Skip to content
Posted Consumer Debt

News stats..Higher debt, but lower defaults

debt aminationSaw this article today about higher consumer debt levels BUT lower defaults.   Equifax Canada is quoted as saying that consumer debt rose by 7.2% in  the second quarter 2014 to $1.45 trillion ,compared with $1.35 trillion from a year ago. This includes credit cards, loans, lines of credits and mortgages.

The average Canadian now has $20,759 in personal debt, excluding mortgages.   That’s a 1.5% increase since last year.   So that means mortgage debt has risen by around 7%.    Here’s a heads up… you will see and hear articles sounding the panic alarm… again.

Well, before we hit that panic button, there was one more stat that we should pay attention to.   DEFAULTS.   Defaults are at their lowest level since 2008.  If higher consumer debt levels and lower defaults sound strange to you, it shouldn’t.    I’ll explain… Continue reading “News stats..Higher debt, but lower defaults”

Posted 3 Comments on Variable or Fixed? an update on how to choose. Interest rates

Variable or Fixed? an update on how to choose.

Variable rate mortgage

FIXED OR VARIABLE?

The debate over fixed vs variable never seems to end.   For the past 5 years, the Federal govt and the BIG SIX BANKS have been doing everything in their power to force us into choosing a 5 year Fixed rate.    The govt says it gives us security and protection against the anticipated interest rate hikes.   BANKS jumped on this bandwagon because 5 yr fixed is the most profitable mortgage product.. and with fixed rates hovering at 3.00% for the last 3 years, it’s been an easy sell.

On the surface, it’s not bad advice.    Fixed rates were supposed to go up.   The spread between Fixed and Variable has been less than 1.00% over the last 3 years.     My rule of thumb is that Variable rates should be 1.00% lower than 5 yr fixed in order to benefit from the possible rate fluctuations.   So naturally, 5 yr fixed was a better choice.

DO YOU TRUST YOUR GOVT AND YOUR BANK? Continue reading “Variable or Fixed? an update on how to choose.”

Posted Money saving tips

But it came in a beautiful box?!

canadian-money-giftIf I gave the option of choosing between 2 cell phones, which would you choose?   Both phones had similar specs and were identical in almost every way… except PHONE 1 came in a nicely gift wrapped box with a bow on it.   PHONE 2 came in brown paper bag but was less expensive and also had slightly better options.

Most of us would choose PHONE 2 right?  Wrong!   When it comes to mortgages, most of us are focusing too much on the beautiful gift box and not paying enough attention to the contents.  They say around 47% of all mortgages go through a BANK and 39% go through a Mortgage Broker.   Broker share is up, but not enough in my opinion.

When it comes to mortgages, the BIG SIX BANKS have been charging higher rates than what can be had from MORTGAGE BROKERS (see Bank of Canada study ‘competition in the Canadian mortgage market).   And their inflated prepayment penalty calculations are now infamous (typical BIG SIX BANK penalties are around 4 times higher than other lenders).
Continue reading “But it came in a beautiful box?!”

Posted Money saving tips

Mortgage renewal opportunities missed.

Banksters

DON’T SIGN THAT RENEWAL AGREEMENT BEFORE SPEAKING WITH YOUR BROKER!

Summer is a great time.  Vacations, time off, no school, sun and fun.  It’s also a time when most of our mortgages come up for renewal.   This year, things are a little different.  The loooong winter is really making us cherish the precious few months of summer.   We want to soak up as much of this warmer weather as possible.

This relaxed mindset appears to be making us easier prey for the BANKS mortgage renewal departments.  Mortgage renewals will typically follow the same process.   You get a renewal offer anywhere from 120 to 30 days prior to maturity.   The BANKS will offer you a rate that may be lower than their posted rate but, it’s much higher than the market rate, and some of us will go back and negotiate, some will call a mortgage broker to get unbiased and true market rates, and some of us will just sign that renewal and send it back in.

In the old days, most of us would just sign and return that renewal to our BANKS.   But that trend started to change over the last 10 years.  Consumers were shopping, calling mortgage brokers and seeking out better products.   Until this summer…. Continue reading “Mortgage renewal opportunities missed.”

Posted Mortgage News

The Star article on private lenders

Some comments I made about the changing lending landscape.  Click on the link below.

Private lenders step into Mortgage void left by banks.

The article was good and shed some light on just how much the federal government has tightened the Mortgage rules in Canada.  But the article excluded one very important fact.

loan sharkYes, I agree that the govt has gone overboard with their rule changes, and has forced qualified mortgage borrowers to pay higher rates and fees by having to go to alternative lenders.  But, consumers don’t necessarily have to go from an “A” lender with the best rates (currently at around 3.00%),  to a “C” lender with rates of around 12% to 15%.

There are “B” lenders that offer mortgages with only slightly higher rates. Usually 1% to 2% higher than “A” lenders.   I think it’s important to point this out.

A recent example is where one client was self employed, had a slightly bruised credit score of 602 (a good score is between 680 and 720), and his net income was not high enough to qualify (remember, self employed show a lower net income because they can write off more expenses). We found this client an 80% loan to value mortgage at 4.00% with some fees.   His net annual rate was 4.25%.  

So the message is, ‘There are ‘B’ lenders to fill the void left by the BANKS’…. and their rates are only slightly higher..  There are also ‘C’ lenders that fill a need for even harder to place mortgages…. These products come with much higher rates and fees.. But most consumers will either fit into an ‘A’ or ‘B’ product.   Only a small handful of applicants need to go to a ‘C’ Lender..

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca