected to drop 5.2% in 2009.In Nova Scotia, the average price for an existing home is expected to increase 0.6% in 2009 and 1.83% in 2010.Prices of existing homes are also expected to rise in Prince Edward Island, even after the province has experienced an average growth of 7% per year over the past eight years."Despite the slowing pace it is still expected that the province as a whole will post positive average growth over the next two years," the report said.The average home price in PEI is expected to rise 0.2% in 2009 and 0.9% in 2010.In Newfoundland and Labrador, existing home prices are expected to rise 0.6% in 2009 and 1.7% in 2010, while prices of New Brunswick homes are expected to rise 0.5% and 1.7% for the same period.By CEP News Staff, news@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca
Home Prices in Atlantic Canada Expected to Rise, Report Shows
Thu Feb 19, 2009 12:51pm
(CEP News) - Atlantic Canada seems to be a good place to buy a home as prices in the region are expected to increase in the next two years.According to a report released by the Canada Mortgage and Housing Corporation (CMHC), average existing home prices in Nova Scotia, PEI, New Brunswick and Newfoundland are all expected to rise, although at a much slower pace than in previous years.Finding a region where home prices are rising seems to be a luxury during troubling economic times, especially as the average nationwide price for an existing home in Canada is expected to drop 5.2% in 2009.In Nova Scotia, the average price for an existing home is expected to increase 0.6% in 2009 and 1.83% in 2010.Prices of existing homes are also expected to rise in Prince Edward Island, even after the province has experienced an average growth of 7% per year over the past eight years."Despite the slowing pace it is still expected that the province as a whole will post positive average growth over the next two years," the report said.The average home price in PEI is expected to rise 0.2% in 2009 and 0.9% in 2010.In Newfoundland and Labrador, existing home prices are expected to rise 0.6% in 2009 and 1.7% in 2010, while prices of New Brunswick homes are expected to rise 0.5% and 1.7% for the same period.By CEP News Staff, news@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca
Tuesday, March 10, 2009
Housing starts defy slide
Construction jump in Atlantic region bucks national trendBy BRUCE ERSKINE Business ReporterTue. Mar 10 - 6:13 AM
A new 90-unit apartment development helped drive up residential construction starts in Halifax in February, according to Canada Mortgage and Housing Corp.
"One of the city’s anticipated apartment projects began construction last month and this bolstered the overall numbers for February," said Matthew Gilmore, senior market analyst with CMHC’s Atlantic Business Centre.
CMHC data released Monday showed there were 128 new housing starts in Halifax last month, compared to 86 starts in February 2008.
Mr. Gilmore said the apartment development increased multiple-unit starts in Halifax to 106 for the month and helped compensate for weak single-detached starts, which dropped to 22 in February from 73 in the same period last year.
"While demand for singles is expected to remain weak throughout the year, alternative styles, such as row housing, are already showing some strength," he said.
Mr. Gilmore said in an interview that semi-detached dwellings provide good value for money.
In the Atlantic region, 262 new residential units were started in February 2009, up slightly from the 255 units started during the same period in 2008.
Pascal Gauthier, an economist with the TD Bank Financial Group, attributed the uptick, relative to a downturn in the rest of the country, to the region’s "more balanced market."
Mr. Gilmore agreed, noting that Atlantic Canada doesn’t experience the economic peaks and valleys now being experienced in places like Western Canada.
"It’s more of a slow and steady growth."
Nationally, CMHC reported that urban housing starts in February declined dramatically, by 59 per cent, to 5,594 from last year’s tally of 13,531 for the month.
Single-detached starts decreased 53 per cent to 2,019 units in February, while multiple-unit starts were down 61 per cent from 9,192 units in 2008 to 3,575 units this year.
CMHC said new residential construction in Canada is slowing to more sustainable levels and forecasts there will be 160,250 unit starts in 2009, down from the exceptionally strong 200,000 starts per year that Canada averaged over the past seven years.
In Halifax, CMHC projects that total residential housing starts in 2009 will be in the 2,000-unit range, down from 2,100 in 2008, while total provincial starts in 2009 are projected at 3,675 units, down from 4,000 last year.
