Mortgage Rates & Mortgage Broker News in Canada

Mortgage Brokers Today

Joe Tomkins recently did a story in the Nanaimo News Bulletin on mortgage brokers.  Here's some highlights:

• Mortgage brokers have doubled their market share in Canada over the past five years.  People clearly value the advice and one-stop shopping that only a good mortgage planner can provide.
• While brokers handle roughly 1/3 of all Canadian mortgages, in the U.S. Tomkins says the number is close to 85%.  (That may be high. The figure commonly quoted is 70%.)
• Canada's mortgage industry is being inundated with newcomers.  Be careful who you work with.  In most cases, experience matters, and it cannot be taught.
• Brokers are increasingly "trying to develop an advice-based relationship" with clients instead of focusing strictly on finding the lowest interest rate.
• Clients should ask what advice a mortgage planner can provide. If it’s all about the rate, Tomkins says, "look elsewhere."

Mortgage Bytes

• Vancouver real estate speculation may be slowing. The Vancouver Sun says "mortgage brokers...are busy writing up more mortgages than they would in the sell-out years of 2005 and 2006...which is a sign today's buyers aren't in it simply to flip their units."
• The U.S. Fed left interest rates unchanged today.
• Million Dollar Journey reviews National Bank's All-in-One mortgage.
• If you're moving into a new neighbourhood in the GTA check out this neat little area profiler from Realosophy.

Ignorant Homeowners?

Jonathan Chevreau of the Financial Post says "The No. 1 financial tip I can dispense is to pay off your mortgage as soon as possible."

That's definitely not the worst advice in the world (although some might feel that certain tax sheltered or high-return investments are preferable).

Jonathan, however, goes on to say that "homeowners are getting more ignorant."  He says, "The rise of interest-only mortgages or 40-year amortization periods can only be possible in a world where consumers are oblivious to the arithmetic of compounding interest."

Well, that may not be the case.  In fact, our 40-year "am" clients know exactly what they're getting into--because we tell them.  They're not oblivious at all.  They simply want more house, or need to lower their payments to meet debt service ratios.

In addition, most plan to pre-pay their mortgages well before their amortization period.

It's an instant gratification society we live in.  People don't want to wait 20 years to afford their dream home.  Right or wrong, they want it yesterday, and long-am and interest-only products permit that.

Subprime...A Post-mortem

Subprime mortgages have taken a lot of heat, but RBC says "don't blame the product."  Blame the players.

Subprime loans help economies by making homes more accessible--if the money is loaned intelligently.  The problem in the U.S. was unsound underwriting, plain and simple.  Giving people BIG loans with no proof of income, debatable credit, insufficient debt service analysis, no supporting documentation, and no appraisals was just asking for it.

That doesn't mean lenders now need to be drowned in new regulations.  Market forces will surely correct many of the excesses.  In addition, RBC gives plenty of examples of how hastily crafted laws meant to "protect" consumers actually hurt America's financial industry and were ultimately overcome by loopholes.

Read More of RBC's Report

Mortgage Bytes

• Victoria's cheapest house is $325,000, and comes complete with railway tracks in the back.  Ain't she a beauty!
• Do you need title insurance if you live in B.C.?  Here's the Times Colonist's opinion.  FYI: did you know that 10.7% of Canadians have a criminal record?
• We've all heard about the subprime mess in the U.S., but there are also an abnormal number of "A" and "Alt-A" quality mortgages in foreclosure.  CNBC's Jim Cramer says the distinction between "A" and less credit-worthy "Alt-A" mortgages is now "shot to hell."
• Canada's five largest banks face "minimal" losses from their exposure to U.S. subprime loans.
• First National's mortgage revenue is up 42% in the last year.  They attribute their success to "increasing market share in the growing single-family residential mortgage broker channel."
• ActiveRain.com now offers a referral exchange for mortgage brokers.  Unfortunately, it needs a little marketing because no Canadian referrals are currently posted.

30-40 Year Amortizations

More people than ever are getting mortgages with long-term amortizations and it has big implications according to RBC.

For one thing, it's making Canadians less sensitive to rate hikes.  If rates jumped 1%, for example, RBC says a borrower could simply increase their amortization from 25 to 33 years to offset the impact.  (Mind you, while their payments would remain similar, their interest paid would soar.)

Secondly, long-term amortizations appear to be driving up home prices.  We've been suspecting this for months, and now RBC has finally confirmed it by noting that "longer amortizations are contributing to upward price pressures..."  This has been David Dodge's fear ever since CMHC launched long-term amortization products last summer. 

You didn't have to be a fortune teller, though, to foresee all this.  If people are able to finance pricier houses they will probably buy pricier houses!

The moral is, innovative mortgage products are a powerful new force residential financing.  They will probably fuel Canada's real estate engine for a while to come--at least until there is no one left to "buy higher."

Easier Terms for High Credit Borrowers

If you've got a high Beacon score the mortgage process just got easier.  Merix Financial now offers a new mortgage that is low on documentation and high on loan-to-value.

Here's the deal.  If you've got a credit score over 680 Merix can offer up to 95% financing with no proof of down payment required.  Typically, lenders make you prove where your down payment came from with bank statements, etc.  Not with this mortgage.

Even the income verification is easy.  Simply show any of the following:  a)  Your three most recent pay stubs (must match employer on bureau); b) A salary Letter; or, c) A Notice of Assessment.

If you have no money to put down Merix will also do 100% financing.

This product is exclusive to Merix and insured by Genworth.  It is only available through a mortgage planner.  Other terms may apply so contact us or any other good mortgage planner for more info.