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CategoryMortgage Trends

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 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”

Posted Interest rates

Mortgage Rate Forecast in Canada

Here’s a recent article forecasting low rates that appeared in The Globe and Mail. The article points to Scotiabank’s Economist as saying “the economy has lost considerable momentum.”

Scotiabank is also forecasting  the Bank of Canada to keep the Target Rate or the Overnight Rate flat until the 3rd quarter of 2011.   This means the Variable rate should remain a good option with rates between 2.25% to 2.30%.

Current Bond yields are at 1.94% as of today…. this means the fixed rate spread is 1.65%.. this is above the normal 1.25% to 1.40%…

Fixed rates are priced closely to the Bond market but indirectly by the Bank of Canada’s actions… we are seeing 5 year fixed rates (the benchmark for fixed rates) hovering at 3.59% to 3.69%… and they could still go lower…

Enjoy the low rates… borrow wisely!

Posted 14 Comments on Introducing the new TD mortgage…hand-cuffs included Mortgage News

Introducing the new TD mortgage…hand-cuffs included

The rumors are true…TD Canada Trust will begin registering all mortgages as collateral charges after October 18.    (No official release from TD yet but a source inside TD has confirmed this to us).

What does this mean for the consumer?  Well, there is some good but mainly it’s bad..…

  • a collateral mortgage is normally registered for floating or revolving debt such as a secured line of credit.  It allows for the balance to float up or down.
  • TD will register a collateral charge for 125% of the loan amount… this will allow the client to come back at a later date and apply to increase their mortgage if needed….
  • in theory, it sounds great…no legal fees required in the future if you need to refinance… and easy approval…

BUT HOLD ON…

  • a COLLATERAL MORTGAGE is NOT really portable…meaning you cannot transfer to another institution…that’s because no other Bank or Lender is accepting collateral mortgages for transfer… including TD…you will lose some leverage to negotiate the rate when your mortgage matures…
  • and if you wanted to increase your mortgage in the future, you would need to reapply for approval…let’s suppose you don’t qualify in the future..not because your situation changed but because the Bank’s lending policy changes…this happens regularly….you would now have to seek out an entirely  new 1st mortgage as no other lender would register a 2nd mortgage in behind a collateral first mortgage (at least none that I am aware of)…  that could mean penalties, definitely legal fees and other costs….
  • It’s obvious that a big reason TD would be doing this is to improve mortgage retention.. this makes it less appealing to leave TD because of the costs….
  • BOTTOM LINE…this type of mortgage limits your options..it doesn’t expand them.. you MAY save on legal fees..but that’s not a big enough reason to go with this product..

My advise to anyone looking at a TD mortgage is to be careful…make sure you understand all the terms, conditions, the differences and the limitations…you be the judge… is this a good thing for the client or is it a good thing for the Bank??  Will other Banks follow?  Some might say this is like putting handcuffs on the client… I tend to agree…