Single-unit starts in Halifax are projected to drop to 1,000 in 2009 from 1,200 last year, while multiple-unit starts are expected to increase to 1,000 from 900 in 2008.
Single-unit starts across Nova Scotia are projected to drop to 2,350 in 2009 from 2,650 last year, he said, while provincial multiple-unit starts this year are projected to drop slightly to 1,325 from 1,350 in 2008.
"Nova Scotia is not seeing significant declines," said Mr. Gilmore.
He said Halifax’s economy, while feeling the effects of recession, remains relatively strong in terms of employment and wages.
Paul Pettipas, CEO of the Nova Scotia Home Builders’ Association, wasn’t surprised by the February numbers and was positive about the prospects for 2009, despite the many doom-and-gloom scenarios in circulation.
"We had a tremendous home show (on the weekend) and people are ready to buy," he said, agreeing that Halifax’s largely public sector economy remains strong. "The labour market is still tight."
CMHC is a federal agency established in 1946 that provides mortgage loan insurance and mortgage-backed securities. It also conducts housing research and develops housing policy and programs.
A new 90-unit apartment development helped drive up residential construction starts in Halifax in February, according to Canada Mortgage and Housing Corp.
"One of the city’s anticipated apartment projects began construction last month and this bolstered the overall numbers for February," said Matthew Gilmore, senior market analyst with CMHC’s Atlantic Business Centre.
CMHC data released Monday showed there were 128 new housing starts in Halifax last month, compared to 86 starts in February 2008.
Mr. Gilmore said the apartment development increased multiple-unit starts in Halifax to 106 for the month and helped compensate for weak single-detached starts, which dropped to 22 in February from 73 in the same period last year.
"While demand for singles is expected to remain weak throughout the year, alternative styles, such as row housing, are already showing some strength," he said.
Mr. Gilmore said in an interview that semi-detached dwellings provide good value for money.
In the Atlantic region, 262 new residential units were started in February 2009, up slightly from the 255 units started during the same period in 2008.
Pascal Gauthier, an economist with the TD Bank Financial Group, attributed the uptick, relative to a downturn in the rest of the country, to the region’s "more balanced market."
Mr. Gilmore agreed, noting that Atlantic Canada doesn’t experience the economic peaks and valleys now being experienced in places like Western Canada.
"It’s more of a slow and steady growth."
Nationally, CMHC reported that urban housing starts in February declined dramatically, by 59 per cent, to 5,594 from last year’s tally of 13,531 for the month.
Single-detached starts decreased 53 per cent to 2,019 units in February, while multiple-unit starts were down 61 per cent from 9,192 units in 2008 to 3,575 units this year.
CMHC said new residential construction in Canada is slowing to more sustainable levels and forecasts there will be 160,250 unit starts in 2009, down from the exceptionally strong 200,000 starts per year that Canada averaged over the past seven years.
In Halifax, CMHC projects that total residential housing starts in 2009 will be in the 2,000-unit range, down from 2,100 in 2008, while total provincial starts in 2009 are projected at 3,675 units, down from 4,000 last year.
Single-unit starts in Halifax are projected to drop to 1,000 in 2009 from 1,200 last year, while multiple-unit starts are expected to increase to 1,000 from 900 in 2008.
Single-unit starts across Nova Scotia are projected to drop to 2,350 in 2009 from 2,650 last year, he said, while provincial multiple-unit starts this year are projected to drop slightly to 1,325 from 1,350 in 2008.
"Nova Scotia is not seeing significant declines," said Mr. Gilmore.
He said Halifax’s economy, while feeling the effects of recession, remains relatively strong in terms of employment and wages.
Paul Pettipas, CEO of the Nova Scotia Home Builders’ Association, wasn’t surprised by the February numbers and was positive about the prospects for 2009, despite the many doom-and-gloom scenarios in circulation.
"We had a tremendous home show (on the weekend) and people are ready to buy," he said, agreeing that Halifax’s largely public sector economy remains strong. "The labour market is still tight."
CMHC is a federal agency established in 1946 that provides mortgage loan insurance and mortgage-backed securities. It also conducts housing research and develops housing policy and programs.
