I have been bad...not posting on my blog since September is just not acceptable. So I have posted a bunch of new posts tonight. We have had a very busy October with the re-launch of our B products, new lending areas, our new One-Charge, and great rates on our Insured/Accelerator products.
So I will try to do new posts every week going forward, time permitting.
Thanks.
Thursday, October 28, 2010
Focus on Refinance
A recent article suggested that more Canadians are choosing to stay in their current home and renovate rather than move to upgrade. In fact, the split between purchase and refinance business this year has shown up to a 50/50 split rather than the typical 25% refinance and 75% purchase split.
What does this mean for you? Tayloring your business to go with trends is a good way to keep deals flowing in the door. Advertise that you are the "refinance expert" and show clients ways that they can tap into their equity to refinance, pay for renovations, and ultimately increase the value of their home.
With great rates, like our 3.49% Rate Promo for 5 year Fixed, your clients can even save money while borrowing more.
What does this mean for you? Tayloring your business to go with trends is a good way to keep deals flowing in the door. Advertise that you are the "refinance expert" and show clients ways that they can tap into their equity to refinance, pay for renovations, and ultimately increase the value of their home.
With great rates, like our 3.49% Rate Promo for 5 year Fixed, your clients can even save money while borrowing more.
Social Networking
Social networking is catching on in a big way. Home Trust now has a Twitter account too. For you as a broker, social networking should be looked at as planning for the future. Currently (according to CMHC) only about 3% of new mortgages are sourced from social networking (Twitter, Facebook, Linkedin, etc.), but you have to look at the current demographic using social networking (approximate ages 18 to 35) as the future mortgage borrowers. These people continue to move into the "home buyer" category and it is important to get them thinking early of you as their first choice when it comes to mortgage financing. So set up a Twitter, Facebook, and/or Linkedin today and get your message out there (www.twitter.com; www.facebook.com; www.linkedin.com).
Bank Rate Forecast
Rate Forecast
Here is a good article from Canadian Mortgage Trends (www.canadianmortgagetrends.com) last week that talks about where Fixed and Variable rates are headed in the near future. This information will help you in your discussions with clients as to what to do today when choosing their mortgage options.
October 12, 2010
Canadian Interest Rate Forecast
After bursting out of the gates earlier this year, the economy is hobbling to the 2010 finish line. With inflation well-contained, interest rate expectations are down across the board since the last rate forecast in August.
Rate Forecasting In Perspective
Major economists are paid well to tell us where interest rates are headed. They have access to every data source, academic study, historical backtest, and analysis tool imaginable. While far from infallible, these forecasts serve as a point of reference when creating amortization models based on future rate assumptions.
Below you'll find a summary of the latest year-end interest rate projections from each of Canada's Big 5 banks. Use them only as a rough guide because rate outlooks have considerable margins of error.
Latest Overnight Rate Forecast
The Bank of Canada's overnight target has a direct impact on variable mortgage rates.
Bank 2010 2011
BMO 1.00 2.25
CIBC 1.00 1.75
RBC 1.00 2.25
Scotia 1.00 1.75
TD 1.00 2.00
Year-end Avg 1.00 2.00
Chg vs Today 0.00 +1.00
(All figures rounded to the nearest 1/4 point increment.)
Latest 5-Year Government Bond Yield Forecast
Government bond yields drive 5-year fixed mortgage rates.
Bank 2010 2011
BMO 2.03 3.05
RBC 2.45 3.50
Scotia 1.85 2.50
TD 2.30 3.10
Year-end Avg 2.16 3.04
Chg vs Today +0.29 +1.17
(CIBC's 5-year bond forecast was not available.)
Variable-Rate Mortgage Forecast
Most analysts now expect the Bank of Canada to remain on the sidelines until 2nd quarter 2011. On average, major economists now predict a 100 basis point increase in the overnight rate over the next 15 months. Their outlooks, if accurate, imply a 4.00% prime rate by December 31, 2011. Prime rate is currently 3.00% and the 10-year average of prime is 4.50%.
Based on a 75-basis-point discount from prime, these forecasts suggests 5-year variable rates in the 3.25% range by year-end 2011.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 117 basis points in the same 15-month timeframe. That would put the 5-year yield at 3.41% by the end of next year. The 10-year average of the five-year yield is 3.93%.
Assuming a typical 120 basis point spread above yields, these forecasts suggest deep-discounted 5-year fixed rates could rise to roughly 4.24% by year-end 2011.
______________________________________________
Things to Note: These forecasts are made by the banks and are subject to frequent change. This data is provided only for general interest. Always discuss your needs and risk tolerance with a mortgage professional before acting on any information you read online.
History has shown that it's near impossible to accurately predict interest rates long-term so use these figures at your own risk. That said, while economist projections are often wrong, they are still one of the better sources of educated opinion on interest rates.
"Chg" = the expected change in rates from today. In other words, Chg is the average forecast minus today's rates. All forecasts are based on the respective year-end.
Not all contributors have published updates since CMT's last rate forecast review. For banks providing mean quarterly overnight rate forecasts, we have averaged their Q4 and Q1 forecasts to estimate year-end figures for 2010 and 2011. Results are rounded to the nearest 1/4 point, in keeping with the Bank of Canada's standard rate setting increments.
Data Sources: BMO, CIBC, RBC, Scotiabank, TD
Here is a good article from Canadian Mortgage Trends (www.canadianmortgagetrends.com) last week that talks about where Fixed and Variable rates are headed in the near future. This information will help you in your discussions with clients as to what to do today when choosing their mortgage options.
October 12, 2010
Canadian Interest Rate Forecast
After bursting out of the gates earlier this year, the economy is hobbling to the 2010 finish line. With inflation well-contained, interest rate expectations are down across the board since the last rate forecast in August.
Rate Forecasting In Perspective
Major economists are paid well to tell us where interest rates are headed. They have access to every data source, academic study, historical backtest, and analysis tool imaginable. While far from infallible, these forecasts serve as a point of reference when creating amortization models based on future rate assumptions.
Below you'll find a summary of the latest year-end interest rate projections from each of Canada's Big 5 banks. Use them only as a rough guide because rate outlooks have considerable margins of error.
Latest Overnight Rate Forecast
The Bank of Canada's overnight target has a direct impact on variable mortgage rates.
Bank 2010 2011
BMO 1.00 2.25
CIBC 1.00 1.75
RBC 1.00 2.25
Scotia 1.00 1.75
TD 1.00 2.00
Year-end Avg 1.00 2.00
Chg vs Today 0.00 +1.00
(All figures rounded to the nearest 1/4 point increment.)
Latest 5-Year Government Bond Yield Forecast
Government bond yields drive 5-year fixed mortgage rates.
Bank 2010 2011
BMO 2.03 3.05
RBC 2.45 3.50
Scotia 1.85 2.50
TD 2.30 3.10
Year-end Avg 2.16 3.04
Chg vs Today +0.29 +1.17
(CIBC's 5-year bond forecast was not available.)
Variable-Rate Mortgage Forecast
Most analysts now expect the Bank of Canada to remain on the sidelines until 2nd quarter 2011. On average, major economists now predict a 100 basis point increase in the overnight rate over the next 15 months. Their outlooks, if accurate, imply a 4.00% prime rate by December 31, 2011. Prime rate is currently 3.00% and the 10-year average of prime is 4.50%.
Based on a 75-basis-point discount from prime, these forecasts suggests 5-year variable rates in the 3.25% range by year-end 2011.
Fixed-Rate Mortgage Forecast
Banks foresee 5-year bond yields climbing 117 basis points in the same 15-month timeframe. That would put the 5-year yield at 3.41% by the end of next year. The 10-year average of the five-year yield is 3.93%.
Assuming a typical 120 basis point spread above yields, these forecasts suggest deep-discounted 5-year fixed rates could rise to roughly 4.24% by year-end 2011.
______________________________________________
Things to Note: These forecasts are made by the banks and are subject to frequent change. This data is provided only for general interest. Always discuss your needs and risk tolerance with a mortgage professional before acting on any information you read online.
History has shown that it's near impossible to accurately predict interest rates long-term so use these figures at your own risk. That said, while economist projections are often wrong, they are still one of the better sources of educated opinion on interest rates.
"Chg" = the expected change in rates from today. In other words, Chg is the average forecast minus today's rates. All forecasts are based on the respective year-end.
Not all contributors have published updates since CMT's last rate forecast review. For banks providing mean quarterly overnight rate forecasts, we have averaged their Q4 and Q1 forecasts to estimate year-end figures for 2010 and 2011. Results are rounded to the nearest 1/4 point, in keeping with the Bank of Canada's standard rate setting increments.
Data Sources: BMO, CIBC, RBC, Scotiabank, TD
Rate Projections from Ben Tal
Rate Uncertainty & Ben Tal's Call
Choosing between a fixed or variable mortgage can seem like throwing darts with your eyes closed.
Borrowers today are seeing headlines like this:
Economists want BoC to keep raising interest rates
Then they turn the page and see this:
Could the Bank of Canada be forced to cut rates again?
Even the Bank of Canada's Mark Carney isn't too sure of the future.
On CBC yesterday Carney said, "Upside risks are balanced by downside risks...The upside is as likely as the downside."
At a FirstLine Mortgages event yesterday, CIBC economist Benjamin Tal translated that. "What Carney is telling us," Tal said, "is (the Bank of Canada) has no clue what is going to happen."
Tal added:
"The bond market is pricing in inflation below 1.50% for the next ten years." (But he believes "the bond market is mispricing inflation.")
The Bank of Canada now predicts the economy won't reach its full potential until year-end 2012, one year later than previously expected.
The BoC doesn't need to raise rates to slow consumer credit because "it's already happening."
Consumers' spending capability is at a "30-year low." It won't take many rate hikes to slow the economy from here.
As a result, Tal asserted: "I don't expect (variable or fixed) mortgage rates to rise in any significant way in the next 12 months." There is "no rush to make a mortgage decision."
