Great article to share with clients and realtors about the great shape of the Atlantic Market, especially St. John’s.
Transmitted by CNW Group on : September 9, 2009 05:00
Steady improvement for housing affordability in Atlantic Canada: RBC Economics
TORONTO, Sept. 9 /CNW/ - Housing affordability continues to improve inAtlantic Canada, although at a more moderate pace than the rest of thecountry, according to the latest housing report released today by RBCEconomics.
"The rebound in Atlantic Canada has been a more subdued affair than inmost other parts of the country, but the downturn was also more restrained here," noted Robert Hogue, senior economist, RBC. "Overall, the East Coast enjoys relatively attractive affordability levels, which should supporthousing activity in the period ahead."
RBC's Affordability measures in the Atlantic Provinces have improvednoticeably since early last year, with homeownership costs falling between 0.4and 0.8 percentage points in the second quarter. Sales of existing homes climbed more than 18 per cent since January and there has also been a moderate run-up in property values.
The report noted that St. John's continues to be among the most vibrant housing markets in Canada - although the pace has cooled in the past few months - while Halifax, Saint John and Charlottetown are displaying fairlybalanced conditions.
RBC's Affordability measure for a detached bungalow for Canada's largestcities is as follows: Vancouver 63.4 per cent, Toronto 46.5 per cent, Ottawa38.6 per cent, Montreal 37.3 per cent and Calgary 35.7 per cent.
The report also looked at mortgage carrying costs relative to incomes for a broader sampling of cities across the country, including St. John's, Halifax, Saint John and Charlottetown. For these cities, RBC has used a narrower measure of housing affordability that only takes mortgage payments relative to income into account.
The property benchmark for the Housing Affordability measure, which RBC has compiled since 1985, is based on the costs of owning a detached bungalow.Alternative housing types are also presented including a standard two-storeyhome, a standard townhouse and a standard condo. The higher the reading, themore costly it is to afford a home. For example, an Affordability reading of50 per cent means that homeownership costs, including mortgage payments,utilities and property taxes, take up 50 per cent of a typical household'smonthly pre-tax income. Highlights from across Canada:
- British Columbia: In the second quarter, housing affordability in B.C. eased once again, further extending the downward trend since the start of 2008, although homeownership costs are still significantly above long-term levels. Sales of existing homes surged by more than 125 per cent from their cyclical trough early this year. Market conditions have tightened and there has been some firming of prices.
- Alberta: The biggest cumulative drop in the history of RBC Affordability measures in Alberta deepened further in the second quarter, falling to levels not seen since before the housing boom. Existing home sales soared by more than 60 per cent between April and July, fully reversing last year's slide. Tightening market conditions should set the stage for some property value appreciation in the near future.
- Saskatchewan: Affordability has improved considerably in Saskatchewan since early last year, but homeownership costs remain above long-term averages. Regardless, sales of existing homes rebounded smartly, rising by more than 50 per cent since their lows in March. If this trend is sustained, property prices can be expected to eventually heat up as well.
- Manitoba: The notable easing of homeownership costs in the past year has fully repaired affordability in Manitoba, compared to historical averages. Resale activity ramped up during spring and summer and property prices generally maintained their steady upward trend, supported by relatively tight market conditions.
- Ontario: Solid improvements in affordability in Ontario have supported a strong upturn in the market in recent months. All affordability measures are now below historic averages, indicating that homeownership costs are at attractive levels in the province. The general tone of the market is generally positive, but local demand continues to be held back by the tough economic prospects many communities in Ontario continue to face.
- Quebec: Housing affordability improved once again in the second quarter in Quebec, prolonging a trend that has been ongoing during the past year. Sales of existing homes surged by more than 40 per cent over the cyclical low reached mid-winter. With a more upbeat market sentiment and tightening demand-supply conditions pushing property values upward, the Quebec housing market appears to be back on track.
The full RBC Housing Affordability report is available online, as of 8a.m. EDT today at www.rbc.com/economics/market/pdf/house.pdf.
Thursday, August 13, 2009
This article is mainly for originators in NS, but it is of interest to everyone. The NS Government is rolling out a tax rebate for new construction homes. This is on the heels of the new CMHC stats that show new home starts are down 30%. Good timing me thinks. The article is from today’s Halifax Chronicle Herald.
