Banks see rate increases, mortgage brokers still offer deals

Magnifying glass

News of Canadian banks increasing their mortgage rates has some mortgage brokers on edge, according to an article from Mortgage Broker News. The main area of concern? That monolines will follow suit.

Monolines are mortgage lenders that focus solely on mortgages. Whereas banks and credit unions have other loan types and products to sell, monolines are focused on home loans. Mortgage brokers are often able to obtain mortgages with ultra-low rates from these lenders, helping them get business from homebuyers looking for rates lower than the big banks can offer. However, if monolines begin raising their mortgage rates along with banks and credit unions, that competitive edge may disappear for brokers.

It's been widely reported that the Royal Bank of Canada increased its rates. The rate on four-year closed mortgages is set to increased 10 basis points, reaching 3.09 percent, while the rate on five-years will rise 20 basis points, reaching 3.29 percent. Meanwhile, the posted rate on a one-year mortgage is set to increase 14 basis points, reaching 3.14 percent, while two- and three-year mortgage rates are rising 10 basis points, reaching 3.14 and 3.65 percent, respectively. Continue reading

Low mortgage rates can offset high prices

low rate high priceMagnifying glass

While rising home prices are good news for sellers and buyers seeking a sound investment, they can also make it that much harder for some Canadians to enter into homeownership.

As a recent article from The Globe and Mail points out, even with mortgage tightening and a dip in sales, home prices continue to remain high throughout the country. As home sales decreased, so did the number of homeowners putting their properties up for sale, keeping the inventory of available properties fairly low, and, by extension, prices high.

"The latest data suggest that the softening in prices is likely to be milder than expected," the article stated. "In Vancouver, the city that was the frothiest in 2011 and the hardest hit by last year's correction, prices did decline. But they're already on the mend." Continue reading

Canadians saving more, paying off mortgages faster

Magnifying glass

Who says Canadians can't save?

According to an article from The Globe and Mail, the Canadian personal savings rate is twice that of our neighbors to the south, and nearly six times higher than it was 10 years ago.

"All the talk about the Canadian household being tapped out or out of shape is a bit overdone," Doug Porter, chief economist at BMO Nesbitt Burns, told the news source.

Data from Statistics Canada shows that the savings rate during the first quarter of 2013 was 5.5 percent, up from 5.4 percent during the final three months of 2012. That may not seem like a large improvement, but it's important to keep in mind that the original forecast for the savings rate during the fourth quarter of last year was 3.8 percent, according to Statscan. Continue reading

Possibility of rate increase looms

Among all the ups and downs in Canada's housing market over the last few months, one thing has remained certain: Mortgage rates are low. This has spurred homebuyers and homeowners alike to obtain new mortgages or refinance their current ones, offsetting the cooldown in sales due to Finance Minister Jim Flaherty's restrictions on government-backed mortgages.

However, some industry observers are exploring the possibility that rates may be rising sooner rather than later.

"If you're house hunting or thinking of refinancing, and you don't have a mortgage rate hold, consider getting one," writes Rob McLister for Canadian Mortgage Trends. "Canada's 5-year bond yield just pierced a three-month high. That means – barring a big reversal – there's a good likelihood that fixed rates will ratchet higher. (Bond yields steer fixed mortgage pricing, most of the time.)"

Continue reading

Mortgage rates present opportunity

Low mortgage ratesMagnifying glass

Historically low mortgage rates are continuing to make homeownership affordable for Canadians, according to the Royal Bank of Canada.

Data from the RBC's Housing Trends and Affordability report shows that low mortgage rates are keeping Canadian homeowners from entering dangerously unaffordable territory. Additionally, the report stated that rate increases are likely not on the horizon.

"Exceptionally low mortgage rates have been the main factor preventing affordability from reaching dangerous levels in recent years; yet, we believe that the likelihood of a surge in rates is slim at this stage," the report stated.