Monday, March 9, 2009
Fixed Rate Direction after BoC Rate Cut
The article is from www.canadianmortgagetrends.com.
March 04, 2009
Fixed Rate Direction After the Cut
Now that prime rate has dropped to 2.50%, variable rates are falling accordingly. The typical closed variable (for new mortgages) is now just 3.30%, down from 3.80% Monday.
But what about fixed rates?
Interestingly enough, a lot of people were waiting for yesterday’s Bank of Canada rate meeting before deciding on a fixed-rate mortgage.
That’s odd because, unlike variable rates, the Bank of Canada does not directly impact fixed rates. Fixed rates are instead linked to bond yields (usually)—and bonds, in turn, trade off of economic reports and the relative yields of other securities.
Bond yields are basically unchanged following the Bank of Canada’s rate cut. The 5-year bond is hovering at 1.90% as of this writing. (5-year bond yield chart)
From the looks of it, bond traders anticipated just about all of the grim news in yesterday’s Bank of Canada announcement.
So what now?
To be realistic, not much has changed. The Bank of Canada told the market very little that it didn’t already know.
For now, we’re once again in a wait-and-see mode. Fixed-rate spreads have improved ever-so-slightly lately. However, lenders have not cut long-term fixed rates by any appreciable amount in the last week or so. (1-2 year rates have dropped a fair amount though)
In short, the BoC announcement has been a relative non-event for 3-5-year fixed rates. Going forward, fixed rates will continue to be driven by the economy and bond yields.
If you’re a fixed-rate mortgage shopper it boils down to this. If you need a fixed mortgage, don’t procrastinate. There is no reason to put off getting a rate hold now. If rates go down, most lenders will give you an adjustment before closing anyway. If fixed rates ramp up, then you’ll be safe and locked-in.
Posted at 10:15 AM in Mortgage Rate Trends
March 04, 2009
Fixed Rate Direction After the Cut
Now that prime rate has dropped to 2.50%, variable rates are falling accordingly. The typical closed variable (for new mortgages) is now just 3.30%, down from 3.80% Monday.
But what about fixed rates?
Interestingly enough, a lot of people were waiting for yesterday’s Bank of Canada rate meeting before deciding on a fixed-rate mortgage.
That’s odd because, unlike variable rates, the Bank of Canada does not directly impact fixed rates. Fixed rates are instead linked to bond yields (usually)—and bonds, in turn, trade off of economic reports and the relative yields of other securities.
Bond yields are basically unchanged following the Bank of Canada’s rate cut. The 5-year bond is hovering at 1.90% as of this writing. (5-year bond yield chart)
From the looks of it, bond traders anticipated just about all of the grim news in yesterday’s Bank of Canada announcement.
So what now?
To be realistic, not much has changed. The Bank of Canada told the market very little that it didn’t already know.
For now, we’re once again in a wait-and-see mode. Fixed-rate spreads have improved ever-so-slightly lately. However, lenders have not cut long-term fixed rates by any appreciable amount in the last week or so. (1-2 year rates have dropped a fair amount though)
In short, the BoC announcement has been a relative non-event for 3-5-year fixed rates. Going forward, fixed rates will continue to be driven by the economy and bond yields.
If you’re a fixed-rate mortgage shopper it boils down to this. If you need a fixed mortgage, don’t procrastinate. There is no reason to put off getting a rate hold now. If rates go down, most lenders will give you an adjustment before closing anyway. If fixed rates ramp up, then you’ll be safe and locked-in.
Posted at 10:15 AM in Mortgage Rate Trends
Friday, March 6, 2009
Banker urges calm amid uncertainty
Bank of Canada official warns against 'irrational fear' but admits there's more bad news to come
Julian Beltrame The Canadian Press
OTTAWA
Bank of Canada deputy governor Pierre Duguay is warning Canadians not to be spooked by "irrational fear'' over the economy and says there's a risk of overstating the global crisis.
"When there is a string of bad news, risk can be overstated,'' Duguay said yesterday. "People hear bad news and that affects confidence and that can amplify (economic problems).''
And there will be more bad economic news coming, Duguay warned the House of Commons finance committee.
In the past few weeks, Canadians have been told that the economy contracted 3.4 per cent last quarter and lost more than 210,000 jobs in three months.
As well, announcements of future layoffs -- including Chrysler's decision Wednesday to slash 1,200 jobs in Windsor, Ont. -- have been coming almost daily.
Duguay says Canada will be hit with a string of alarming economic news in the next few months, adding it was urgent that the budget fiscal stimulus package, particularly lending provisions, be put to work in the economy as quickly as possible.
"We are going through a recession and because of fear, consumers are spending less, companies are spending less and that is antithetical to stabilizing the situation,'' Duguay said.
"It is very important to cut it (a slowdown) off at the pass, so people can see recovery is coming.''
Duguay suggested that even with the fiscal stimulus package -- $40 billion over two years -- and the central bank's policies to bring the overnight lending rate to a record low of 0.5 per cent, the Canadian economy will need help.
He said the central bank is keeping with its prediction the Canadian economy will recover in 2010 to a relatively robust 3.8 per cent advance.
However, he said the bounceback will be both delayed and weaker if international efforts to stabilize the global financial system are not timely, bold and well-executed.
One of the advantages Canada enjoys, said Duguay, is a relatively healthy and functioning banking system that is the envy of the world.
The latest figures show total household credit in January rising 9.6 per cent over last year and limited deceleration of business credit, he said.
"Accelerating growth in bank lending has helped to offset a contraction in market financing,'' Duguay said.
Julian Beltrame The Canadian Press
OTTAWA
Bank of Canada deputy governor Pierre Duguay is warning Canadians not to be spooked by "irrational fear'' over the economy and says there's a risk of overstating the global crisis.
"When there is a string of bad news, risk can be overstated,'' Duguay said yesterday. "People hear bad news and that affects confidence and that can amplify (economic problems).''
And there will be more bad economic news coming, Duguay warned the House of Commons finance committee.
In the past few weeks, Canadians have been told that the economy contracted 3.4 per cent last quarter and lost more than 210,000 jobs in three months.
As well, announcements of future layoffs -- including Chrysler's decision Wednesday to slash 1,200 jobs in Windsor, Ont. -- have been coming almost daily.
Duguay says Canada will be hit with a string of alarming economic news in the next few months, adding it was urgent that the budget fiscal stimulus package, particularly lending provisions, be put to work in the economy as quickly as possible.
"We are going through a recession and because of fear, consumers are spending less, companies are spending less and that is antithetical to stabilizing the situation,'' Duguay said.
"It is very important to cut it (a slowdown) off at the pass, so people can see recovery is coming.''
Duguay suggested that even with the fiscal stimulus package -- $40 billion over two years -- and the central bank's policies to bring the overnight lending rate to a record low of 0.5 per cent, the Canadian economy will need help.
He said the central bank is keeping with its prediction the Canadian economy will recover in 2010 to a relatively robust 3.8 per cent advance.
However, he said the bounceback will be both delayed and weaker if international efforts to stabilize the global financial system are not timely, bold and well-executed.
One of the advantages Canada enjoys, said Duguay, is a relatively healthy and functioning banking system that is the envy of the world.
The latest figures show total household credit in January rising 9.6 per cent over last year and limited deceleration of business credit, he said.
"Accelerating growth in bank lending has helped to offset a contraction in market financing,'' Duguay said.