NDP rolls out rebate for new houses
By DAVID JACKSON Provincial Reporter Thu. Aug 13 - 6:12 AM
Home builders and homebuyers stand to benefit from a new tax break, Premier Darrell Dexter said Wednesday.Buyers of newly constructed homes can now apply for a 50 per cent rebate on the provincial portion of the harmonized sales tax.It’s a program the Nova Scotia Home Builders’ Association suggested to the three major political parties before the spring election.The NDP put the program in its platform, but with a start date of May 1. The government has changed it to Jan. 1, at the association’s urging. A maximum of 1,500 rebates will be offered.To qualify, buyers of new homes must have a municipal building permit dated on or after Jan. 1, 2009, and before April 1, 2010. The home must be the primary residence and construction has to be completed between Jan. 1, 2009, and March 31, 2010, or the purchase closed by March 31, 2010.Cottages and income properties don’t qualify.Mr. Dexter said the government changed the start date because the association was concerned that homes started between January and May might not have sold because the tax break came later in the year.“They indicated that they had been working through the winter, trying to keep people employed, so . . . there were a large number of building permits between Jan. 1 and the May 1 date. The result of that, of course . . . potentially, would have been to strand that inventory," Mr. Dexter said.Speaking at a Dartmouth townhouse construction site, Mr. Dexter said there were about 600 permits issued in the province between January and May, although he didn’t know how many homes were under construction. Opposition leaders said the tax incentive sounds more like a reward.“I don’t see it stimulating any activity that otherwise wouldn’t have happened," Liberal Leader Stephen McNeil said.Mr. McNeil also said he is skeptical whether a $7,000 benefit will be enough to entice people making a $200,000 or $300,000 purchase. And he wondered whether home builders would increase their prices, negating the benefit of the tax break to the buyer.Mr. Dexter said buyers will negotiate their prices, and he thinks competition will take care of Mr. McNeil’s concern.“There are a lot of companies out there that are really looking to get work, so I expect there to be a very competitive market, and that this rebate will ultimately benefit those who are intended to benefit," he said.Interim Tory leader Karen Casey said people now looking at buying a new home may be concerned that the 1,500 rebates will be gone by the time they apply.Service Nova Scotia Minister Ramona Jennex said at the news conference that the website www.getyourrebate.ca will track the number of applicants and rebates.Ms. Casey said the original intent of the program — to spur economic activity and keep tradespeople working — was good, but that doesn’t seem to be happening.“I consider this now a reward, rather than an incentive," she said.Andrew Holley, president of the home builders association, said he would have preferred the qualifying date go back to October, but he was still pleased with the new program.“We didn’t get everything that we wanted, but it was a good compromise," Mr. Holley said.Mr. Dexter said the NDP did its own due diligence on the proposal and decided the province could do it.The province would forgo $10.5million if the maximum number of people gets the top rebate.The maximum — $7,000 — kicks in for homes costing $175,000 or more.“I don’t think there’s anything wrong with listening to the stakeholders who are involved in the industry, and thereby turning the wheels of the economy," Mr. Dexter said.“That’s really what we’re here for, to try and make sure that we get through what is a very difficult economic time, try to recognize the importance of the residential construction sector and make sure that we keep tradespeople working."Mr. Holley said more than 20,000 people work in the residential construction industry across the province, while new housing accounts for more than $800 million in annual revenue.A Canada Mortgage and Housing Corp. report released this week said housing starts, which include apartment buildings, were down close to 30 per cent in the province during the spring and early summer. In Halifax, the decline was 44 per cent.Housing sales, provincewide, were also down by 14.5 per cent when compared to the same period last year.
More information is available at www.getyourrebate.ca, or by calling 424-5200 in the Halifax region or toll-free 1-800-670-4357.(djackson@herald.ca)
NDP rolls out rebate for new houses
By DAVID JACKSON Provincial Reporter Thu. Aug 13 - 6:12 AM
Home builders and homebuyers stand to benefit from a new tax break, Premier Darrell Dexter said Wednesday.Buyers of newly constructed homes can now apply for a 50 per cent rebate on the provincial portion of the harmonized sales tax.It’s a program the Nova Scotia Home Builders’ Association suggested to the three major political parties before the spring election.The NDP put the program in its platform, but with a start date of May 1. The government has changed it to Jan. 1, at the association’s urging. A maximum of 1,500 rebates will be offered.To qualify, buyers of new homes must have a municipal building permit dated on or after Jan. 1, 2009, and before April 1, 2010. The home must be the primary residence and construction has to be completed between Jan. 1, 2009, and March 31, 2010, or the purchase closed by March 31, 2010.Cottages and income properties don’t qualify.Mr. Dexter said the government changed the start date because the association was concerned that homes started between January and May might not have sold because the tax break came later in the year.“They indicated that they had been working through the winter, trying to keep people employed, so . . . there were a large number of building permits between Jan. 1 and the May 1 date. The result of that, of course . . . potentially, would have been to strand that inventory," Mr. Dexter said.Speaking at a Dartmouth townhouse construction site, Mr. Dexter said there were about 600 permits issued in the province between January and May, although he didn’t know how many homes were under construction. Opposition leaders said the tax incentive sounds more like a reward.