When someone in the audience asked him which mortgage he'd take today (fixed or variable), Tal replied:
"I'm almost convinced that over the next 2-3 years variable will be better. In the last two years fixed will be better. But, the gap (between fixed and variable) will not be significant over five years."
That said, if he had to choose today, he feels that "mathematically speaking," variable-rate mortgages will "probably" outperform fixed rates.
Choosing between a fixed or variable mortgage can seem like throwing darts with your eyes closed.
Borrowers today are seeing headlines like this:
Economists want BoC to keep raising interest rates
Then they turn the page and see this:
Could the Bank of Canada be forced to cut rates again?
Even the Bank of Canada's Mark Carney isn't too sure of the future.
On CBC yesterday Carney said, "Upside risks are balanced by downside risks...The upside is as likely as the downside."
At a FirstLine Mortgages event yesterday, CIBC economist Benjamin Tal translated that. "What Carney is telling us," Tal said, "is (the Bank of Canada) has no clue what is going to happen."
Tal added:
"The bond market is pricing in inflation below 1.50% for the next ten years." (But he believes "the bond market is mispricing inflation.")
The Bank of Canada now predicts the economy won't reach its full potential until year-end 2012, one year later than previously expected.
The BoC doesn't need to raise rates to slow consumer credit because "it's already happening."
Consumers' spending capability is at a "30-year low." It won't take many rate hikes to slow the economy from here.
As a result, Tal asserted: "I don't expect (variable or fixed) mortgage rates to rise in any significant way in the next 12 months." There is "no rush to make a mortgage decision."
When someone in the audience asked him which mortgage he'd take today (fixed or variable), Tal replied:
"I'm almost convinced that over the next 2-3 years variable will be better. In the last two years fixed will be better. But, the gap (between fixed and variable) will not be significant over five years."
That said, if he had to choose today, he feels that "mathematically speaking," variable-rate mortgages will "probably" outperform fixed rates.
Tuesday, September 28, 2010
New Brunswick Broker Licensing
If you are a broker in New Brunswick, or are doing business in NB, this will be of interest to you. The NB government is now licensing all brokers. Here is an article prepared by a law firm outlining the details:
New Brunswick's New Cost of Credit Disclosure Act
New Brunswick has a new Cost of Credit Disclosure Act, c.28.3 (the "Act") and New Brunswick Regulation 2010-104 under the Cost of Credit Disclosure Act (the "Regulation"), both of which became effective on September 15, 2010. The Act substantially addresses New Brunswick's commitment to harmonize its cost of credit disclosure requirements with the laws of other Canadian jurisdictions in accordance with the principles and the harmonization template agreed to in 1998 by the federal, provincial and territorial governments. The provisions of the Act and the Regulation change significantly the disclosure requirements applicable in New Brunswick. The Act was passed in 2002 but was not brought into force until new regulations were passed.
Registration Requirement for Lenders, Lessors and Credit Brokers
Of particular note is that lessors who provide financing for personal, family or household purposes now must register under the Act in order to carry on that business in New Brunswick. Similarly, credit brokers who arrange, facilitate or attempt to arrange consumer credit must be registered to carry on this activity in New Brunswick. Lenders were required to be registered in New Brunswick under the former legislation, and the requirement continues under the Act, now referring to lenders as "credit grantors."
Overview
The Act requires credit grantors, lessors and credit brokers acting in the ordinary course of business to register under the Act unless they come within one of several exemptions specified in the Regulation. The Act only applies to lessors, credit brokers, or credit grantors insofar as their respective credit agreements or lease agreements are entered into primarily for personal, family, or household purposes. Lenders should note that registrations made under the previous version of the Act will remain in effect until such registrations expire.
The Act defines a "credit grantor" as a person who (i) has entered into, or who is negotiating to enter into, a credit agreement under which the person extends or is to extend credit to a borrower if the credit is not in respect of the sale of goods intended for resale, and the credit is for $100 or more or (ii) is an assignee of the original credit grantor's rights under a credit agreement. The Act defines a "lessor" as a person who (i) negotiates to enter into or who enters into a lease under which the person leases goods to a lessee or (ii) is an assignee of the original lessor's rights under the lease. The Act defines a "credit broker" as anyone who, for compensation, arranges, negotiates or facilities (or attempts to do any of the foregoing) an extension of credit from a credit grantor to a borrower.
A "credit agreement" is an agreement under which credit is extended and includes (a) an agreement in relation to (i) a loan of money, (ii) a credit sale, (iii) a line of credit, or (iv) a credit card, (b) a renewal of or an amendment to an agreement referred to in (b), and (c) a lease.
Mortgage Brokers and Mortgage Lenders
Parties who arrange the financings of mortgages must ensure they review the requirements of the Act and understand their responsibilities because the scope of the definition of "credit agreement" is broad enough to include mortgage loans (which the Regulation defines as a loan of money secured by a charge against real property). Accordingly, mortgage brokers and mortgage lenders will typically be caught within the definition of credit broker or credit grantor, as the case may be, and must, therefore, register under the Act. This is a significant change in the legislative framework since, previously, mortgage lenders typically were not required to issue disclosure documents to borrowers in connection with New Brunswick mortgage loans.
Given that it is now an offence under the Act to fail to provide the required disclosure information, lessors, credit brokers, and credit grantors will want to ensure that they understand and comply with the provisions of the Act and should review the Act and the Regulation in detail.
New Brunswick's New Cost of Credit Disclosure Act
New Brunswick has a new Cost of Credit Disclosure Act, c.28.3 (the "Act") and New Brunswick Regulation 2010-104 under the Cost of Credit Disclosure Act (the "Regulation"), both of which became effective on September 15, 2010. The Act substantially addresses New Brunswick's commitment to harmonize its cost of credit disclosure requirements with the laws of other Canadian jurisdictions in accordance with the principles and the harmonization template agreed to in 1998 by the federal, provincial and territorial governments. The provisions of the Act and the Regulation change significantly the disclosure requirements applicable in New Brunswick. The Act was passed in 2002 but was not brought into force until new regulations were passed.
Registration Requirement for Lenders, Lessors and Credit Brokers
Of particular note is that lessors who provide financing for personal, family or household purposes now must register under the Act in order to carry on that business in New Brunswick. Similarly, credit brokers who arrange, facilitate or attempt to arrange consumer credit must be registered to carry on this activity in New Brunswick. Lenders were required to be registered in New Brunswick under the former legislation, and the requirement continues under the Act, now referring to lenders as "credit grantors."
Overview
The Act requires credit grantors, lessors and credit brokers acting in the ordinary course of business to register under the Act unless they come within one of several exemptions specified in the Regulation. The Act only applies to lessors, credit brokers, or credit grantors insofar as their respective credit agreements or lease agreements are entered into primarily for personal, family, or household purposes. Lenders should note that registrations made under the previous version of the Act will remain in effect until such registrations expire.
The Act defines a "credit grantor" as a person who (i) has entered into, or who is negotiating to enter into, a credit agreement under which the person extends or is to extend credit to a borrower if the credit is not in respect of the sale of goods intended for resale, and the credit is for $100 or more or (ii) is an assignee of the original credit grantor's rights under a credit agreement. The Act defines a "lessor" as a person who (i) negotiates to enter into or who enters into a lease under which the person leases goods to a lessee or (ii) is an assignee of the original lessor's rights under the lease. The Act defines a "credit broker" as anyone who, for compensation, arranges, negotiates or facilities (or attempts to do any of the foregoing) an extension of credit from a credit grantor to a borrower.
A "credit agreement" is an agreement under which credit is extended and includes (a) an agreement in relation to (i) a loan of money, (ii) a credit sale, (iii) a line of credit, or (iv) a credit card, (b) a renewal of or an amendment to an agreement referred to in (b), and (c) a lease.
Mortgage Brokers and Mortgage Lenders
Parties who arrange the financings of mortgages must ensure they review the requirements of the Act and understand their responsibilities because the scope of the definition of "credit agreement" is broad enough to include mortgage loans (which the Regulation defines as a loan of money secured by a charge against real property). Accordingly, mortgage brokers and mortgage lenders will typically be caught within the definition of credit broker or credit grantor, as the case may be, and must, therefore, register under the Act. This is a significant change in the legislative framework since, previously, mortgage lenders typically were not required to issue disclosure documents to borrowers in connection with New Brunswick mortgage loans.
Given that it is now an offence under the Act to fail to provide the required disclosure information, lessors, credit brokers, and credit grantors will want to ensure that they understand and comply with the provisions of the Act and should review the Act and the Regulation in detail.
Saturday, July 3, 2010
Summer Hours
I heard an great concept a few years ago...outwork your competition. We have all heard "work smarter, not harder". This goes along with it. Outworking your competition is easy during the summer. Lots of people are taking vacations but some are taking Friday afternoon off. What if you were to work those Friday afternoons when other were at the cottage or on the golf course. Just like that, you would be outworking your competition. Vacations are an important way to recharge the batteries. But you are usually not that busy during the summer months that you "need" to only work four day weeks. Top producers are often workaholics, but you don't need to work 20 hour days. Just be available and you will become a top producer.
Tuesday, June 29, 2010
Understanding Accelerated Payments
One of my brokers gave me this piece. I thought it was worth sharing.
Non-accelerated payments are calculated using 12 months worth of payments in a 12 month period.
Accelerated payments are calculated by incorporating 13 months worth of payments in a 12 month period. The additional month is divided equally among your payment to increase them.
Impact of Accelerated Payments
Contractual Amortization Impact on Amortization
40 years 8 years, 1 month
35 years 6 years, 3 months
30 years 4 years, 10 months
25 years 3 years, 7 months
20 years 2 years, 6 months
15 years 1 year, 8 months
10 years 1 year
5 years 5 months
Non-accelerated payments are calculated using 12 months worth of payments in a 12 month period.
