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Posted Interest rates

Mortgage refinances are down nearly 40%.

Mortgage refinances are down in Canada according to CMHC…. No big surprise to those of us in the Mortgage industry…   The govt has made it more difficult to access money over the past 3 years with all the Mortgage rule changes.    They have accomplished their goal of trying to discourage us from borrowing more.

Here’s a look at some of the rule changes that made an impact:

-mortgage refinances are capped at 85% loan to value from 95% loan to value just a few years ago.

-maximum amortization for hi-ratio mortgages (over 80% loan to value) is 30 years.  Down from 40 years.

-variable rate mortgages and mortgages with terms less than 5 years must be qualified at the Bank’s POSTED 5 year fixed rate… this too will squeeze out many more borrowers as it forces us to qualify at the much higher POSTED rate…. 5.39% vs a discounted fixed rate of 3.49%….

The Banksters are happy to see you take the much higher 5 year fixed rate vs the lower, Variable rate (current Variable is hovering around 2.40%… RBC is advertising their  and Bank’s are advertising their 5 year fixed rate special offer at 4.24%…..).   Banks make more money on the 5 year fixed vs the Variable rate.  Remember that when choosing your next mortgage term.

Oh, and by the way, there are better Fixed rates out there…  we are currently seeing 3.49% for 5 years from the wholesale market.

Posted Mortgage News

U.S. govt suing banks for $196billion for bad mortgages.

FHFA, the US housing agency, is suing 17 banks for selling toxic mortgage backed securities.  Another sign that the fallout from the October 2008 mortgage crisis is not completely behind us.    The lawsuit is for is for a staggering $196 billion.

Just to give you an idea of what that number compares to…. In Canada, it is estimated that we have around $1 trillion in outstanding mortgages…

The reality of these types of lawsuits is that it will cause some uncertainty in the market… and remember, uncertainty usually means a low-interest rate environment..

Posted Mortgage News

More Banks raise their variable rates

BMO has joined RBC in raising their Variable rate mortgage pricing. The Financial Post reports that BMO raised their Variable rate mortgages from Prime 015% to Prime less 0%.

Can you say, ‘we want to force borrowers into the more profitable 5 year fixed rate products’???  That’s right.. The Banks would rather see you in a 4.00% rate vs. a 2.25% rate…  And why not?  They are a business after all.

We have also just received reports from other wholesale lenders that they will raise their pricing as well…  If you were looking at buying a house, refinancing your mortgage or had a mortgage coming up for renewal in the next 4 months, I would suggest you speak with your Mortgage Broker and get some rates locked in…

It’s important to understand, the Bank of Canada is not likely to raise their rate anytime soon.   Bank Prime remains at 3.00%.  We are seeing the Bank Economists tell us they think the economy will remain slow… The Banks do not make as much profit with the low Variable rate mortgages… They want and prefer you to take a 5 year fixed.. these are the most profitable mortgage products for them.

So  the bad news is Lenders will raise their Variable rates slightly, the good news is that we are probably going to continue to enjoy mortgage rates under 3.00% for some time to come…..

Posted Case study

Solar power subsidy… part 3 and the conclusion of my application.

Solar power…. those words make me think of green energy.. no more smoke stacks… electric cars, no nuclear power plants..etc…    These were some of the reasons I applied to get my own home approved for the Ontario Government’s Microfit subsidy program.   Oh, that and the $0.805/ KwH that I would be earning… a $0.70/KwH profit… Sounds like a no-branier, but would that be enough of an incentive for me to go through with the purchase?

Three months ago, I began the process of applying to the Ontario Power Authority for approval to the Microfit program and was approved.   I applied for approval to the Local Distributor Company (LDC local hydro company)..in my case it was Burlington Hydro.   They sent out an Engineer to ensure my house would qualify….. good news is that I was approved…  Everything was set.  I just needed to get a site assessment for my our peace of mind to see if my house was positioned correctly to take advantage of the sun’s rays.

I contacted an installer and supplier… They did a free site assessment…(most installers and suppliers wanted to charge me a fee)…  My house was not positioned to achieve optimum efficiency…. I would achieve only achieve 72% efficiency out of a recommended 90%…. Cost to install 30 high-end panels would be $45k.    My expected annual return would be around $5,500.…

End result…it would take me almost 10 years to recover my investment… but then again, I would have that 20 year govt contract selling my power at $0.805/Kwh compared with paying $0.11/KwH…

So after several dozen hours spent researching, applying, meeting with inspectors, installers, etc and 3 months later, my decision is to not move forward with the install.   There are many reasons but it seems to me that we still don’t know what effect this would have on the value of our homes…. Will prospective buyers like the panels in 3, 5, or 10 years?   Will the panels be out of date when I go to sell?   There just seems to be too many unanswered questions at this time…

The installer told me that my approval from OPA is good for 12 months… and maybe the price of the panels will drop enough that it could make sense for me to get the installation done…. but right now, a 10 year payback it way too long….   I’ll update you further should I have any new information…

My advice to anyone that is looking to participate is to do your research… there is a lot of data to be digested…  Buy Canadian… don’t just go with the lowest cost panels… buy quality.. we have some harsh weather in Ontario… Contact the Canadian Solar Industries Association for some referrals…. seek out a reputable installer and supplier… Get recommendations directly from the manufacturer….

If you want more info, just drop me a line and I’d be happy to share more details of my research.

Posted Mortgage News

RBC raises their Variable rate mortgage pricing.

Earlier this year, we saw a few lenders raise their Variable rate pricing from Prime less 0.75% to Prime less 0.50%…. Most other lenders did not follow.. But it made us wonder if there was some concern that the Bank of Canada might hold off on any increases in the  Bank Prime this year, as was widely forecast by most Experts….

Sure enough, the recent stock market collapse, the European and US debt crisis has put any potential rate hikes on the back burner with most Economists forecasting for no increases until next year…

Fast forward to today… The Financial Post reported that RBC would increase their pricing from Prime less 0.65% to Prime less 0.45%.   This move would indicate that the RBC Economists think the Bank of Canada is not in any hurry to raise the Prime rate…. or they believe the BOC may even lower the rate at some point…

Mortgage Brokers still have access to better priced Variable rate products through their wholesale channels but will other Lenders raise their pricing in the coming weeks?   We’ll be watching and will let you know…