“I don’t see it stimulating any activity that otherwise wouldn’t have happened," Liberal Leader Stephen McNeil said.Mr. McNeil also said he is skeptical whether a $7,000 benefit will be enough to entice people making a $200,000 or $300,000 purchase. And he wondered whether home builders would increase their prices, negating the benefit of the tax break to the buyer.Mr. Dexter said buyers will negotiate their prices, and he thinks competition will take care of Mr. McNeil’s concern.“There are a lot of companies out there that are really looking to get work, so I expect there to be a very competitive market, and that this rebate will ultimately benefit those who are intended to benefit," he said.Interim Tory leader Karen Casey said people now looking at buying a new home may be concerned that the 1,500 rebates will be gone by the time they apply.Service Nova Scotia Minister Ramona Jennex said at the news conference that the website www.getyourrebate.ca will track the number of applicants and rebates.Ms. Casey said the original intent of the program — to spur economic activity and keep tradespeople working — was good, but that doesn’t seem to be happening.“I consider this now a reward, rather than an incentive," she said.Andrew Holley, president of the home builders association, said he would have preferred the qualifying date go back to October, but he was still pleased with the new program.“We didn’t get everything that we wanted, but it was a good compromise," Mr. Holley said.Mr. Dexter said the NDP did its own due diligence on the proposal and decided the province could do it.The province would forgo $10.5million if the maximum number of people gets the top rebate.The maximum — $7,000 — kicks in for homes costing $175,000 or more.“I don’t think there’s anything wrong with listening to the stakeholders who are involved in the industry, and thereby turning the wheels of the economy," Mr. Dexter said.“That’s really what we’re here for, to try and make sure that we get through what is a very difficult economic time, try to recognize the importance of the residential construction sector and make sure that we keep tradespeople working."Mr. Holley said more than 20,000 people work in the residential construction industry across the province, while new housing accounts for more than $800 million in annual revenue.A Canada Mortgage and Housing Corp. report released this week said housing starts, which include apartment buildings, were down close to 30 per cent in the province during the spring and early summer. In Halifax, the decline was 44 per cent.Housing sales, provincewide, were also down by 14.5 per cent when compared to the same period last year.
More information is available at www.getyourrebate.ca, or by calling 424-5200 in the Halifax region or toll-free 1-800-670-4357.(djackson@herald.ca)
Friday, August 7, 2009
How are HELOCs affecting credit scores
Interesting article from Canadian Mortgage Trends today about how some HELOC mortgages are being reported to Equifax and changing the clients credit score. I am checking to see if our HELOCs were reported (but I don’t think they were).
August 06, 2009
HELOCs & Credit Scores
Lots of people are now choosing HELOCs for their next mortgage. HELOCs offer features like:
Fully open terms
Interest offsetting (where positive savings or chequing balances reduce your debt and interest)
Re-advancebility (i.e. the ability to re-borrow after you make principle payments)
Multiple segregated sub-accounts (to separate different types of borrowing)
Interest-only payments
What many don’t realize is that choosing a HELOC instead of a mortgage can have a potentially adverse effect on their credit score. That’s because HELOCs are often reported to credit bureaus while mortgages are generally not. (In cases where mortgages are reported, sources at Equifax, the nation’s largest credit bureau, say they don’t harm your score).
We recently came across a case where a person’s credit score dropped 80 points after putting their $300,000 mortgage in a HELOC.
Causation is hard to quantify because Equifax doesn’t disclose its scoring algorithms, but here are the facts of this particular case:
The individual’s score before the HELOC was in the low 700’s. Following the HELOC being reported to the credit bureau, the score fell below 630.
There were no other major differences on this individual’s two credit reports (i.e. the report before the HELOC and after)
After the HELOC closed, an explanatory note appeared on the person’s credit report stating that his balances were too high in relation to his credit limits.
The lender reported the HELOC balance as being 99% of the HELOC limit. (Which is common when the mortgage amount and HELOC limit are similar)
Given that Equifax bases 30% of its Beacon scores on credit utilization and 15% on account age, a brand new $300,000 HELOC, at 99% of its limit, is a big potential negative.
Now, an 80 point drop is not catastrophic to some people, but to many others it can be. 80 points is over 10% of the average Canadian’s score. A drop like that can cause you to no longer qualify for financing on other properties, for financing on consumer loans, for credit cards, and even for getting a job (some employers check credit before hiring).
At the very least, it’s something to keep in mind when comparing lines of credit. There are a handful of lenders who do not report HELOCs to the bureaus. If you’re concerned about your score, you’d do well to consult a mortgage professional and consider those options.
Posted at 06:18 PM
August 06, 2009
HELOCs & Credit Scores
Lots of people are now choosing HELOCs for their next mortgage. HELOCs offer features like:
Fully open terms
Interest offsetting (where positive savings or chequing balances reduce your debt and interest)
Re-advancebility (i.e. the ability to re-borrow after you make principle payments)
Multiple segregated sub-accounts (to separate different types of borrowing)
Interest-only payments
What many don’t realize is that choosing a HELOC instead of a mortgage can have a potentially adverse effect on their credit score. That’s because HELOCs are often reported to credit bureaus while mortgages are generally not. (In cases where mortgages are reported, sources at Equifax, the nation’s largest credit bureau, say they don’t harm your score).
We recently came across a case where a person’s credit score dropped 80 points after putting their $300,000 mortgage in a HELOC.
Causation is hard to quantify because Equifax doesn’t disclose its scoring algorithms, but here are the facts of this particular case:
The individual’s score before the HELOC was in the low 700’s. Following the HELOC being reported to the credit bureau, the score fell below 630.