Accelerated payments are calculated by incorporating 13 months worth of payments in a 12 month period. The additional month is divided equally among your payment to increase them.
Impact of Accelerated Payments
Contractual Amortization Impact on Amortization
40 years 8 years, 1 month
35 years 6 years, 3 months
30 years 4 years, 10 months
25 years 3 years, 7 months
20 years 2 years, 6 months
15 years 1 year, 8 months
10 years 1 year
5 years 5 months
Tuesday, June 22, 2010
Home Capital likely to double assets in four years
Here is an article out of this month's CMP Magazine...
Home Capital likely to double assets in four years
| Monday, 7 June 2010
Home Capital Group Inc., the mortgage lender whose stock outperformed Canada's eight banks last year, will likely double its assets in the next four years, reported Bloomberg Businessweek.
"We think we can be a C$20-billion ($18.9 billion)-plus company within three to four years because of the momentum we have," CEO Gerald Soloway said. The Toronto-based company had about C$12 billion in assets at the end of the first quarter, and reported a record profit of C$41.7 million.
Home Capital primarily offers uninsured mortgages to clients who can't get loans from Canadian banks. Since the financial crisis began, Home Capital president Martin Reid said half of 25 "decent competitors," including General Electric Co.'s GE Money and Accredited Home Lenders, have exited the C$200 billion market. Home Capital only does business within Canada, and deals mostly with lending, credit cards and deposit products.
Home capital fell C$1.02 to close at C$41.60 on June 4 on the TSX. The shares have fallen less than 1 per cent this year after more than doubling in 2009.
Home Capital likely to double assets in four years
| Monday, 7 June 2010
Home Capital Group Inc., the mortgage lender whose stock outperformed Canada's eight banks last year, will likely double its assets in the next four years, reported Bloomberg Businessweek.
"We think we can be a C$20-billion ($18.9 billion)-plus company within three to four years because of the momentum we have," CEO Gerald Soloway said. The Toronto-based company had about C$12 billion in assets at the end of the first quarter, and reported a record profit of C$41.7 million.
Home Capital primarily offers uninsured mortgages to clients who can't get loans from Canadian banks. Since the financial crisis began, Home Capital president Martin Reid said half of 25 "decent competitors," including General Electric Co.'s GE Money and Accredited Home Lenders, have exited the C$200 billion market. Home Capital only does business within Canada, and deals mostly with lending, credit cards and deposit products.
Home capital fell C$1.02 to close at C$41.60 on June 4 on the TSX. The shares have fallen less than 1 per cent this year after more than doubling in 2009.
Thursday, June 17, 2010
CAAMP Atlantic Wrap Up, Plus a Few More Things
CAAMP Atlantic has wrapped for another year. For me, it started on Saturday with a small social gathering involving a couple of brokers from NL. Sunday was the annual Invis/Mortgage Intelligence Boat Cruise around Halifax Harbour, followed by the Verico Cocktail Mixer, supper with the Home Trust team, capped off by a visit to a packed Lower Deck. Monday was the trade show and symposium. Lots of great presentations, but best of all was the time to see our brokers at the trade show. Monday night was the TMG mixer followed by another team supper and another trip to the Lower Deck. Tuesday was the windy golf day at Glen Arbour. Get time in the sun.
One of the big messages coming out of CAAMP was marketing and networking...how to grow your business. If you are not on to social networking today(Facebook, Twitter, Linkedin, etc.) then you will miss the boat tomorrow. CMHC estimates that only 3% of all business today comes from social networking. However, that is based on all age ranges. I would guess that if you broke that down to buyers between ages 25 and 35, that number would jump a lot. The "new buyers" are using social networking so much that they are not using traditional methods of communications (mail flyers and landlines are becoming a thing of the past). Think of a YouTube video that goes "viral" and gets 100,000+ hits within hours. How do you think word gets out about it...that's right, social networking.
The book I just finished is called The Purple Cow, and it has opened my eyes. The premise is if you drive by a field of brown cows, none of them stand out. But put a purple cow in that field and you will notice it. The same goes for marketing your business. If you jump on the social networking bandwagon too late, then you will be a purple cow among thousands and never get noticed. Social networking is going to catch on even more within months. So don't delay, have a go at it today.
Last thing is rates. We have seemed to have stabilized on the rate front. With the BoC rate hike really turning into a "non-event" and bond yields being fairly stable after the EU/Greek economic crisis, we hope to see rates stay this way through the summer. So let's get those clients off the fence and into their dream house today.
One of the big messages coming out of CAAMP was marketing and networking...how to grow your business. If you are not on to social networking today(Facebook, Twitter, Linkedin, etc.) then you will miss the boat tomorrow. CMHC estimates that only 3% of all business today comes from social networking. However, that is based on all age ranges. I would guess that if you broke that down to buyers between ages 25 and 35, that number would jump a lot. The "new buyers" are using social networking so much that they are not using traditional methods of communications (mail flyers and landlines are becoming a thing of the past). Think of a YouTube video that goes "viral" and gets 100,000+ hits within hours. How do you think word gets out about it...that's right, social networking.
The book I just finished is called The Purple Cow, and it has opened my eyes. The premise is if you drive by a field of brown cows, none of them stand out. But put a purple cow in that field and you will notice it. The same goes for marketing your business. If you jump on the social networking bandwagon too late, then you will be a purple cow among thousands and never get noticed. Social networking is going to catch on even more within months. So don't delay, have a go at it today.
Last thing is rates. We have seemed to have stabilized on the rate front. With the BoC rate hike really turning into a "non-event" and bond yields being fairly stable after the EU/Greek economic crisis, we hope to see rates stay this way through the summer. So let's get those clients off the fence and into their dream house today.
Friday, June 4, 2010
Chicken Little, the sky is not falling!
My kids are a little old for that story now, but it is a good reminder that even though Prime went up 0.25% this week and fixed rates are no longer at that "all time low", rates are still FANTASTIC! And while it is great for those inside the industry to debate this all day long, we need to get this message out to the buying public so that they have more than just the media's fatalistic view of things. The average consumer needs to know that sub 5% rates are worth getting into the game on - the home buying game that is. If the message is not being delivered, the home buyers will continue to stay on the sidelines, and when rates do go up over 5% (or even higher) that potential buyer will have missed their opportunity and will be out of the game all together.
But what can you do? Do you have a sign outside your office, a newsletter, an email list of potential clients, or even the ability to speak? Then start talking, telling people that now is the time to buy. It is fairly easy, after all, as mortgage professionals you are the ones clients turn to for advice.
Have a great weekend.
But what can you do? Do you have a sign outside your office, a newsletter, an email list of potential clients, or even the ability to speak? Then start talking, telling people that now is the time to buy. It is fairly easy, after all, as mortgage professionals you are the ones clients turn to for advice.
Have a great weekend.
Tuesday, May 25, 2010
Another Bank Chooses Specialists over Brokers
HSBC announced that they were shutting down their broker operations last week. Add them to the list of banks who have pulled out of the broker channel or never came into "broker land". This list includes BMO and RBC. Plus other lenders available to the broker network also have specialists competing directly with brokers. They include TD, Scotia, and CIBC/First Line/HLC.
Monoline lenders only deal with brokers, making these lenders the best choice and most logical choice for brokers. There is a place for banks, but not necessarily the first choice.
Support the lenders that support you!
Monoline lenders only deal with brokers, making these lenders the best choice and most logical choice for brokers. There is a place for banks, but not necessarily the first choice.
Support the lenders that support you!
Thursday, May 20, 2010
Prime Rate Hike Still in Question
No sooner did I say that BoC's overnight/benchmark rate (0.25%) "will go up in June" then they say that again is in question. Mr. Carney, please make a decision and stick with it! This indecision is hurting more than an actual rate hike would hurt. It keeps home buyers on the sidelines. The reason for this waffling is that the US Fed is saying inflation is down/stabile due to lower prices in things including gas prices.
I will continue to comment on this as time goes on.
I will continue to comment on this as time goes on.
Wednesday, May 19, 2010
Updates, Random Items
Had a few things to update on...
-Deutsche Bank is rumoured to be pulling out of the origination side for mortgage lenders. They provided funding for a number of monoline lenders in Canada.
-reports say that home values will drop 2% this year
-reposts also say that home sales are up 20% over last year, but last year was down from 2008
-Bank of Canada's overnight/benchmark rate will go up in June, likely by 0.25%. What no one is talking about is how this will affect lenders Prime rates (today at 2.25%). Most people expect that lenders will raise rates by that same 0.25%, but I think the Prime rates will go up more than that (maybe even 0.50%)
-bond yields are all over the place lately. This is due to a number of reasons all linked to the stock markets. The European economy, the Greek debt crisis, US economic recovery are all affecting the stock market and bond yields.
-CAAMP Atlantic is coming up on June 14th. By the looks of the presenters list, this year will be a good one for the attendees. Home Trust's own Martin Reid (President) will be giving a presentation on Securitization - don't miss this.
-foreclosures in rural areas of Atlantic are up. This is a trend that many lenders are keeping an eye on.
-social media is the biggest buzz this spring. Are you using it to boost your business. Twitter, Facebook, Linkedin, and Blogspot are great, free ways to start using social networking to your advantage
-the "white paper" with proposed changes to the NS Brokers and Lenders Registration Act is out for industry review. Get your copy today at http://www.gov.ns.ca/snsmr/consumer/pdf/Mortgage-Brokers-Discussion.pdf -have a voice and reply to the white paper. It is your industry.
-Deutsche Bank is rumoured to be pulling out of the origination side for mortgage lenders. They provided funding for a number of monoline lenders in Canada.
-reports say that home values will drop 2% this year
-reposts also say that home sales are up 20% over last year, but last year was down from 2008
-Bank of Canada's overnight/benchmark rate will go up in June, likely by 0.25%. What no one is talking about is how this will affect lenders Prime rates (today at 2.25%). Most people expect that lenders will raise rates by that same 0.25%, but I think the Prime rates will go up more than that (maybe even 0.50%)
-bond yields are all over the place lately. This is due to a number of reasons all linked to the stock markets. The European economy, the Greek debt crisis, US economic recovery are all affecting the stock market and bond yields.