Merix Nominated for CMP Awards
Merix Nominated for CMP Awards
Merix Financial was nominated in a couple of categories for the upcoming CMP Awards:
The RateSupermarket.ca Award for Best Internet Presence
Canequity Mortgage Canada - canequity.com
Go Max Solutions - gomaxsolutions.com
Jessi Johnson, Global Mortgage Corp - jessijohnson.com
MCAP - mcap.com
Merix Financial - Merixfinancial.com
My Virtual Mortgage Broker, Mortgage Architects - Canadianmortgagetrends.com
Scotia Mortgage Authority - Scotiamortgageauthority.com
Tax Deductible Mortgage Plan - TDMP.com
Verico - Verico.ca
The Mortgage Centre Canada Award for Best Lender BDM
Geoff Charkow, Merix, Toronto, ON
John Simmons, ING Direct, Kitchener, ON
Kristina Morrison, First National Financial, Vancouver, BC
Margie Murray, Resmor Trust, Calgary, AB
Nina Labate, Equitable Trust, Toronto, ON
Richard Coleman, National Bank, Brampton/Toronto, ON
Scott Carroll, Firstline Mortgages, Kitchener, ON
Stacy Brown, MCAP, Toronto, ON
Lani Williams, Scotia Mortgage Authority, Vancouver, BC
The Solidifi Award for Best Lender Underwriter
Adrian Lawrence, Merix, Toronto, ON
Anne Warner, Scotia Mortgage Authority, Oxford Mills, ON
Cathy Snitchuk, Westminster Credit Union, Vancouver, BC
Kevin Reichmuth, TD Canada Trust, Vancouver, BC
Marcy Drohan, MCAP, Toronto, ON
Pam Weinbender, Resmor Trust, Calgary, AB
Selma Granger, First National Financial, Toronto, ON
Congrats to Adrian and Geoff.
Merix Financial was nominated in a couple of categories for the upcoming CMP Awards:
The RateSupermarket.ca Award for Best Internet Presence
Canequity Mortgage Canada - canequity.com
Go Max Solutions - gomaxsolutions.com
Jessi Johnson, Global Mortgage Corp - jessijohnson.com
MCAP - mcap.com
Merix Financial - Merixfinancial.com
My Virtual Mortgage Broker, Mortgage Architects - Canadianmortgagetrends.com
Scotia Mortgage Authority - Scotiamortgageauthority.com
Tax Deductible Mortgage Plan - TDMP.com
Verico - Verico.ca
The Mortgage Centre Canada Award for Best Lender BDM
Geoff Charkow, Merix, Toronto, ON
John Simmons, ING Direct, Kitchener, ON
Kristina Morrison, First National Financial, Vancouver, BC
Margie Murray, Resmor Trust, Calgary, AB
Nina Labate, Equitable Trust, Toronto, ON
Richard Coleman, National Bank, Brampton/Toronto, ON
Scott Carroll, Firstline Mortgages, Kitchener, ON
Stacy Brown, MCAP, Toronto, ON
Lani Williams, Scotia Mortgage Authority, Vancouver, BC
The Solidifi Award for Best Lender Underwriter
Adrian Lawrence, Merix, Toronto, ON
Anne Warner, Scotia Mortgage Authority, Oxford Mills, ON
Cathy Snitchuk, Westminster Credit Union, Vancouver, BC
Kevin Reichmuth, TD Canada Trust, Vancouver, BC
Marcy Drohan, MCAP, Toronto, ON
Pam Weinbender, Resmor Trust, Calgary, AB
Selma Granger, First National Financial, Toronto, ON
Congrats to Adrian and Geoff.
Tuesday, March 3, 2009
Sharp Drop into Recession Suggests Pain Will be Short
As always, I try to post articles with a positive message. It is always tough to find positive articles, but I think I’ve managed to find an optimistic article about the current state of our economy. Treasure this one. These don’t come along very often…
Sharp drop into recession suggests pain will be short
GDP contracts 3.4%, but experts say dismal numbers signal growth is ahead
KEVIN CARMICHAEL
From Tuesday's Globe and Mail
March 3, 2009 at 12:30 AM EST
OTTAWA — Canada's recession is brutal. It could also turn out to be mercifully short.
Gross Domestic Product contracted at an annual rate of 3.4 per cent in the fourth quarter, the worst showing since 1991, Statistics Canada reported yesterday.
While doing nothing to dilute the pain being felt in every corner of the country's economy, the data support Bank of Canada Governor Mark Carney's contention that record-low interest rates and hundreds of billions in government spending around the world will spark a rebound by the second half of this year.
The glimmer of hope comes from the fact that Canada's descent into recession last year was faster and deeper than the two previous economic contractions in the early 1990s and the early 1980s.
That suggests a significant portion of the hurt that typically accompanies a downturn has already been felt. The unprecedented stimulus in the system promises to make it easier for companies and consumers to spark a recovery than at any time in history.