There were no other major differences on this individual’s two credit reports (i.e. the report before the HELOC and after)
After the HELOC closed, an explanatory note appeared on the person’s credit report stating that his balances were too high in relation to his credit limits.
The lender reported the HELOC balance as being 99% of the HELOC limit. (Which is common when the mortgage amount and HELOC limit are similar)
Given that Equifax bases 30% of its Beacon scores on credit utilization and 15% on account age, a brand new $300,000 HELOC, at 99% of its limit, is a big potential negative.
Now, an 80 point drop is not catastrophic to some people, but to many others it can be. 80 points is over 10% of the average Canadian’s score. A drop like that can cause you to no longer qualify for financing on other properties, for financing on consumer loans, for credit cards, and even for getting a job (some employers check credit before hiring).
At the very least, it’s something to keep in mind when comparing lines of credit. There are a handful of lenders who do not report HELOCs to the bureaus. If you’re concerned about your score, you’d do well to consult a mortgage professional and consider those options.
Posted at 06:18 PM
Friday, July 24, 2009
The Recession is Over...
BoC Governor Mark Carney has indicated that the recession is over, with conditions. Jobless numbers will still be affected and consumers (including real estate buyers) have to get the message and start spending. Here is the article from Halifax’s Chronicle Herald.
BoC: Recession over
Economy will grow this summer but job growth will lag, Carney says
By JULIAN BELTRAME The Canadian PressFri. Jul 24 - 4:46 AM
OTTAWA — The Bank of Canada is declaring the recession essentially over, saying Canada’s economy will begin growing this summer after nine months of stagnation and lead most of the industrialized world next year.
The rosy assessment — despite numerous cautions and caveats — rippled through the markets Thursday, lifting the loonie and many stocks.
"We believe the economy will grow this quarter," bank governor Mark Carney told a news conference.
"Things are unfolding a little faster in terms of the recovery in (consumer and business) confidence and financial conditions."
However, experts say the renewed growth after three quarters of economic shrinkage — two straight declining quarters is the technical definition of a recession — won’t lead to job growth until much later, when companies regain confidence and begin hiring again.
Earlier, the bank had dropped its April call for a one per cent contraction this quarter and now says the economy will instead expand by 1.3 per cent annualized.
That will be followed by a three per cent advance in the last three months of this year, and three per cent growth next year.
But Carney also issued a caution that recovery "is not a foregone conclusion," and that the economy remains dependent on massive government stimulus and his own conditional pledge to keep the policy interest rate at the historic low of 0.25 per cent until mid-2010.
Without such interventions in Canada and around the world, economies would still be spiraling downwards, he said.
Even with recent improvements, Carney said the part of the economy that impacts Canadians most directly — jobs — will continue to deteriorate even as output perks up. Economists say that’s because employers are unlikely to take on new workers until they are certain demand will last. "It is going to be a tough, long, hard slog to get this country back to full employment and Mr. Carney is hinting at that we are not out of the woods yet," agreed, Liberal Leader Michael Ignatieff, repeating his call for expansion of employment insurance benefits."
Statistics Canada calculates 370,000 jobs have disappeared since October, and some economists believe more than 500,000 will be lost before labour markets begin to recover.
While more optimistic than most forecasts, Carney concedes the bounce-back is modest by historical standards. In fact, he does not have the economy returning to full capacity until mid-2011.
Currently, the bank estimates the Canadian economy is operating 3.5 per cent below capacity.
Still, the markets chose to see the bright side of Carney’s new outlook.
The Toronto stock market surged almost 200 points late morning, while the Canadian dollar gained a full cent against the greenback and peaked above 92 cents US.
The latter result won’t please the central banker, who again voiced his concern that a stubbornly high-priced loonie will cut into the recovery because it will price some Canadian exports out of world markets.
Many economists doubt that the central bank would intervene to reign in the loonie, however, although the bank’s governing council has not ruled out action.
’Things are unfolding a little faster in terms of the recovery . . .’
MARK CARNEY Bank of Canada governor
BoC: Recession over
Economy will grow this summer but job growth will lag, Carney says
By JULIAN BELTRAME The Canadian PressFri. Jul 24 - 4:46 AM
OTTAWA — The Bank of Canada is declaring the recession essentially over, saying Canada’s economy will begin growing this summer after nine months of stagnation and lead most of the industrialized world next year.
The rosy assessment — despite numerous cautions and caveats — rippled through the markets Thursday, lifting the loonie and many stocks.
"We believe the economy will grow this quarter," bank governor Mark Carney told a news conference.
"Things are unfolding a little faster in terms of the recovery in (consumer and business) confidence and financial conditions."
However, experts say the renewed growth after three quarters of economic shrinkage — two straight declining quarters is the technical definition of a recession — won’t lead to job growth until much later, when companies regain confidence and begin hiring again.
Earlier, the bank had dropped its April call for a one per cent contraction this quarter and now says the economy will instead expand by 1.3 per cent annualized.