-CAAMP Atlantic is coming up on June 14th. By the looks of the presenters list, this year will be a good one for the attendees. Home Trust's own Martin Reid (President) will be giving a presentation on Securitization - don't miss this.
-foreclosures in rural areas of Atlantic are up. This is a trend that many lenders are keeping an eye on.
-social media is the biggest buzz this spring. Are you using it to boost your business. Twitter, Facebook, Linkedin, and Blogspot are great, free ways to start using social networking to your advantage
-the "white paper" with proposed changes to the NS Brokers and Lenders Registration Act is out for industry review. Get your copy today at http://www.gov.ns.ca/snsmr/consumer/pdf/Mortgage-Brokers-Discussion.pdf -have a voice and reply to the white paper. It is your industry.
Tuesday, May 11, 2010
New Name for my Blog
As the last part of my Blog's transformation, I have renamed it Atlantic Mortgage Insider. The link to get here is still the same, but the name better reflects the mission that I have for the Blog...to give mortgage information from an insider.
Sunday, May 9, 2010
What lenders are looking for...CMP Magazine Article
I got a mention in CMP Magazine this month...
What lenders are looking for
Tuesday, 4 May 2010
When we talked to lender BDMs and underwriters nominated for CMP Canadian Mortgage Awards last year, they were happy to share what brokers could improve on application-wise and what their predictions were for the year ahead.
This year, with a fresh batch of finalists- including those from the newly added lender newcomer categories - and a host of new issues facing the industry, we asked similar questions to the people who put through deals and work with mortgage brokers and agents on a daily basis. Their feedback is particularly relevant and interesting with the advent of the new mortgage insurance rules, the harmonized sales tax in Ontario and B.C., and rising interest rates. While the lender employees interviewed seemed relatively calm about the upcoming changes, David Neville, a BDM with Home Trust, neatly summed up the situation and how it will affect brokers.
"I think brokers have to expect the unexpected," said Neville, who is based in Halifax. "Insurers are going through uncharted territory and what was approved yesterday might not be approved today - not everything is a slam dunk as it has been in years past." With that in mind, here are some insider views on how brokers can develop closer relationships with lender partners and get a greater number of deals approved.
Common mistakes
Because lender BDMs and underwriters see hundreds upon hundreds of mortgage applications in a year, it's no surprise they can name off common errors and suggestions for improvement without hesitation.
"One of the big frustrations is having an application that isn't complete," said Christine Siddiqui, an underwriter with ING Direct in Toronto. She adds that brokers can improve on this by having better relationships with clients and completing applications with full disclosure in mind.
Along the same lines, Barb Morgan, a BDM at Merix Financial in Toronto, says the biggest thing she sees is brokers rushing applications after they get a rate quoted from the lender and then missing important information to get the deal done.
"I can't stress enough that it's not a race - it's the biggest financial transaction most people are going to go through, so it's important for originators to coach their clients to do things correctly and not rush just to get a rate," says Morgan, who encourages face-toface meetings with clients when possible.
"We waste so much time going back and forth on tiny pieces of information and that delays everything."
The most common type of information she sees missing on applications is related to property taxes, employment and income. She says it's important to get clients to differentiate their base salary and extras like bonuses, overtime and commission.
Chris Hoeppner a BDM for Street Capital in Chilliwack, B.C., also stresses the importance of brokers clarifying to lenders how a client's income is derived.
"The best brokers are the ones that ask clients for income documents upfront and then ask them to break down how they are paid as opposed to just putting down salary," he says. "The majority of delays generally have to do with the fact that questions weren't asked at the beginning of the process."
For alt-A and B deals, brokers have to pay more attention when filling out an application so they can go into more detail with lenders about why a credit score is a certain way or why income is irregular. This is especially important as guidelines tighten and formerly 'A-minus deals' may need to be turned over to an alternative lender.
"When insurers had easier guidelines, it was enough for brokers to say 'here are the facts' and that was that," says HomeTrust's Neville. "Now telling the story really does help and allowing for some more time for the deal to be done because there is an appraisal involved."
Like last year, the BDMs and underwriters interviewed emphasized the importance of good notes in getting an application processed. Neville says this is especially important for pieces of information like additional income or original purchase price, which don't always carry over to underwriting systems.
Good habits
Beyond a thorough application, there are other ways brokers can ensure smoother relationships with both clients and lenders.These habits go beyond simply knowing what numbers fit where and how to shape an application to work with a certain lenderor product. For Ambrose Wong, an underwriter at Bridgewater Bank in Calgary, a key component he looks for in applications is a client's financial maturity. It's something he thinks brokers need to pay attention to as well.
"If I see a client that makes $200,000 a year in Fort McMurray but he has almost no savings, I'll certainly ask questions and see if the broker is missing any information," Wong says. "Brokers are sometimes too focused on policies where they make sure a deal is with the right ratios and meets the five Cs of credit, but they don't look at things like financial maturity or unsupported marketability of a property."
Related to that, Wong often advises brokers to recommend amortizations under 35 years, especially for clients who are putting the minimum five per cent down. And if a client clearly isn't ready to take on a mortgage or will be stretched thin if they make such a big financial decision, he says it shouldn't be pushed.
"Don't force a deal because that can create massive credit hits and then the Beacon score will be driven down," he says.
Another aspect of responsible brokering is managing client expectations so that, for example, alt-A clients know they might not be able to get the best rate on offer.
"Because a lot of clients see ads showing the lowest mortgage rate, they think they're going to automatically get that rate, so a big part of the broker's job is pre-selling a deal to a client and making sure they have realistic expectations, especially in thisenvironment," says Neville.
For better client relationships, Hoeppner recommends brokers take the initiative to explain new rules or changing guidelinesto clients.
"It's a real value-add if brokers can call their database and explain the new rules and how they could affect them like, for example, if they're thinking of refinancing," he says. "It's a personal touch and it allows clients to prepare accordingly."
Future predictions
Last year, lender BDMs and underwriters predicted a few changes that would affect the mortgage industry over the remainder of 2009 and at the beginning of 2010. (This was, of course, before signs of the housing market picking up at an explosive pace.) A lot of these predictions remained this year, including a much bigger focus on responsible lending practices and brokers choosing fewer lenders to work with.
"Lenders are asking for higher volumes and more of a volume commitment, so I think there's a trend toward brokers sending deals to three or four main lenders that cover off every type of deal they need to get done and building those relationships as opposed to scattering deals around," says Hoeppner.
Siddiqui from ING agrees. She says brokers are becoming more selective and realizing the benefits of having a "strategic relationship" with the lender. But while many lenders and brokers see this as a positive development, there can be somedrawbacks, particularly for originators in smaller locales.
"Especially here in Atlantic Canada, individual brokers don't do huge volumes, so picking one or two lenders to deal with has been a tough road for them to travel," says Neville, adding he has seen a lot of brokers talking about pooling deals and looking at ways to stay within funding ratios of certain lenders. Neville also says that with the changing market, brokers will have to take on more of a "jack-of-all-trades" attitude compared to when the market was booming and relatively stable.
"Six years ago, brokers were taking every type of business they could get and then you saw people starting to specialize in A deals or B deals or rental property deals. Now I think you're going to see the broker population decrease slightly and brokers diversifying deals instead of focusing on just one thing."
Like last year, there are also predictions that there will be a greater interest in alt-A and B lending, particularly with slightlyhigher qualifying standards and tightened insurance guidelines for self-employed clients. Home Trust, for example, has put a reemphasis on its B lending products and other lenders may follow suit. As for the housing market, which is still seeing near-record numbers, there is a general consensus that sales will dampen in the not-too-distant future.
"We're predicting the last half of 2010 is probably going to be much slower with the combination of changes coming in," says Morgan, although she adds the new mortgage rules probably won't have too much of an effect. "I think most good originators already qualify clients on a higher rate - it's a smart thing to do because if you have any surprises, there'ssome wiggle room."
Brokers and lenders may have survived the recession, but the lessons of the financial crisis have left the mortgage lending andinsurance realms more cautious than when times were good, meaning more challenges for brokers and clients.Fortunately, there is still a lot to be said for good relationships between brokers and their lender BDMs and underwriters. Withregular communication, brokers can keep their efficiency ratios high - something that is becoming increasingly important - and
keep on top of new products and guidelines. And brokers shouldn't forget the importance of teamwork.
"To me, we both chip in - they send the deal and I'll make sure it doesn't turn around in two years and that will help them do better," says Ambrose. "Together, our ultimate goal is to secure financing for a client that truly deserves to be a homeowner."
What lenders are looking for
Tuesday, 4 May 2010
When we talked to lender BDMs and underwriters nominated for CMP Canadian Mortgage Awards last year, they were happy to share what brokers could improve on application-wise and what their predictions were for the year ahead.
This year, with a fresh batch of finalists- including those from the newly added lender newcomer categories - and a host of new issues facing the industry, we asked similar questions to the people who put through deals and work with mortgage brokers and agents on a daily basis. Their feedback is particularly relevant and interesting with the advent of the new mortgage insurance rules, the harmonized sales tax in Ontario and B.C., and rising interest rates. While the lender employees interviewed seemed relatively calm about the upcoming changes, David Neville, a BDM with Home Trust, neatly summed up the situation and how it will affect brokers.
"I think brokers have to expect the unexpected," said Neville, who is based in Halifax. "Insurers are going through uncharted territory and what was approved yesterday might not be approved today - not everything is a slam dunk as it has been in years past." With that in mind, here are some insider views on how brokers can develop closer relationships with lender partners and get a greater number of deals approved.
Common mistakes
Because lender BDMs and underwriters see hundreds upon hundreds of mortgage applications in a year, it's no surprise they can name off common errors and suggestions for improvement without hesitation.
