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Posted Mortgage News

2010 CMHC Survey shows Mortgage Broker share is stable

45% of First Time homebuyer’s said they would seek advice from a Mortgage Broker… according to the CMHC’s Mortgage Consumer Survey.

The study also found that internet usage was on the rise…no surprise there… 69% of First time buyers…

And 92% agree that Home ownership was a good, long-term investment.

68% of recent Homebuyer’s believe they will pay off their mortgage sooner than their current amortization.

All this adds up to a high level of confidence in our Housing market…   Enjoy those low interest rates…

Posted 5 Comments on Bank Complaints on the rise and Mortgage penalties are a big reason Mortgage News

Bank Complaints on the rise and Mortgage penalties are a big reason

A report just came out from the Ombudsman for Banking Services and Investments that shows complaints are on the rise…

The report shows Bank complaints were up 21%.  Many of the complaints had to do with Mortgage Prepayment Penalties and rates on Lines of Credit….. This shouldn’t come as any surprise to anyone with a Bank Mortgage.

Last year was the start of record low interest rates… Mortgage rates were down below 4.00% for a 5 yr fixed and Variable rates were below 2.00%…  If you bought a new house or renewed your mortgage, it was great….you couldn’t have timed it better….

But what if you wanted to refinance your existing mortgage?  Could you do it?  If you were in a Variable rate mortgage, your penalty was probably 3 months interest or less…. That’s quite reasonable and manageable for most.. but if you were in a Fixed Rate Mortgage, then you were in for a surprise from the Big Banks… Enormous prepayment penalties….  Here are some real life examples… a $250k mortgage had a $13,000 penalty… a $275k mortgage had a $18,000 penalty…

These penalties equaled 8 and 10 months of interest.…How can this be?  Well, the Banks changed how they calculate prepayment penalties about 10 years ago… To sum it up, you have to pay for any ‘discount’ off the posted rate.  And you have to pay for that discount in full.. for the entire duration of the mortgage….Not fair?  I agree.. extremely unfair…

Is there a connection with $billion Bank profits and these prepayment penalties?

If you are unsatisfied with a prepayment penalty then make some noise.. I encourage you to contact me or the Ombudsman for Banking Services and Investments .

Posted Real Estate Trends

Cooler housing market in May

The Globe and Mail reported that CMHC has reported that housing starts dropped in May compared with April.   This isn’t something to fear… I think we want a cooling off period to avoid falling into the housing bubble trap.

A housing bubble would mean that house prices would fall dramatically… no one wants that…  but if we see a price levelling or modest price drop of 10% of so, this isn’t going to kill the market…

Watch for a cooler summer (house market that is) and a warm fall market…

Posted Mortgage Rates

Bank of Canada raises rates by 0.25%

As expected, the Bank of Canada raised it’s Target lending rate to 0.50% from 0.25%.   This prompted most Banks to raise their Bank Prime lending rate to 2.50% from 2.25%.    But there is some uncertainty about when the next increase will take place as reported in The Star.…. and oh yes, the increases will happen.. not ‘if’, but ‘when’.

Economists have said repeatedly that the Bank of Canada must raise their rate to slow the economy and keep inflation in check… The Target inflation rate is 2.00%.    Most Economists agree that they only need to raise this by 2.00% to 3.00% to have the desired effect.  (See a full report)

Posted Mortgage News

Expecting a June 1st rate hike

It seems like a rate hike is almost certain for tomorrow’s Bank of Canada meeting.. but we need to put this in perspective… The Bank of Canada has not raised rates since July 2007… and Mr. Carney has never raised the Target rate since he took his place as Governor…. (he should be a popular person among Canadian borrowers).

But let’s put it in perspective…even if the Variable rate doubles to 4.50% from it’s current 2.25%, we would still be in historically low interest rate territory when it comes to variable mortgage rates…

A 25bps or 50bps or even a 100bps increase should only slow the housing market and not kill it….. Remember, these are EMERGENCY RATES…. The Emergency is over.. and we should want it be over…  We should be happy that we’ve been able to enjoy these record low rates for so long…..  the sky isn’t falling…  we won’t be seeing rates of 9% or 10% or anything near that level…