That will be followed by a three per cent advance in the last three months of this year, and three per cent growth next year.
But Carney also issued a caution that recovery "is not a foregone conclusion," and that the economy remains dependent on massive government stimulus and his own conditional pledge to keep the policy interest rate at the historic low of 0.25 per cent until mid-2010.
Without such interventions in Canada and around the world, economies would still be spiraling downwards, he said.
Even with recent improvements, Carney said the part of the economy that impacts Canadians most directly — jobs — will continue to deteriorate even as output perks up. Economists say that’s because employers are unlikely to take on new workers until they are certain demand will last. "It is going to be a tough, long, hard slog to get this country back to full employment and Mr. Carney is hinting at that we are not out of the woods yet," agreed, Liberal Leader Michael Ignatieff, repeating his call for expansion of employment insurance benefits."
Statistics Canada calculates 370,000 jobs have disappeared since October, and some economists believe more than 500,000 will be lost before labour markets begin to recover.
While more optimistic than most forecasts, Carney concedes the bounce-back is modest by historical standards. In fact, he does not have the economy returning to full capacity until mid-2011.
Currently, the bank estimates the Canadian economy is operating 3.5 per cent below capacity.
Still, the markets chose to see the bright side of Carney’s new outlook.
The Toronto stock market surged almost 200 points late morning, while the Canadian dollar gained a full cent against the greenback and peaked above 92 cents US.
The latter result won’t please the central banker, who again voiced his concern that a stubbornly high-priced loonie will cut into the recovery because it will price some Canadian exports out of world markets.
Many economists doubt that the central bank would intervene to reign in the loonie, however, although the bank’s governing council has not ruled out action.
’Things are unfolding a little faster in terms of the recovery . . .’
MARK CARNEY Bank of Canada governor
Thursday, July 23, 2009
Rate - how important is it? Really?
Lots of info in this one. First off, I recently attended the CMHC 2009 Broker Survey meeting in Halifax and got some great information to share (some of it about rates is very surprising). And to back it up, I got an article from Canadian Mortgage Trends website that talks to the point of Best Deal over Best Rate. Enjoy.
CMHC 2009 Customer Survey
· Brokers market share
o 44% of first time buyers
o 38% of all purchasers (nationally and in Atlantic Canada)
· 24% of all mortgage transactions are done by brokers
o 16% are done by personal bankers
o 13% are done by general loans officers
o Another 7% done by bank managers/senior staff
o That’s 36% being done in the bank and another 33% done by bank’s “sales force” staff
· 90% of all renewers stay with their original lender (this speaks volumes about trailer fees offered by Merix – why swim against the current?)
o 66% of all first time home buyers stay with their original lender
· What is the customer’s main reason for remaining with their original lender?
Reason Renewers Refinancers 1st time buyers Repeat buyers
Rate 45% 40% 52% 50%
Service related 33% 32% 26% 26%
Convenience 20% 17% 16% 13%
· This shows that if the client is staying with their original lender, it is usually rate/deal related, so trying to move a client for a better rate doesn’t seem to work
· And if they are switching lenders due to rate, how much of a difference does it take for them to move. You might be surprised by this:
Main Reason Renewers Refinancers 1st time buyers Repeat buyers
25 bps or less 7% 3% 5% 8%
25 to 50 bps 17% 10% 23% 21%
50 to 75 bps 8% 18% 22% 15%
75 to 100 bps 16% 13% 8% 8%
100 to 200 bps 23% 22% 21% 29%
200+ bps 24% 31% 13% 14%
· This shows that a rate difference below 25 BPS is really not that important to the clients.
· Then what drives a client’s satisfaction, if it is not just rate? Of all segments surveyed, 32% said “Best Deal” was the key driver of satisfaction. 25% said “Rate”, 20% said “Good Relationship” and 13% said “Good Service”.
These are great points to guide you as to where to focus in your business. Get the client the “Best Deal”, not just the best rate, but keep the rate in the ballpark (within 25 BPS of the others). And use a lender who will pay you after renewal (now who does that, oh yeah – MERIX), as 90% of your customers are staying with their original lender!
July 22, 2009
The Best Mortgage Rate for You
The Mortgage Centre’s rate page has a very sage title:
“Is it the best rate, or the best rate for you?”
Its point being: A lot of websites claim to have the best rates, but there’s always more to the story.
For one thing, probably 95% of “best rate” claims are false. More importantly, as the Mortgage Centre rightly suggests, the lowest rate is not necessarily the best rate for you.
Unless you know who the quoted lender is, and know that lender’s criteria for credit score, debt ratio, property type, loan-to-value, income, etc., there’s no way to tell on your own if you meet their standards. (Albeit, someone proving $100,000 income the past few years, putting down 20% on a marketable home, with a 35% TDS, and an 720 beacon score, can feel confident about qualifying at most lenders [just as an example]).
Back to the point, there are lots of qualification hoops to jump through with some lenders—especially the lowest cost lenders.