"One of the big frustrations is having an application that isn't complete," said Christine Siddiqui, an underwriter with ING Direct in Toronto. She adds that brokers can improve on this by having better relationships with clients and completing applications with full disclosure in mind.
Along the same lines, Barb Morgan, a BDM at Merix Financial in Toronto, says the biggest thing she sees is brokers rushing applications after they get a rate quoted from the lender and then missing important information to get the deal done.
"I can't stress enough that it's not a race - it's the biggest financial transaction most people are going to go through, so it's important for originators to coach their clients to do things correctly and not rush just to get a rate," says Morgan, who encourages face-toface meetings with clients when possible.
"We waste so much time going back and forth on tiny pieces of information and that delays everything."
The most common type of information she sees missing on applications is related to property taxes, employment and income. She says it's important to get clients to differentiate their base salary and extras like bonuses, overtime and commission.
Chris Hoeppner a BDM for Street Capital in Chilliwack, B.C., also stresses the importance of brokers clarifying to lenders how a client's income is derived.
"The best brokers are the ones that ask clients for income documents upfront and then ask them to break down how they are paid as opposed to just putting down salary," he says. "The majority of delays generally have to do with the fact that questions weren't asked at the beginning of the process."
For alt-A and B deals, brokers have to pay more attention when filling out an application so they can go into more detail with lenders about why a credit score is a certain way or why income is irregular. This is especially important as guidelines tighten and formerly 'A-minus deals' may need to be turned over to an alternative lender.
"When insurers had easier guidelines, it was enough for brokers to say 'here are the facts' and that was that," says HomeTrust's Neville. "Now telling the story really does help and allowing for some more time for the deal to be done because there is an appraisal involved."
Like last year, the BDMs and underwriters interviewed emphasized the importance of good notes in getting an application processed. Neville says this is especially important for pieces of information like additional income or original purchase price, which don't always carry over to underwriting systems.
Good habits
Beyond a thorough application, there are other ways brokers can ensure smoother relationships with both clients and lenders.These habits go beyond simply knowing what numbers fit where and how to shape an application to work with a certain lenderor product. For Ambrose Wong, an underwriter at Bridgewater Bank in Calgary, a key component he looks for in applications is a client's financial maturity. It's something he thinks brokers need to pay attention to as well.
"If I see a client that makes $200,000 a year in Fort McMurray but he has almost no savings, I'll certainly ask questions and see if the broker is missing any information," Wong says. "Brokers are sometimes too focused on policies where they make sure a deal is with the right ratios and meets the five Cs of credit, but they don't look at things like financial maturity or unsupported marketability of a property."
Related to that, Wong often advises brokers to recommend amortizations under 35 years, especially for clients who are putting the minimum five per cent down. And if a client clearly isn't ready to take on a mortgage or will be stretched thin if they make such a big financial decision, he says it shouldn't be pushed.
"Don't force a deal because that can create massive credit hits and then the Beacon score will be driven down," he says.
Another aspect of responsible brokering is managing client expectations so that, for example, alt-A clients know they might not be able to get the best rate on offer.
"Because a lot of clients see ads showing the lowest mortgage rate, they think they're going to automatically get that rate, so a big part of the broker's job is pre-selling a deal to a client and making sure they have realistic expectations, especially in thisenvironment," says Neville.
For better client relationships, Hoeppner recommends brokers take the initiative to explain new rules or changing guidelinesto clients.
"It's a real value-add if brokers can call their database and explain the new rules and how they could affect them like, for example, if they're thinking of refinancing," he says. "It's a personal touch and it allows clients to prepare accordingly."
Future predictions
Last year, lender BDMs and underwriters predicted a few changes that would affect the mortgage industry over the remainder of 2009 and at the beginning of 2010. (This was, of course, before signs of the housing market picking up at an explosive pace.) A lot of these predictions remained this year, including a much bigger focus on responsible lending practices and brokers choosing fewer lenders to work with.
"Lenders are asking for higher volumes and more of a volume commitment, so I think there's a trend toward brokers sending deals to three or four main lenders that cover off every type of deal they need to get done and building those relationships as opposed to scattering deals around," says Hoeppner.
Siddiqui from ING agrees. She says brokers are becoming more selective and realizing the benefits of having a "strategic relationship" with the lender. But while many lenders and brokers see this as a positive development, there can be somedrawbacks, particularly for originators in smaller locales.
"Especially here in Atlantic Canada, individual brokers don't do huge volumes, so picking one or two lenders to deal with has been a tough road for them to travel," says Neville, adding he has seen a lot of brokers talking about pooling deals and looking at ways to stay within funding ratios of certain lenders. Neville also says that with the changing market, brokers will have to take on more of a "jack-of-all-trades" attitude compared to when the market was booming and relatively stable.
"Six years ago, brokers were taking every type of business they could get and then you saw people starting to specialize in A deals or B deals or rental property deals. Now I think you're going to see the broker population decrease slightly and brokers diversifying deals instead of focusing on just one thing."
Like last year, there are also predictions that there will be a greater interest in alt-A and B lending, particularly with slightlyhigher qualifying standards and tightened insurance guidelines for self-employed clients. Home Trust, for example, has put a reemphasis on its B lending products and other lenders may follow suit. As for the housing market, which is still seeing near-record numbers, there is a general consensus that sales will dampen in the not-too-distant future.
"We're predicting the last half of 2010 is probably going to be much slower with the combination of changes coming in," says Morgan, although she adds the new mortgage rules probably won't have too much of an effect. "I think most good originators already qualify clients on a higher rate - it's a smart thing to do because if you have any surprises, there'ssome wiggle room."
Brokers and lenders may have survived the recession, but the lessons of the financial crisis have left the mortgage lending andinsurance realms more cautious than when times were good, meaning more challenges for brokers and clients.Fortunately, there is still a lot to be said for good relationships between brokers and their lender BDMs and underwriters. Withregular communication, brokers can keep their efficiency ratios high - something that is becoming increasingly important - and
keep on top of new products and guidelines. And brokers shouldn't forget the importance of teamwork.
"To me, we both chip in - they send the deal and I'll make sure it doesn't turn around in two years and that will help them do better," says Ambrose. "Together, our ultimate goal is to secure financing for a client that truly deserves to be a homeowner."
Tuesday, April 27, 2010
News News News
I haven't put much on the blog lately about the changes within the industry as I know everyone has been bombarded with information. So I decided to give some quick insights on this entry...
- rates have gone up twice in less than 30 days and we are expecting another rate hike of 15 bps any day now
- the qualifying rate is at 6.10% (for all deals except 5 year fixed rates) and that will likely be 6.25% by May 3rd
- keep an eye on the BA (Banker's Acceptance) Rate as it is what Variable Rate Mortgages are priced on. If and when Prime goes up from 2.25%, the BA Rate will be on the rise too and this could lead to larger increments below Prime for VRMs (think Prime minus 0.60% in the summer and Prime minus 0.80% by next spring)
- I attended the CMP Awards on April 23rd as a Finalists in the BDM of the Year category. Alas, I did not win, but it was truly an honour just to be nominated. Thanks to Home Trust, the Atlantic Brokers, and CMP Magazine
- AIG is now Canada Guaranty. Other than the name change, nothing has changed there. Home Trust uses Canada Guaranty and they have some great products to offer.
- we are seeing a number a trends come out by both the government and the insurers aimed squarely at slowing down the economy. This is not a bad thing (think what goes up must come down). If we recover out of this recession slowly, we will also recover strongly. And no recovery is without it's pain. Time to get used to the new way of doing business.
- last thought...think back to the summer of 2008. Fixed rates were 5.25% to 5.99% and VRMs were Prime minus 0.50% to 0.90%. Look forward to the summer of 2010 and you might see the same type of thing - low risk options cost more! If your client wants to take some risk on a VRM, they will get the better rate; if they want the security of a guaranteed rate for 5 years, they will have to pay a bit more for it.
- rates have gone up twice in less than 30 days and we are expecting another rate hike of 15 bps any day now
- the qualifying rate is at 6.10% (for all deals except 5 year fixed rates) and that will likely be 6.25% by May 3rd
- keep an eye on the BA (Banker's Acceptance) Rate as it is what Variable Rate Mortgages are priced on. If and when Prime goes up from 2.25%, the BA Rate will be on the rise too and this could lead to larger increments below Prime for VRMs (think Prime minus 0.60% in the summer and Prime minus 0.80% by next spring)
- I attended the CMP Awards on April 23rd as a Finalists in the BDM of the Year category. Alas, I did not win, but it was truly an honour just to be nominated. Thanks to Home Trust, the Atlantic Brokers, and CMP Magazine
- AIG is now Canada Guaranty. Other than the name change, nothing has changed there. Home Trust uses Canada Guaranty and they have some great products to offer.
- we are seeing a number a trends come out by both the government and the insurers aimed squarely at slowing down the economy. This is not a bad thing (think what goes up must come down). If we recover out of this recession slowly, we will also recover strongly. And no recovery is without it's pain. Time to get used to the new way of doing business.
- last thought...think back to the summer of 2008. Fixed rates were 5.25% to 5.99% and VRMs were Prime minus 0.50% to 0.90%. Look forward to the summer of 2010 and you might see the same type of thing - low risk options cost more! If your client wants to take some risk on a VRM, they will get the better rate; if they want the security of a guaranteed rate for 5 years, they will have to pay a bit more for it.
Friday, April 2, 2010
Spring Market - boom or bust?
How will the spring market flesh out for you? Will it be a Boom or a Bust? Let's look at the stats. The new regulations come in during April (9th for the CMHC changes and 19th for Federal regulations) and this will affect a small amount volume overall. Rates have moved up, with the promise of them moving higher (don't be fooled when the rates move down by 10-20 bps, that is just the natural "settling" of the rates) and this will move clients out of the market. The new qualifying rate won't affect the market over and above the rate increase as those who can't qualify when rates go up still can't qualify.