Continued low mortgage rates are good news for Canadians, especially as a report from the Certified General Accountants Association of Canada shows that while many Canadians are satisfied with their finances, they're not necessarily keeping on top of them. Continue reading

Fitch Ratings highlights six default factors

FitchRatingsMagnifying glass

According to Fitch Ratings' Canadian Residential Mortgage Loan Loss Model, there are six primary factors that influence mortgage defaults. These include borrower equity, borrower credit score, total debt service ratio, loan purpose, occupancy and property type.

Equity
A mortgage borrower's equity is the difference between the value of a home and value of all mortgage secured against it. As a borrower pays off their home loan, they build equity. This can be a valuable asset to homeowners, as the more equity that's built up in a home, the more that can be accessed through home equity loans or home equity lines of credit. This essentially allows homeowners to turn the value of the home into cash for any number of purposes, including renovations, college tuition or medical costs. Continue reading

Low mortgage rates remain despite government interference

It seems that not every member of the Conservative cabinet is a huge fan of Finance Minister Jim Flaherty's penchant for getting involved in the mortgage market.

According to a report from The Globe and Mail, Small Business Minister Maxime Bernier recently expressed his opinion regarding Flaherty's meddling in the world of mortgage rates. The verdict? Leave the market alone.

"Me, personally, I would not dictate to businesses what prices to decide," Bernier said. "It's the market. It's supply and demand that decides the prices. It is the case for interest rates, it is the case for other products too."

Of course, Flaherty has critics outside his party as well.

"We either have a competitive mortgage market or we do not," said Bob Rae, interim Liberal leader. "And it's clear to me that Mr. Flaherty would prefer to have a cartel where… he and his officials are setting the interest rates for every mortgage in this country."

The criticism being leveled at Flaherty is in regards to his asking both Manulife Financial to withdraw their discount on five-year mortgages, as well as complaining about the Bank of Montreal lowering it's five-year mortgage rates. Continue reading

New study spotlights renewals, brokers

mortgage renewalMagnifying glass

According to the Bank of Canada, buyers who stick with their current mortgage lender when it comes time for renewal may be cheating themselves out of a discount.

Data from Discounting in Mortgage Markets, a study conducted by three economists for the Bank of Canada regarding insured mortgages, found that homeowners who switch banks when it comes time to renew their mortgage get better deals than existing customers.

As the Toronto Star puts it, when it comes to mortgage lenders, loyalty doesn't pay off.

"The economists found that people who switch banks get a better deal than existing customers, because new customers offer the banks an opportunity to sell more products," Adam Mayers writes for the news source. "Existing customers assume they will automatically get a better deal because they're loyal, but don't. They don't bother to shop around because they assume they'll get the best rate so, lacking ammunition, the discount may not be much." Continue reading

Avoiding homebuying mistakes

royal bankMagnifying glass

Everyone makes mistakes, but when it comes to buying a home, those mistakes can be costly. According to data from the Royal Bank of Canada's 20th Annual Homeownership Poll, most Canadians admit to make some kind of mistake during the homebuying process. While 40 percent said everything went smoothly, 60 percent said there was some type of error on their part.

The following are the most common homebuying mistakes according to the RBC poll, as well as ways to avoid them. Continue reading

Obtaining a mortgage as a self-employed borrower

small business ownersMagnifying glass

With mortgage rates continuing to stay near ultra-low levels, it's no surprise that many Canadians are clamoring to invest in a home purchase or refinance their current home loan. However, the process can be slightly more difficult for one of Canada's growing demographics: The self-employed.

The latest statistics from Industry Canada show that the country has 2.67 million self-employed individuals, which represent nearly 15.4 percent of all the employed workers in the country's economy. In fact, the number of self-employed Canadians has risen steadily over the last 10 years, especially amongst women.

"Over the past decade, the number of self-employed workers increased by 17 percent, while the growth rate of the overall labour force was 15 percent," reads an excerpt from Industry Canada's official website. "Slightly more than one-third of self-employed workers were female – the share of female self-employment rose steadily from 1976 to 1998, from 26 percent to 36 percent, and has remained at around 35 percent since 1999." Continue reading