Moreover, there are various economic dangers strewn about the fine print of many mortgages. Examples include:
Zero prepayment privileges
12-month interest penalties
IRD penalties based on bond yields
Fully closed terms (no way out until maturity)
Ultra-short rate-hold periods
No pre-approvals
No portability
Other annoyances:
Horrible post-closing service
Slow approval times
No online access
Unexpected fees
It is the job of mortgage planners to filter the plethora of mortgages and present the best overall value to you. When determining overall value, rate is the #1 criteria, but only after a mortgage is determined to be suitable.
There’s no downside to good advice, so get as much of it as you can. As Canadian Mortgage Professional very wisely wrote: “Homebuyers who ask mortgage professionals 'what is your best rate?' are not going to be well served by a mortgage professional that simply responds with a number.”
Posted at 12:49 AM (www.canadianmortgagetrends.com)
CMHC 2009 Customer Survey
· Brokers market share
o 44% of first time buyers
o 38% of all purchasers (nationally and in Atlantic Canada)
· 24% of all mortgage transactions are done by brokers
o 16% are done by personal bankers
o 13% are done by general loans officers
o Another 7% done by bank managers/senior staff
o That’s 36% being done in the bank and another 33% done by bank’s “sales force” staff
· 90% of all renewers stay with their original lender (this speaks volumes about trailer fees offered by Merix – why swim against the current?)
o 66% of all first time home buyers stay with their original lender
· What is the customer’s main reason for remaining with their original lender?
Reason Renewers Refinancers 1st time buyers Repeat buyers
Rate 45% 40% 52% 50%
Service related 33% 32% 26% 26%
Convenience 20% 17% 16% 13%
· This shows that if the client is staying with their original lender, it is usually rate/deal related, so trying to move a client for a better rate doesn’t seem to work
· And if they are switching lenders due to rate, how much of a difference does it take for them to move. You might be surprised by this:
Main Reason Renewers Refinancers 1st time buyers Repeat buyers
25 bps or less 7% 3% 5% 8%
25 to 50 bps 17% 10% 23% 21%
50 to 75 bps 8% 18% 22% 15%
75 to 100 bps 16% 13% 8% 8%
100 to 200 bps 23% 22% 21% 29%
200+ bps 24% 31% 13% 14%
· This shows that a rate difference below 25 BPS is really not that important to the clients.
· Then what drives a client’s satisfaction, if it is not just rate? Of all segments surveyed, 32% said “Best Deal” was the key driver of satisfaction. 25% said “Rate”, 20% said “Good Relationship” and 13% said “Good Service”.
These are great points to guide you as to where to focus in your business. Get the client the “Best Deal”, not just the best rate, but keep the rate in the ballpark (within 25 BPS of the others). And use a lender who will pay you after renewal (now who does that, oh yeah – MERIX), as 90% of your customers are staying with their original lender!
July 22, 2009
The Best Mortgage Rate for You
The Mortgage Centre’s rate page has a very sage title:
“Is it the best rate, or the best rate for you?”
Its point being: A lot of websites claim to have the best rates, but there’s always more to the story.
For one thing, probably 95% of “best rate” claims are false. More importantly, as the Mortgage Centre rightly suggests, the lowest rate is not necessarily the best rate for you.
Unless you know who the quoted lender is, and know that lender’s criteria for credit score, debt ratio, property type, loan-to-value, income, etc., there’s no way to tell on your own if you meet their standards. (Albeit, someone proving $100,000 income the past few years, putting down 20% on a marketable home, with a 35% TDS, and an 720 beacon score, can feel confident about qualifying at most lenders [just as an example]).
Back to the point, there are lots of qualification hoops to jump through with some lenders—especially the lowest cost lenders.
Moreover, there are various economic dangers strewn about the fine print of many mortgages. Examples include:
Zero prepayment privileges
12-month interest penalties
IRD penalties based on bond yields
Fully closed terms (no way out until maturity)
Ultra-short rate-hold periods
No pre-approvals
No portability
Other annoyances:
Horrible post-closing service
Slow approval times
No online access
Unexpected fees
It is the job of mortgage planners to filter the plethora of mortgages and present the best overall value to you. When determining overall value, rate is the #1 criteria, but only after a mortgage is determined to be suitable.
There’s no downside to good advice, so get as much of it as you can. As Canadian Mortgage Professional very wisely wrote: “Homebuyers who ask mortgage professionals 'what is your best rate?' are not going to be well served by a mortgage professional that simply responds with a number.”
Posted at 12:49 AM (www.canadianmortgagetrends.com)
Wednesday, July 15, 2009
Where is the 5 year rate going?
Here is an interesting article from Canadian Mortgage Trends on where the 5 year rate is headed. They say that lenders want to make sure the lower bond yields are not a “flash in the pan”, but with the bond yield going up to 2.52% and spreads falling below 2% today, I submit that we are going to continue to see that yo-yo effect on bond yields and that will keep the lenders from committing to a rate drop (based on bond yields) until there is some more stability on the spreads.
July 14, 2009
Will 5-Year Mortgage Rates Fall Further?