So where does this leave our question...Boom or Bust. That is going to fall on potential buyer's preception of the market and the economy. If they feel that they have to buy now, no matter what, that is when they will buy. This is the time where you, as mortgage professionals, can help to guide that preception. A smile and an "everything's great" attitude will carry over to the client. Being Debbie Downer will rub off on the client in a negative way and they will walk. Staying positive now will pay dividends down the road.
So, what's the lesson...don't get caught in the "negative trap". Your words and actions will drive a Booming Spring Market!
Wednesday, March 31, 2010
Rates are up...but this isn't so bad
No saying "the sky is falling"! Rates have gone up 50bps to 60 bps since Monday, with most lenders already making the move. 4.39% is the new mark (but some, like Home Trust, have a rate special of 4.29%) for 5 years. But this is still a great rate. As I have said before, the average interest rate for 5 years in Canada since 1951 is 9.04%. We are at less than half that rate. Keep your clients thinking positively and we will surge through the spring market with little ill effects.
Thursday, March 25, 2010
Rates are going up...
According to Mark Carney's speak yesterday, the Bank of Canada governor stated that the overnight rate might go up quicker and higher than first thought. This move would be to combat inflation. Here is the article from the Globe and Mail:
Mark Carney mindful of hotter inflation
Kevin Carmichael, The Globe and Mail
March 24, 2010
Bank of Canada Governor Mark Carney acknowledged Wednesday that inflation is running hotter than he had predicted, and emphasized the central bank's commitment to containing price increases, a combination of fact and nuance that increases the odds of an interest rate increase within the next few months.
The measure of inflation the central bank uses as a guide to where overall prices are headed touched 2.1 percent in February, a pace the Bank of Canada was not expecting until at least the second half of 2011.
"Core inflation has been slightly firmer than projected," Carney said in the text of his speech to the Ottawa Economics Association.
Some economists have dismissed the stronger core rate as the result of temporary factors, such as a surge in hotel costs related to the Vancouver Olympics. Carney agreed that some of the increase is the result of "transitory factors," but also said that a "higher level of economic activity" is also playing a role, suggesting policy makers are taking the jump in the core rate seriously.
Carney's musings about inflation are important because he and his senior advisers on the Governing Council are grappling with when to raise the central bank's benchmark overnight lending target from it current record low of 0.25 percent.
The decision is a delicate one, which explains why Carney avoided using his speech to draw conclusions about the economy based on recent indicators that suggest Canada's recovery is well entrenched. He said economic activity "has surprised slightly on the upside," yet "persistent strength" in the dollar and weak demand from the United States could yet impede the rebound.
A higher overnight target will cause consumer and business borrowing rates to rise and could put further upward pressure on the dollar, potential impediments to a recovery that most policy makers, including Carney, still consider fragile because it is reliant on heavy government spending and rock-bottom borrowing costs.
Almost a year ago, Carney dropped the overnight target to 0.25 percent and pledged to leave it there until at least the end of June of this year, provided there was no risk that the central bank would fail to fulfill its mandate of keeping annual inflation advancing at a pace of about 2 percent.
At the time, policy makers were struggling to stoke declining prices back to the target. Now, the greater risk appears to be overshooting 2 percent.
Carney emphasized that his commitment to keep the benchmark rate at 0.25 percent is "expressly" conditional on the outlook for inflation, a new phrase that will give pause to the many economists and investors that have based strategies and forecasts on the assumption that the Bank of Canada always intended on leaving borrowing costs unchanged until at least the end of the second quarter, if not longer.
The Bank of Canada will update its outlook for inflation in its next quarterly economic report, scheduled for release on April 22, Carney said. The central bank's next interest rate decisions are scheduled for April 20, June 1 and July 20.
"The Bank of Canada has an unwavering commitment to price stability," Carney said. "The single, most direct contribution that monetary policy can make to sound economic performance is to provide Canadians with confidence that their money will retain its purchasing power. That means keeping inflation low, stable and predictable."
Mark Carney mindful of hotter inflation
Kevin Carmichael, The Globe and Mail
March 24, 2010
Bank of Canada Governor Mark Carney acknowledged Wednesday that inflation is running hotter than he had predicted, and emphasized the central bank's commitment to containing price increases, a combination of fact and nuance that increases the odds of an interest rate increase within the next few months.
The measure of inflation the central bank uses as a guide to where overall prices are headed touched 2.1 percent in February, a pace the Bank of Canada was not expecting until at least the second half of 2011.
"Core inflation has been slightly firmer than projected," Carney said in the text of his speech to the Ottawa Economics Association.
Some economists have dismissed the stronger core rate as the result of temporary factors, such as a surge in hotel costs related to the Vancouver Olympics. Carney agreed that some of the increase is the result of "transitory factors," but also said that a "higher level of economic activity" is also playing a role, suggesting policy makers are taking the jump in the core rate seriously.
Carney's musings about inflation are important because he and his senior advisers on the Governing Council are grappling with when to raise the central bank's benchmark overnight lending target from it current record low of 0.25 percent.
The decision is a delicate one, which explains why Carney avoided using his speech to draw conclusions about the economy based on recent indicators that suggest Canada's recovery is well entrenched. He said economic activity "has surprised slightly on the upside," yet "persistent strength" in the dollar and weak demand from the United States could yet impede the rebound.
A higher overnight target will cause consumer and business borrowing rates to rise and could put further upward pressure on the dollar, potential impediments to a recovery that most policy makers, including Carney, still consider fragile because it is reliant on heavy government spending and rock-bottom borrowing costs.
Almost a year ago, Carney dropped the overnight target to 0.25 percent and pledged to leave it there until at least the end of June of this year, provided there was no risk that the central bank would fail to fulfill its mandate of keeping annual inflation advancing at a pace of about 2 percent.
At the time, policy makers were struggling to stoke declining prices back to the target. Now, the greater risk appears to be overshooting 2 percent.
Carney emphasized that his commitment to keep the benchmark rate at 0.25 percent is "expressly" conditional on the outlook for inflation, a new phrase that will give pause to the many economists and investors that have based strategies and forecasts on the assumption that the Bank of Canada always intended on leaving borrowing costs unchanged until at least the end of the second quarter, if not longer.
The Bank of Canada will update its outlook for inflation in its next quarterly economic report, scheduled for release on April 22, Carney said. The central bank's next interest rate decisions are scheduled for April 20, June 1 and July 20.
"The Bank of Canada has an unwavering commitment to price stability," Carney said. "The single, most direct contribution that monetary policy can make to sound economic performance is to provide Canadians with confidence that their money will retain its purchasing power. That means keeping inflation low, stable and predictable."
Tuesday, March 16, 2010
NS is affordable, but housing costs will go up
According to a recent article from an RBC economist, housing in Nova Scotia remains affordable, but not for long according to a second article. Since NS didn't experience the boom that other areas experienced in real estate, we are also not subject to the bust caused by the projected "housing bubble". Links to both articles are below.
Housing a deal in Atlantic Canada
http://thechronicleherald.ca/Business/1172396.html
Homeownership more costly
http://thechronicleherald.ca/Business/1172478.html
Housing a deal in Atlantic Canada
http://thechronicleherald.ca/Business/1172396.html
Homeownership more costly
http://thechronicleherald.ca/Business/1172478.html
The Qualifying Rate Link to Bank of Canada...
The race is on...
The new "rules" are upon us and one of the biggest changes is the Qualifying Rate Rule.
To clarify, if your client is taking a 5 year fixed rate (today at 3.89%) then they qualify based on that rate. If they want a fixed term shorter than 5 years or a VRM of any term, they will have to qualify at the Bank of Canada posted 5 year rate available weekly at this link: http://www.bankofcanada.ca/en/rates/interest-look.html and check V121764 (5 year Conventional Mortgage rate) then scroll up and click "Get Rates"
This is a great bookmark to have going forward to ensure that your client qualifies for the term they want.
Upcoming CMHC / Home Trust event
WHEN: March 30th 8:30am - 10:00am
WHO: Home Trust and CMHC
WHAT: Breakfast Meeting featuring Guest Speaker
Jeremie Leblanc, CMHC Account Manager
WHY: To explain and discuss the new Federal Government and
CMHC rules coming into effect
WHERE: Halifax (not downtown), location details to follow, once your RSVP is received.
BONUS: Earn 1 AMP Credit for Attending
RSVP: Please RSVP below!
PLUS! Continental Breakfast and Door Prizes!
EMAIL Michelle at address listed below to RSVP:
Michelle.Johnstone@hometrust.ca
Tuesday, March 9, 2010
New Rules from CMHC
Along with the new mortgage rules that the federal government has put in place, CMHC has made some changes too. Most notibly is the change to the program formerly known as Simplified BFS. Here is the breakdown, straight from CMHC:
Recently, the Government of Canada announced new parameters regarding the application of the government guarantee supporting the Canadian mortgage insurance industry. CMHC will be aligning its 1 to 4 unit product offering to reflect the new Government Guarantee Parameters. CMHC is also making Policy changes to its Self Employed & Second Home Products
Consistent with the parameters, these changes are effective April 19, 2010:
Qualifying Interest Rates:
· For loans with a fixed rate term of less than 5 years and for all variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of the benchmark rate and the contract interest rate.
· 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.
· For loans with a fixed rate term of 5 years or more, the qualifying interest rate is the contract interest rate.
· For mortgages with Multiple Interest Rates (e.g. Multi-Component Mortgages) each component must be qualified using the applicable criteria defined above.
CMHC Refinance
· The maximum amount Canadians can withdraw in refinancing their mortgages is reduced to 90 per cent from 95 per cent of the value of their homes.
CMHC Income Property
· A 20 per cent downpayment is required for small (i.e. 1- to 4-unit) non-owner occupied residential rental properties. Mortgage Loan Insurance covering large rental properties, of 5 or more units, is not impacted.