“I don't want to be too doom-and-gloom,” said Yanick Desnoyers, assistant chief economist at National Bank Financial in Montreal. “The prompt responses of Canadian government and the central bank will induce a recovery, provided the U.S. recession doesn't persist.”
Still, there remains doom and gloom aplenty.
In Toronto, the country's main stock exchange plunged 435.51 points, or 5.35 per cent, to 7,687.51, its lowest level since fall of 2003, in part in reaction to the GDP figures.
The Canadian dollar fell 1.16 cents to 77.44 cents, the weakest in three months.
That kind of volatility will do nothing to ease the consumer anxiety at the heart of the recession.
Household spending fell for the first time in 13 years in the fourth quarter, even as income increased, suggesting consumers are too fearful of the future to do the spending that's necessary to spark a recovery.
“That's the fear factor,” said Glen Hodgson, chief economist at the Ottawa-based Conference Board of Canada and a former official at the Finance Department. “People are worried about their futures and their jobs.”
Unlike the downturn of the early 1990s, which was concentrated in manufacturing, the pain this time is being felt more broadly.
Factory production declined 4.7 per cent in the fourth quarter and exports dropped for the sixth consecutive quarter, the longest slump since Statscan started keeping records more than 60 years ago.
The output generated by financial advisers, consultants, retailers, baristas and others in the services industry fell for the first time since 1991. Corporate profits collapsed 20 per cent. Residential investment and spending on plants and equipment also plunged.
In the House of Commons, John McCallum, the Liberal finance critic, said the GDP figures showed the government was too slow in coming up with the $40-billion economic stimulus program that Finance Minister Jim Flaherty presented at the end of January.
Prime Minister Stephen Harper responded that Canada is doing much better than other nations, and called on the opposition parties to speed passage of Mr. Flaherty's program.
“Our economy remains in a position of relative strength,” Mr. Harper said. “I would urge the opposition to focus on that and to pass the important measures we have to sustain this economy through these difficult times.”
Statscan noted yesterday that the U.S. economy contracted at an annual rate of 6.2 per cent in the fourth quarter, the European Union registered a decline of 5.9 per cent and Japan's economic output deteriorated 12.7 per cent.
In Canada, Mr. Carney, who is expected to reduce the Bank of Canada's benchmark lending rate again today, also predicted in January that the current recession would last only nine months, with growth resuming in the third quarter of 2009.
That's short by contemporary historical standards.
The previous recession began in the second quarter of 1990, when the economy shrank at an annual rate of 1.7 per cent. The deterioration of the economy gradually picked up speed, contracting at an annual rate of 5.9 per cent when the downturn ended in the first quarter of 1991.
The recession of 1981-82, which lasted six quarters, began when GDP shrank 2.8 per cent over the autumn months of 1981.
Mr. Desnoyers said he's optimistic the worst of the U.S. recession is over because of recent indicators that suggest the collapse of the housing market is finding a bottom, which would boost confidence and steady financial markets.
Still, until that happens, it's up to the Canadian government to get the economy going, he said. In the fourth quarter, public spending was the only source of growth, according to Statscan.
With Mr. Flaherty's stimulus program set to pass Parliament by the end of the month, there's much more on the way. The faster it's spent, the better the chances the recession will end quickly.
“For the first time in many years,” Mr. Desnoyers said, “we are counting on policy for the recovery.”
Sharp drop into recession suggests pain will be short
GDP contracts 3.4%, but experts say dismal numbers signal growth is ahead
KEVIN CARMICHAEL
From Tuesday's Globe and Mail
March 3, 2009 at 12:30 AM EST
OTTAWA — Canada's recession is brutal. It could also turn out to be mercifully short.
Gross Domestic Product contracted at an annual rate of 3.4 per cent in the fourth quarter, the worst showing since 1991, Statistics Canada reported yesterday.
While doing nothing to dilute the pain being felt in every corner of the country's economy, the data support Bank of Canada Governor Mark Carney's contention that record-low interest rates and hundreds of billions in government spending around the world will spark a rebound by the second half of this year.