Banks last raised mortgage rates on June 9, when the 5-year bond yield was at 2.68%.
Since then, the 5-year yield (which guides fixed mortgage pricing) has fallen to 2.44%, but bank rates have not budged.
BMO economist, Doug Porter, told the Toronto Star it’s because banks "want to be convinced that it is not a flash in the pan and that any retreat in yields is sustained."
He says: "I believe that we are probably not too far away from that point. It might take a little more of a deeper rally (in bond prices) to make it completely convincing."
The often quoted CIBC economist, Benjamin Tal, thinks yields could fall another 0.05% to 0.10%, but any drop in fixed-rates will be short-lived. "By the end of the year, we'll start seeing rates rising," he says.
If rates do drop another 0.10%, it would translate into a $5.50 monthly payment savings for every $100,000 of mortgage. That’s a total savings of $478 over five years, assuming a 25-year amortization and typical fixed rates.
But remember, trying to time bond and mortgage rates is financially hazardous. While you’re waiting, rates can move the wrong way—quickly.
You’re usually better served by focusing on factors that can dwarf a 0.10% rate savings, like finding a mortgage with the optimal term and just the right amount of flexibility (pre-payment options, openness, re-advanceability, etc.). Too much flexibility is a waste, and too little can cost you in the long-run.
Posted at 12:03 AM in Mortgage Rate Trends
July 14, 2009
Will 5-Year Mortgage Rates Fall Further?
Banks last raised mortgage rates on June 9, when the 5-year bond yield was at 2.68%.
Since then, the 5-year yield (which guides fixed mortgage pricing) has fallen to 2.44%, but bank rates have not budged.
BMO economist, Doug Porter, told the Toronto Star it’s because banks "want to be convinced that it is not a flash in the pan and that any retreat in yields is sustained."
He says: "I believe that we are probably not too far away from that point. It might take a little more of a deeper rally (in bond prices) to make it completely convincing."
The often quoted CIBC economist, Benjamin Tal, thinks yields could fall another 0.05% to 0.10%, but any drop in fixed-rates will be short-lived. "By the end of the year, we'll start seeing rates rising," he says.
If rates do drop another 0.10%, it would translate into a $5.50 monthly payment savings for every $100,000 of mortgage. That’s a total savings of $478 over five years, assuming a 25-year amortization and typical fixed rates.
But remember, trying to time bond and mortgage rates is financially hazardous. While you’re waiting, rates can move the wrong way—quickly.
You’re usually better served by focusing on factors that can dwarf a 0.10% rate savings, like finding a mortgage with the optimal term and just the right amount of flexibility (pre-payment options, openness, re-advanceability, etc.). Too much flexibility is a waste, and too little can cost you in the long-run.
Posted at 12:03 AM in Mortgage Rate Trends
Wednesday, July 8, 2009
Atlantic Canada better than most in Canada for housing
Here is a great article to share with your clients and referral sources. Looks like Atlantic Canada is doing better than most other regions.
Transmitted by CNW Group on : July 8, 2009 05:00
Atlantic Canada sails through the housing storm with minimal damage, says RBC Economics
TORONTO, July 8 /CNW/ - The cost of owning a home in Atlantic Canada continues to improve with housing affordability rates among the best in the country, according to the latest housing report released today by RBCEconomics.
"Generally favourable affordability levels in Atlantic Canada have giventhe region some protection against the housing storm," said Robert Hogue,senior economist, RBC. "Home prices have sailed through mostly unscathed, withfew declines reported since last fall."
RBC's affordability measures in the Atlantic Provinces improved again inthe first quarter between 2.1 and 3.5 percentage points, marking the thirdtime this has occurred in the past year, for all housing types.
The report noted that St. John's continues to be Canada's housing hotspot, showing significant price appreciation over the past year although thepace has slowed in recent months. The price of homes in Halifax, Saint Johnand Charlottetown also grew, despite increased levels of volatility.
RBC's Affordability measure for a detached bungalow for Canada's largestcities is as follows: Vancouver 62.6 per cent, Toronto 45.9 per cent, Ottawa39.1 per cent, Montreal 36.5 per cent and Calgary 35.1 per cent.
The report also looked at mortgage carrying costs relative to incomes fora broader sampling of cities across the country, including St. John's,Halifax, Saint John and Charlottetown. For these cities, RBC has used anarrower measure of housing affordability that only takes mortgage paymentsrelative to income into account.
The property benchmark for the Housing Affordability measure, which RBChas compiled since 1985, is based on the costs of owning a detached bungalow.Alternative housing types are also presented including a standard two-storeyhome, a standard townhouse and a standard condo. The higher the reading, themore costly it is to afford a home. For example, an Affordability reading of50 per cent means that homeownership costs, including mortgage payments,utilities and property taxes, take up 50 per cent of a typical household'smonthly pre-tax income.
Highlights from across Canada:
- British Columbia: In the first quarter, housing affordability in B.C. showed the sharpest improvements since 1991. Sales of existing homes have picked up vigorously since the November-January lows, prices appear to be leveling off and more balanced supply and demand conditions are expected to emerge in coming months.