TDS Formula
· CMHC will also be implementing changes to the calculation of a borrower’s Total Debt Service Ratio where rental income is included in the calculation of household gross annual income.
· Effective April 19, 2010, under the revised calculation, fifty 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.
· Previously 80% of the gross rental income was deducted from the total household debt service cost to calculate the Total Debt Service Ratio.
· Rental income from all other rental properties will be treated the same as other non-salaried income.
CMHC Second Home
· CMHC Second Home product will only be available for 1 unit owner occupied properties.
CMHC Self Employed
· CMHC is reducing the maximum LTV for the Self-Employed Product Without Traditional Third Party Validation of Income.
· For purchase and portability transactions, the maximum LTV is being reduced from 95% to 90%; and for refinance transactions, the maximum LTV is being reduced from 90% to 85%.
· Effective April 9, 2010, self-employed borrowers who have been self-employed in the same business for more than 3 years will not be eligible under CMHC’s Self-Employed Product Without Traditional Third Party Validation of Income.
· Since commissioned income can be relatively easily substantiated, borrowers who earn income through commission will no longer be eligible for the CMHC Self-Employed Product Without Traditional Third Party Validation of Income.
Recently, the Government of Canada announced new parameters regarding the application of the government guarantee supporting the Canadian mortgage insurance industry. CMHC will be aligning its 1 to 4 unit product offering to reflect the new Government Guarantee Parameters. CMHC is also making Policy changes to its Self Employed & Second Home Products
Consistent with the parameters, these changes are effective April 19, 2010:
Qualifying Interest Rates:
· For loans with a fixed rate term of less than 5 years and for all variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of the benchmark rate and the contract interest rate.
· 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.
· For loans with a fixed rate term of 5 years or more, the qualifying interest rate is the contract interest rate.
· For mortgages with Multiple Interest Rates (e.g. Multi-Component Mortgages) each component must be qualified using the applicable criteria defined above.
CMHC Refinance
· The maximum amount Canadians can withdraw in refinancing their mortgages is reduced to 90 per cent from 95 per cent of the value of their homes.
CMHC Income Property
· A 20 per cent downpayment is required for small (i.e. 1- to 4-unit) non-owner occupied residential rental properties. Mortgage Loan Insurance covering large rental properties, of 5 or more units, is not impacted.
TDS Formula
· CMHC will also be implementing changes to the calculation of a borrower’s Total Debt Service Ratio where rental income is included in the calculation of household gross annual income.
· Effective April 19, 2010, under the revised calculation, fifty 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.
· Previously 80% of the gross rental income was deducted from the total household debt service cost to calculate the Total Debt Service Ratio.
· Rental income from all other rental properties will be treated the same as other non-salaried income.
CMHC Second Home
· CMHC Second Home product will only be available for 1 unit owner occupied properties.
CMHC Self Employed
· CMHC is reducing the maximum LTV for the Self-Employed Product Without Traditional Third Party Validation of Income.
· For purchase and portability transactions, the maximum LTV is being reduced from 95% to 90%; and for refinance transactions, the maximum LTV is being reduced from 90% to 85%.
· Effective April 9, 2010, self-employed borrowers who have been self-employed in the same business for more than 3 years will not be eligible under CMHC’s Self-Employed Product Without Traditional Third Party Validation of Income.
· Since commissioned income can be relatively easily substantiated, borrowers who earn income through commission will no longer be eligible for the CMHC Self-Employed Product Without Traditional Third Party Validation of Income.
Friday, March 5, 2010
New look
I have changed the look of my blog, but not the contents. Just wanted to make it "pop" a little more.
Random thoughts for a Friday
Still no clarification to rules
I met with CMHC on Wednesday to go over the new federal guidelines set for April 19th. CMHC, like everyone in the industry, is waiting for clarification on the rules for qualifing rate. Are they using 5 year posted or discounted rates. I get the feeling that they will use discounted and here is why...the banks do have both posted and discounted rates, but most of the broker lenders don't have posted rates (at least not published). So to keep the playing field level, I think they will use discounted rates. We were expecting an answer on this last week, but with the budget coming out yesterday, there was a delay in this. Cross our fingers for the discounted option.
Where are rates headed
We are getting lots of mixed signals on where fixed rates are headed. BMO just dropped their 5 year to 3.75% (not that this makes a difference in the broker world). But on Wednesday the bond yield spread went down again, enough that a rate hike was warranted. I think for the time being, rates will be dictated by market share desired by the lenders, not by spreads and bond yields.
Is being a bank the new way to fund B business
After the August 2007 collaspe of the ABCP (asset backed commercial paper) market, we have seen most of the B lenders disappear. Only my company, Home Trust, survied in Atlantic Canada as a B lender (and expanded into the A world too) and there are only a couple other regional lenders in the rest of the country who survived. So what we have seen is a move by lenders to become banks (or trust companies, which are under the bank act). This move might also make good sense for the insured lenders out there to raise funds to lend on the A side too. Who knows how long the CMB pool will be supported by the federal government. In fact there was speculation that there would be changes to the CMB pool in yesterday's budget. Is being a bank the right move? Time will tell.
I met with CMHC on Wednesday to go over the new federal guidelines set for April 19th. CMHC, like everyone in the industry, is waiting for clarification on the rules for qualifing rate. Are they using 5 year posted or discounted rates. I get the feeling that they will use discounted and here is why...the banks do have both posted and discounted rates, but most of the broker lenders don't have posted rates (at least not published). So to keep the playing field level, I think they will use discounted rates. We were expecting an answer on this last week, but with the budget coming out yesterday, there was a delay in this. Cross our fingers for the discounted option.
Where are rates headed
We are getting lots of mixed signals on where fixed rates are headed. BMO just dropped their 5 year to 3.75% (not that this makes a difference in the broker world). But on Wednesday the bond yield spread went down again, enough that a rate hike was warranted. I think for the time being, rates will be dictated by market share desired by the lenders, not by spreads and bond yields.
Is being a bank the new way to fund B business
After the August 2007 collaspe of the ABCP (asset backed commercial paper) market, we have seen most of the B lenders disappear. Only my company, Home Trust, survied in Atlantic Canada as a B lender (and expanded into the A world too) and there are only a couple other regional lenders in the rest of the country who survived. So what we have seen is a move by lenders to become banks (or trust companies, which are under the bank act). This move might also make good sense for the insured lenders out there to raise funds to lend on the A side too. Who knows how long the CMB pool will be supported by the federal government. In fact there was speculation that there would be changes to the CMB pool in yesterday's budget. Is being a bank the right move? Time will tell.
Wednesday, March 3, 2010
Boc Rate Stays Put...for now
The BoC rate stayed at 0.25% with the announcement yesterday, but it is likely to rise in June. What does that mean for you? First, if prime rate go up even 1% to 3.25%, clients will still get a rate of 2.95% on their current 5 year term (we are offering Prime minus 0.30% on 5 year VRM). Not a bad deal. Here is the technical stuff. Broker lenders usually set their prime rate based on the Bankers Acceptance (BA) rate, which is the rate that banks lend to other banks (right now it is at about 0.30%). They also want to set a "spread" above that BA rate that will pay costs and make some profit. This is reflected in how much below prime the banks set their Variable Rate mortgage (VRM) rates. As prime rate goes up, that spread will go up too, but not at the same pace. In other words, if prime goes to 3.25%, the BA rate micht only have gone up to 0.60% and so the banks can offer VRMs at maybe Prime minus 0.60%.
This won't happen right away, it will take a while. That is why my suggestion for a VRM term is the 3 year. Why? If the scenario above plays out, the increment below prime in 3 years will be well below Prime minus 0.30% so that when the client renews that mortgage in 3 years they could be getting that lower increment. Prime floats, so it is not a variable in this equation, only the amount below prime is a variable. And the data tends to say that we will see larger amounts below prime. Think back to 2 years ago and the VRMs were at Prime minus 0.60% or more. But prime was also around 4%.
This won't happen right away, it will take a while. That is why my suggestion for a VRM term is the 3 year. Why? If the scenario above plays out, the increment below prime in 3 years will be well below Prime minus 0.30% so that when the client renews that mortgage in 3 years they could be getting that lower increment. Prime floats, so it is not a variable in this equation, only the amount below prime is a variable. And the data tends to say that we will see larger amounts below prime. Think back to 2 years ago and the VRMs were at Prime minus 0.60% or more. But prime was also around 4%.
Tuesday, March 2, 2010
CMP Award Nominations
The annual CMP Awards (http://www.mortgagebrokernews.ca/) will be held on April 19th and yours truly has been nominated as a finalist in the BDM of the Year category. Like the oscars, it is an honour just to be nominated. But your votes will help too. Once the nominations are posted on their website, you can vote on the nominees. It would be great to see a winner coming from this region.
Thanks again for your support!
Interest rates will jump soon
I got this article from Halifax's Chronicle Herald today. It points out that rates will rise based on the stronger than expected economy.
Economy rides a big surge
Interest-rate hikes could follow rapid growth in GDP
By JOHN WARD The Canadian Press
Tue. Mar 2 - 4:53 AM
OTTAWA — The Canadian economy boomed back in the fourth quarter of last year, pushing well past expectations and raising the likelihood that the Bank of Canada will start to raise interest rates this summer.
Real gross domestic product grew at an annual rate of five per cent, a full point above what analysts had expected and the largest quarterly increase in nearly a decade, Statistics Canada reported Monday.
The economy was up 1.2 per cent from the third quarter of 2009, the largest such jump since the third quarter of 2000, the agency said. Real GDP, a closely watched inflation-adjusted measure of economic performance, increased 0.6 per cent in December alone, a fourth straight monthly advance.
"Between the structure of the strong fourth-quarter advance . . . and the robust monthly results, this report shouts strength," Bank of Montreal economist Douglas Porter said in a note to clients.
Porter said the data shows that Canada has made a clean break from the recession that began to sink its teeth into the economy in October 2008 and raises the odds that the Bank of Canada will begin to hike interest rates in July — and stay on that path.
