Canadian Mortgage News & Canada's Mortgage Trends

BMO's Take on Mortgage Brokers

Bank of Montreal lost market share when it stopped discounting mortgages last year.  Now BMO no longer sells mortgages through brokers, stating they make more money when they sell mortgages directly through the bank.

There has been a lot of recent press about this decision.  Since BMO is a respected institution, their comments on mortgage brokers are worth analyzing.

Take this story for example.  Bloomberg quotes BMO as saying they were unable to "develop...deep relationships with...customers coming in through (the) broker channel." 

That's easy to imagine.  Clients of mortgage brokers are often far more loyal to their mortgage planner than to the bank lending the actual money.  It is the mortgage planner--not the bank--that shops several different lenders for the best rate and terms, does all the paperwork, gets fast approvals, and provides unbiased money-saving advice.  It's tough for any bank to build relationships when they're not providing these services.

BMO's CEO suggests further that BMO's unnecessarily long approval process has been another thorn in their side.  Again, that's totally conceivable.  Mortgage buyers today want extremely prompt service.  Big institutions, however, have a lot of bureaucracy.  Much of the time immediate service just isn't a possibility. 

With mortgage brokers, however, competition has streamlined things.  We know exactly how to handle complex deals, have fewer hoops to jump through, and use dedicated underwriters to speed up the process.

When all's said and done, BMO is an outstanding bank.  But today is a new age.  If BMO and other banks want to compete with mortgage brokers, perhaps they need to act more like mortgage brokers.

Real Estate Fraud Protection Tips

It does happen.  Here's an article from City News with recommendations to protect yourself:  Story Link

New Mortgage for Self-Employed Homeowners

If you work for yourself or make your living from tips or commissions, there's a new mortgage just for you.

The benefits: 

• Borrow up to 80-95% of your home's value (OAC)
• Stated Income (i.e. minimal proof of income)
• Offered to borrowers with credit scores as low as 540
• No minimum period of self-employment required
• Amortization up to 30 years for lower payments

If you're interested, or have questions, feel free to email or call me (Melanie McLister) for more details at (800) 280-2460.

Owning a Home is Getting Cheaper

Canadians' average monthly home costs are falling according to the Toronto Sun in this story.  Thank lower interest rates, smaller utility bills and slowing home prices.

The Sun says the typical cost of a standard two-story home in Toronto was $446,917 at the end of last quarter.  On average, it takes 48.8% of a Torontonian's income to pay the mortgage, utilities and property taxes on that kind of property.  That's about $2,776 a month.

The good news is that this is down from $2,818 a month and 50.4% of income in the prior quarter.

Side Note: You'd need an annual income of roughly $104,000 to qualify for the mortgage on this kind of home.

5-Year Mortgages Still #1

Two-thirds of Canadians get 5-year fixed rate mortgages, according to CIMBL.

Funny enough, this flies in the face of the top academic studies on the topic--which suggest that variable rate mortgages are the best bet. (Thank you to RedFrog for the study summary.)

The True Cost of Interest-Only Mortgages

This Nanaimo Bulletin story stresses the importance of evaluating the total cost of borrowing when considering an interest-only mortgage.

Their example shows how a $200,000 interest-only mortgage costs about $13,500 more over 10-years than a traditional fixed mortgage.

Where Should You Live? (If You Have a Choice)

If you want to buy your home low and sell high, see this Globe & Mail report about urbanization.

The gist is that towns and cities on the edges of major  population areas are spiking in value.  People who can't afford to live within big city limits are pumping periphery home values.

Milton, Ontario--55 km's outside of Toronto and pictured on the right--is a prime example.  Milton's population has jumped 71% since 2001, with an similarly impressive jump in home values.

The Latest Canadian Mortgage Trends

Here's some interesting mortgage stats from a recent CMHC survey:

• 50% of Canadians plan to pay down their mortgage if they come into extra money.  Note:  Only 34% do according to Manulife.
• According to the survey, 30% would rather have more monthly cash flow than pay off their mortgage sooner.
• 40% of Canadians would rather make higher mortgage payments than put more money down or defer their home purchase.
• Despite that, 74% believe the advantages to putting more money down outweigh the disadvantages.

The CMHC also finds that mortgage brokers are highly adept at securing mortgages for the self-employed. 20% of mortgage broker business is from self-employed borrowers, double the rate of banks.

Tight Ontario Rental Market

Ontario needs to build about 10,000 new rental units a year to meet demand, according to The Ontario Non-Profit Housing Association. See this CTV story

The (semi-) good news?  If you can’t find a good rental, it’s never been easier to qualify for a mortgage.

Subprime Mortgages Surge in Canada

Canadians seem to need more exotic mortgages these days to afford a roof over their head.  Higher risk (subprime) mortgages have been growing 50% a year in Canada.

Of no coincidence, the Canadian Real Estate Association says the average Canadian home price jumped to a record $311,101 in February 2007, up 10% from 2006.