- Alberta: The drop in mortgage rates and sinking home prices have fully restored homeownership affordability in the province. Sales of existing units have rebounded smartly this spring from earlier depressed levels and market conditions have tightened. Alberta's housing market is likely at the point of turning the corner.
- Saskatchewan: Significant improvement in affordability has helped the Saskatchewan housing market pick up pace again after bottoming at the start of the year. Moderately stronger sales of existing homes this spring and a slower pace of home sale listings have restored some balance into the market.
- Manitoba: Supported by relatively favourable affordability rates, Manitoba's market continues to be among the most resilient in the country. A relatively robust economy, steady population growth and recent improvement in affordability should support housing demand in the period ahead.
- Ontario: Spring resales figures show a surprising amount of activity in Ontario, with average prices for existing homes climbing back to where they were mid-2008. Much of this resurgence in the province is due to greater affordability, with homeownership costs for detached bungalows and condominiums dropping below long-term averages.
- Quebec: Resale activity has rebounded quickly in Quebec, reflecting a homeownership market that is now more accessible than has generally been the case in the province since the mid-1980s. Home prices have generally stayed their upward course, even through the period of weaker resale activity earlier this year.
The full RBC Housing Affordability report is available online, as of 8a.m. EDT today at www.rbc.com/economics/market/pdf.house.pdf. /For further information: Robert Hogue, RBC Economics, (416) 974-6192;Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124/
Transmitted by CNW Group on : July 8, 2009 05:00
Atlantic Canada sails through the housing storm with minimal damage, says RBC Economics
TORONTO, July 8 /CNW/ - The cost of owning a home in Atlantic Canada continues to improve with housing affordability rates among the best in the country, according to the latest housing report released today by RBCEconomics.
"Generally favourable affordability levels in Atlantic Canada have giventhe region some protection against the housing storm," said Robert Hogue,senior economist, RBC. "Home prices have sailed through mostly unscathed, withfew declines reported since last fall."
RBC's affordability measures in the Atlantic Provinces improved again inthe first quarter between 2.1 and 3.5 percentage points, marking the thirdtime this has occurred in the past year, for all housing types.
The report noted that St. John's continues to be Canada's housing hotspot, showing significant price appreciation over the past year although thepace has slowed in recent months. The price of homes in Halifax, Saint Johnand Charlottetown also grew, despite increased levels of volatility.
RBC's Affordability measure for a detached bungalow for Canada's largestcities is as follows: Vancouver 62.6 per cent, Toronto 45.9 per cent, Ottawa39.1 per cent, Montreal 36.5 per cent and Calgary 35.1 per cent.
The report also looked at mortgage carrying costs relative to incomes fora broader sampling of cities across the country, including St. John's,Halifax, Saint John and Charlottetown. For these cities, RBC has used anarrower measure of housing affordability that only takes mortgage paymentsrelative to income into account.
The property benchmark for the Housing Affordability measure, which RBChas compiled since 1985, is based on the costs of owning a detached bungalow.Alternative housing types are also presented including a standard two-storeyhome, a standard townhouse and a standard condo. The higher the reading, themore costly it is to afford a home. For example, an Affordability reading of50 per cent means that homeownership costs, including mortgage payments,utilities and property taxes, take up 50 per cent of a typical household'smonthly pre-tax income.
Highlights from across Canada:
- British Columbia: In the first quarter, housing affordability in B.C. showed the sharpest improvements since 1991. Sales of existing homes have picked up vigorously since the November-January lows, prices appear to be leveling off and more balanced supply and demand conditions are expected to emerge in coming months.
- Alberta: The drop in mortgage rates and sinking home prices have fully restored homeownership affordability in the province. Sales of existing units have rebounded smartly this spring from earlier depressed levels and market conditions have tightened. Alberta's housing market is likely at the point of turning the corner.
- Saskatchewan: Significant improvement in affordability has helped the Saskatchewan housing market pick up pace again after bottoming at the start of the year. Moderately stronger sales of existing homes this spring and a slower pace of home sale listings have restored some balance into the market.
- Manitoba: Supported by relatively favourable affordability rates, Manitoba's market continues to be among the most resilient in the country. A relatively robust economy, steady population growth and recent improvement in affordability should support housing demand in the period ahead.
- Ontario: Spring resales figures show a surprising amount of activity in Ontario, with average prices for existing homes climbing back to where they were mid-2008. Much of this resurgence in the province is due to greater affordability, with homeownership costs for detached bungalows and condominiums dropping below long-term averages.
- Quebec: Resale activity has rebounded quickly in Quebec, reflecting a homeownership market that is now more accessible than has generally been the case in the province since the mid-1980s. Home prices have generally stayed their upward course, even through the period of weaker resale activity earlier this year.
The full RBC Housing Affordability report is available online, as of 8a.m. EDT today at www.rbc.com/economics/market/pdf.house.pdf. /For further information: Robert Hogue, RBC Economics, (416) 974-6192;Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124/
Subscribe to:
Posts (Atom)