The five per cent jump far outstripped a Bank of Canada forecast for 3.3 per cent growth on an annual basis and marked a major shift from the "devastating seven per cent decline in the first quarter of last year," Porter added.
The central bank has its next scheduled announcement on key lending rates today but observers expect its overnight rate will remain where it is for now, at an all-time low of 0.25 per cent.
Peter Buchanan, a senior economist at CIBC World Markets, said while the central bank is unlikely to change rates before June, it will probably tone down its wording slightly today about the negative effects of a rising Canadian dollar and the need for stimulus.
"(But) they’re not really under pressure to make major changes in the wording just yet," he said. "And a change in the actual policy is even less likely at this point."
Buchanan predicted the bank will begin tightening interest rates in the third quarter of 2010, when Canadians can expect a rise in the key lending rate to one per cent.
The Bank of Canada and other central banks, particularly the U.S. Federal Reserve, have kept their key lending rates at, or near, the lowest levels possible in order to reduce the cost of borrowing and stimulate spending.
The central bank had all but declared the recession over last summer — a stance that was hotly debated in the months that followed, particularly because unemployment remained high and GDP increased only minimally.
But the fourth-quarter 2009 numbers are solid evidence that the economy did pull out of recession starting in the third quarter of last year, said Paul Ferley, assistant chief economist at Royal Bank.
"The strong rise at the end of the fourth quarter suggests strong momentum going into the first quarter of 2010."
In addition to the fourth-quarter gains, Statistics Canada also revised its tally for third-quarter 2009 growth to 0.9 per cent from an initial reading of 0.4 per cent.
Ferley said the central bank will likely want to see further evidence of sustained strength, but predicted rates will rise in the second half of the year and hit 1.25 per cent by year end, up a full point.
The quarterly increase was below the 5.9 per cent growth recorded in the U.S. economy, but the Canadian strength was more broadly based — American growth has relied heavily on restocking inventories.
For a third straight quarter, growth in final domestic demand was led by increases in personal expenditures, government expenditures, and investment in residential structures.
Export and import volumes both rose for a second straight quarter, with growth in exports outpacing that of imports in the fourth quarter.
Goods-producing industries rose 2.1 per cent in the fourth quarter, the first quarterly gain since the second quarter of 2007.
Final domestic demand advanced 1.1 per cent as consumer spending continued to grow.
Buchanan said Canada’s performance, especially in the housing sector, was much better that the 4.2 per cent growth economists had expected, adding that he is optimistic about the 3.6 per cent increase in consumer spending.
"I think the other thing that was a surprise was the continued strength of household spending and that’s clearly a positive sign for the economy going forward and I think it shows that Canadian consumers . . . are in a bit better shape than their U.S. counterparts," he said.
Economy rides a big surge
Interest-rate hikes could follow rapid growth in GDP
By JOHN WARD The Canadian Press
Tue. Mar 2 - 4:53 AM
OTTAWA — The Canadian economy boomed back in the fourth quarter of last year, pushing well past expectations and raising the likelihood that the Bank of Canada will start to raise interest rates this summer.
Real gross domestic product grew at an annual rate of five per cent, a full point above what analysts had expected and the largest quarterly increase in nearly a decade, Statistics Canada reported Monday.
The economy was up 1.2 per cent from the third quarter of 2009, the largest such jump since the third quarter of 2000, the agency said. Real GDP, a closely watched inflation-adjusted measure of economic performance, increased 0.6 per cent in December alone, a fourth straight monthly advance.
"Between the structure of the strong fourth-quarter advance . . . and the robust monthly results, this report shouts strength," Bank of Montreal economist Douglas Porter said in a note to clients.
Porter said the data shows that Canada has made a clean break from the recession that began to sink its teeth into the economy in October 2008 and raises the odds that the Bank of Canada will begin to hike interest rates in July — and stay on that path.
The five per cent jump far outstripped a Bank of Canada forecast for 3.3 per cent growth on an annual basis and marked a major shift from the "devastating seven per cent decline in the first quarter of last year," Porter added.
The central bank has its next scheduled announcement on key lending rates today but observers expect its overnight rate will remain where it is for now, at an all-time low of 0.25 per cent.
Peter Buchanan, a senior economist at CIBC World Markets, said while the central bank is unlikely to change rates before June, it will probably tone down its wording slightly today about the negative effects of a rising Canadian dollar and the need for stimulus.
"(But) they’re not really under pressure to make major changes in the wording just yet," he said. "And a change in the actual policy is even less likely at this point."
Buchanan predicted the bank will begin tightening interest rates in the third quarter of 2010, when Canadians can expect a rise in the key lending rate to one per cent.
The Bank of Canada and other central banks, particularly the U.S. Federal Reserve, have kept their key lending rates at, or near, the lowest levels possible in order to reduce the cost of borrowing and stimulate spending.
The central bank had all but declared the recession over last summer — a stance that was hotly debated in the months that followed, particularly because unemployment remained high and GDP increased only minimally.
But the fourth-quarter 2009 numbers are solid evidence that the economy did pull out of recession starting in the third quarter of last year, said Paul Ferley, assistant chief economist at Royal Bank.
"The strong rise at the end of the fourth quarter suggests strong momentum going into the first quarter of 2010."
In addition to the fourth-quarter gains, Statistics Canada also revised its tally for third-quarter 2009 growth to 0.9 per cent from an initial reading of 0.4 per cent.
Ferley said the central bank will likely want to see further evidence of sustained strength, but predicted rates will rise in the second half of the year and hit 1.25 per cent by year end, up a full point.
The quarterly increase was below the 5.9 per cent growth recorded in the U.S. economy, but the Canadian strength was more broadly based — American growth has relied heavily on restocking inventories.
For a third straight quarter, growth in final domestic demand was led by increases in personal expenditures, government expenditures, and investment in residential structures.
Export and import volumes both rose for a second straight quarter, with growth in exports outpacing that of imports in the fourth quarter.
Goods-producing industries rose 2.1 per cent in the fourth quarter, the first quarterly gain since the second quarter of 2007.
Final domestic demand advanced 1.1 per cent as consumer spending continued to grow.
Buchanan said Canada’s performance, especially in the housing sector, was much better that the 4.2 per cent growth economists had expected, adding that he is optimistic about the 3.6 per cent increase in consumer spending.
"I think the other thing that was a surprise was the continued strength of household spending and that’s clearly a positive sign for the economy going forward and I think it shows that Canadian consumers . . . are in a bit better shape than their U.S. counterparts," he said.
Monday, March 1, 2010
Are the new mortgage rules all that bad?
The new mortgage rules are coming April 19th and the industry is a buzz about the changes and how they will affect business. Let's look at the changes:
1) refinances to 90% max - if we are to assume that there is a possible housing bubble, then this change is not a bad thing. It will keep the folks who are financing their lifestyle with the equity in their homes from continuing to rack up credit and refinance it to the detriment of the equity in their homes.
2) using the 5 year rate to qualify Variable Rate Mortgages - again, not a bad thing. Prime rate is expected to rise this year, that is almost guaranteed. If clients are not prepared for this, we will see lots of foreclosures. This is good protection for clients. The question remains, will it be discounted or posted rates used in the qualification calculation?
3) rentals, max 80% LTV - this is the most questionable of the three changes. There is lots of debate on this one. This may go too far, but, once again, if we are assuming that there is a housing bubble in Canada, the last thing we need is speculation on rental properties driving that bubble to burst.
Only time will tell if these changes will do what they are intended to do. And of course, hindsight will be 20/20!
1) refinances to 90% max - if we are to assume that there is a possible housing bubble, then this change is not a bad thing. It will keep the folks who are financing their lifestyle with the equity in their homes from continuing to rack up credit and refinance it to the detriment of the equity in their homes.
2) using the 5 year rate to qualify Variable Rate Mortgages - again, not a bad thing. Prime rate is expected to rise this year, that is almost guaranteed. If clients are not prepared for this, we will see lots of foreclosures. This is good protection for clients. The question remains, will it be discounted or posted rates used in the qualification calculation?
3) rentals, max 80% LTV - this is the most questionable of the three changes. There is lots of debate on this one. This may go too far, but, once again, if we are assuming that there is a housing bubble in Canada, the last thing we need is speculation on rental properties driving that bubble to burst.
Only time will tell if these changes will do what they are intended to do. And of course, hindsight will be 20/20!
Home Trust is my new Home - again
I wanted to give a quick update that I started back at Home Trust in Halifax as a BDM in Feb./10. After a 4 year absense, I have come back to my Home and where I started as a BDM.
I am looking forward to once again representing Home Trust here in Atlantic.
I am looking forward to once again representing Home Trust here in Atlantic.
Tuesday, January 12, 2010
New Year, Same Questions
There has been lots of chatter about where fixed rates are headed since the start of the year. I thought now would be a good time to comment on this. I track bond yields and spreads every day and everything that I see is pointing to rates going up. But that hasn't happened...yet. Why? There are a lot of reasons. Most "monoline" lenders are dependant on bond yields to price their fixed rate mortgages, however banks are not subject to the same considerations. They have deposit funds to lend against and the bank are very flush with those deposits right now. So even though it may make sense from the spreads that rates go up, competition with the banks is keeping rates down. The banks don't seem to be in any rush to raise rates and most of the monoline lenders don't want to be the first to raise rates and price themselves out of the market. If the banks were to make a move to increase rates, the monoline lenders are going to be hard on their heels doing the same. I don't think anyone wants to be labelled as the "bad guy" who raised rates first (even though no one will remember who fired the first shot in two weeks anyway). But rates will go up, eventually. An increase of 25 bps is not going to kill the housing market. Rates of 4.25% are excellent. The average interest rate since 1951 in Canada has been 9%. But there still a lot of fence sitters out there waiting for proof that we have hit the lowest point in order to make a move. Now is that time.
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