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CategoryMortgage News

Posted Interest rates

How will the high $Canadian dollar affect mortgage rates?

The Canadian dollar is just about at par with the U.S. dollar…  The BMO Economist sums it up well when he says “Generally speaking, from a stronger currency, consumers win and producers lose.”  As quoted in the Vancouver Sun.

And a high Canadian dollar means the Bank of Canada is less likely to increase the Target Rate which affects Variable Rates…  Any move by the Bank of Canada upwards will only drive the Canadian dollar higher…
A high Canadian dollar hurts our exports as they become more expensive for other countries to buy…  and we will probably see more cross border shopping as our strong $CAD will have more buying power…
Bottom line is that Variable Rates appear to be safe for now… enjoy the low rates…

 

Posted Mortgage News

Annual Mortgage borrowing stats are strong

The Canadian Association of Accredited Mortgage Professionals (CAAMP) released it’s Annual State of the Residential Mortgage Market in Canada, today.   The stats show that mortgage defaults are not a concern….and Canadians can absorb up to another $300/mth in higher mortgage costs…and we have 72% equity in our homes… wow, that’s quite impressive….

I’m amazed at how the media is reporting these stats… look at this headline “Canadian Mortgage Debt tops $1-Trillion for first time”. Well, here are the highlights of the report… the numbers look good to me…

• 35% of all mortgage holders have either increased their payments or made a lump sum
payment on their mortgage in the last 12 months
• Vast majority of Canadians have ability to afford higher mortgage payments. 84% said
they could handle monthly increases of $300 or more in their monthly payments
• 90% of Canadian homeowners have at least 10% equity in their homes, 81% have over
20% equity
• 70% of Canadians are satisfied with their mortgage terms
• Despite low Bank of Canada interest rates reflected in low variable rate mortgages, a
majority (66%) of Canadians still have a five year fixed mortgage, 29% have variable
mortgages and 4% a combination
• Overall, 22% of mortgages have an amortization of greater than 25 years compared to
18% last year
• Overall home equity is 72%. For homeowners with mortgages, equity level averages
50%
• Mortgage rates continue to drop. Average mortgage rate is 4.22% versus 4.55% last
year. For those who took out a mortgage in the last year, the average rate was 3.75%,
72% of those renewing saw a decrease in their mortgage rate
• Overall, mortgage brokers account for 25% of all mortgages and for new mortgages in the
past year, this number rises to 40%
• As of August 2010, there was over $1 trillion in outstanding residential mortgage credit in
Canada
• Mortgage arrears rate remains stable at 0.42%, lower than for most of the 1990s

Posted Mortgage News

Taking a look at Reverse Mortgages

Retirement means different things to different people.   One thing we can all agree on is that we don’t want to run out of money…

Reverse Mortgages seem to be gaining some attention in the media again…. I thought it might be worth bringing or sharing some thoughts… here’s a recent article.

A Reverse Mortgage will give a lump sum of cash or monthly payments for life or a combination of both… it’s all tax free money…. Ok, that does sound good..

But upon closer inspection, we see that the interest rate is around 2% to 3% higher than what you can borrow money at for similar fixed rate products.  5.90% vs. 3.50%. Remember, you are borrowing money and NOT paying it back.. the interest just accumulates and compounds…   there are also appraisal fees, administration fees, legal fees… and if you want to sell your home and pay this off, you face huge penalties that could range from 11 months worth of interest to 4 months of interest….Yikes!

Another alternative would be to borrow a secured line of credit at Prime plus 0.50% with interest only payments…. currently, that rate would be 3.50%….

I remember when these products came out in the mid ’90s.. they were horrible… they have changed and rates are a little better, but my advice is talk with a qualified Mortgage Broker or Financial Planner before making any decision…

My last thoughts… I wouldn’t put my parents into one of these products…..

Posted Case study

Deloitte report on Mortgage Brokers.. 38% use brokers

Here’s a great report that was put out by Deloitte. The report shows that Canadians rely on Mortgage Brokers more than ever… but not as a last resort.

Unlike the U.S., where mortgage brokers used to account for 65% of all mortgages arranged prior to the October 2008 mortgage crisis, U.S. broker now account for less than 20% of mortgage business.

Here in Canada, 38% of all mortgage originations went through a mortgage broker…. including  44% of First Time home buyers.

With national and provincial organizations like CAAMP (Canadian Association of Accredited Mortgage Professionals) and IMBA (Independent Mortgage Brokers Association), Mortgage Brokers play a vital role in informing and educating borrowers.    Mortgage Brokers aren’t just a last resort, they are now viewed as a first choice for getting unbiased and professional advice.

Dare we say it, a mortgage broker helps to create competition….and isn’t competition good for the consumer?

Posted 6 Comments on Update on TD Collateral mortgage rules Mortgage News

Update on TD Collateral mortgage rules

A few weeks ago, we heard from a source that  TD Canada Trust was making a major change in their Mortgage Lending policy.    ALL  new mortgages would be registered as a collateral mortgage instead of as a conventional mortgage…. previously, only secured lines of credit were registered as collateral mortgages.

By the way, here is a great article from Gail Vax-Oxlade, a well known personal money manager…..she would never take one of these new mortgages with TD… I think she is right on the money with her comments and analysis. Continue reading “Update on TD Collateral mortgage rules”