The glimmer of hope comes from the fact that Canada's descent into recession last year was faster and deeper than the two previous economic contractions in the early 1990s and the early 1980s.
That suggests a significant portion of the hurt that typically accompanies a downturn has already been felt. The unprecedented stimulus in the system promises to make it easier for companies and consumers to spark a recovery than at any time in history.
“I don't want to be too doom-and-gloom,” said Yanick Desnoyers, assistant chief economist at National Bank Financial in Montreal. “The prompt responses of Canadian government and the central bank will induce a recovery, provided the U.S. recession doesn't persist.”
Still, there remains doom and gloom aplenty.
In Toronto, the country's main stock exchange plunged 435.51 points, or 5.35 per cent, to 7,687.51, its lowest level since fall of 2003, in part in reaction to the GDP figures.
The Canadian dollar fell 1.16 cents to 77.44 cents, the weakest in three months.
That kind of volatility will do nothing to ease the consumer anxiety at the heart of the recession.
Household spending fell for the first time in 13 years in the fourth quarter, even as income increased, suggesting consumers are too fearful of the future to do the spending that's necessary to spark a recovery.
“That's the fear factor,” said Glen Hodgson, chief economist at the Ottawa-based Conference Board of Canada and a former official at the Finance Department. “People are worried about their futures and their jobs.”
Unlike the downturn of the early 1990s, which was concentrated in manufacturing, the pain this time is being felt more broadly.
Factory production declined 4.7 per cent in the fourth quarter and exports dropped for the sixth consecutive quarter, the longest slump since Statscan started keeping records more than 60 years ago.
The output generated by financial advisers, consultants, retailers, baristas and others in the services industry fell for the first time since 1991. Corporate profits collapsed 20 per cent. Residential investment and spending on plants and equipment also plunged.
In the House of Commons, John McCallum, the Liberal finance critic, said the GDP figures showed the government was too slow in coming up with the $40-billion economic stimulus program that Finance Minister Jim Flaherty presented at the end of January.
Prime Minister Stephen Harper responded that Canada is doing much better than other nations, and called on the opposition parties to speed passage of Mr. Flaherty's program.
“Our economy remains in a position of relative strength,” Mr. Harper said. “I would urge the opposition to focus on that and to pass the important measures we have to sustain this economy through these difficult times.”
Statscan noted yesterday that the U.S. economy contracted at an annual rate of 6.2 per cent in the fourth quarter, the European Union registered a decline of 5.9 per cent and Japan's economic output deteriorated 12.7 per cent.
In Canada, Mr. Carney, who is expected to reduce the Bank of Canada's benchmark lending rate again today, also predicted in January that the current recession would last only nine months, with growth resuming in the third quarter of 2009.
That's short by contemporary historical standards.
The previous recession began in the second quarter of 1990, when the economy shrank at an annual rate of 1.7 per cent. The deterioration of the economy gradually picked up speed, contracting at an annual rate of 5.9 per cent when the downturn ended in the first quarter of 1991.
The recession of 1981-82, which lasted six quarters, began when GDP shrank 2.8 per cent over the autumn months of 1981.
Mr. Desnoyers said he's optimistic the worst of the U.S. recession is over because of recent indicators that suggest the collapse of the housing market is finding a bottom, which would boost confidence and steady financial markets.
Still, until that happens, it's up to the Canadian government to get the economy going, he said. In the fourth quarter, public spending was the only source of growth, according to Statscan.
With Mr. Flaherty's stimulus program set to pass Parliament by the end of the month, there's much more on the way. The faster it's spent, the better the chances the recession will end quickly.
“For the first time in many years,” Mr. Desnoyers said, “we are counting on policy for the recovery.”
Monday, March 2, 2009
BoC Expected to Drop Rate by 0.50%
The Bank of Canada is expected to drop the overnight rate by 0.50% tomorrow, March 3rd. What will this mean for rates? If lenders decide to do so, the Prime Rates could come down by up to 1/2%. The BoC has been using this overnight rate to put pressure on the chartered banks to lower their Prime Rate.
Time will tell, and I will keep you posted.
Time will tell, and I will keep you posted.
Subscribe to:
Posts (Atom)