Mortgage Bytes

Mortgage Tips

• If you’re looking for a pre-approval, be prepared to wait a few days longer than normal.  Refinances and spring home buying are boosting mortgage application volumes at various lenders. That’s forcing pre-approvals to the back burner since lenders deem them non-time-sensitive.
• There are ways to avoid foreclosure if you’re on the brink. This Bankrate story has some good advice. TD’s Kelly Hechler says": “Lenders will work with every customer to try and find a solution for their individual situation.”
• First-time homebuyers have two major ways to offset closing costs: 
• The federal government's new $750 tax credit
• Land transfer tax rebates…
  (Ontario rebate info, Toronto rebate Info, BC rebate info. Transfer tax is not applicable in Alberta, Saskatchewan, and certain other Canadian locales. For Quebec, contact your municipality.)

Real Estate Market

• The average Canadian home was worth $281,972 in February, down 9.2% YOY.  (CREA)
• Should you buy now or wait?  Canadian Real Estate Association economist, Gregory Klump, says:  "Timing the market" can be a bit of a throw of the dice.”  Watching home price charts may therefore be misleading because “sales activity picks up before prices do,” he says. (CBC)
• So, when will we know whether Canada’s housing market has put in a bottom?  “Four months after the fact,” says RE/MAX Condos Plus.
• If you want to watch price trends regardless, here’s an interesting site.
• “The most important factor for housing markets is job creation.” – CAAMP economist Will Dunning (Story…)
• Will the Olympics boost home prices in Vancouver? They didn’t in Calgary (in 1988) or in Montreal (in 1976) says CREA economist Gregory Klump. (CBC)

Mortgage Commentary

• The always vocal Garth Turner calls fixed-rate mortgages “dumb, extreme and costly.” He says “Why the hell” would you lock in now when you can do so later “with a phone call when it becomes apparent” rates are going up.  It sounds like Garth has a “greaterfool-proof” way to predict interest rates. We’ll keep watching his blog in the hope he shares it with the public.

Mortgage Rate Trends

• BMO economist, Doug Porter, expects the Bank of Canada will cut rates again on April 21. (Hamilton Spectator)
• Credit market traders are betting on a 59% chance of a 1/4% rate cut by April 21.  They expect a 0% chance of rate increases by next January.  (CEP)  Traders trade on current economic information, which can change at any time. So use this at your own risk.
• “Over the past 6 months, a bubble of government bonds developed as investors sought refuge in the face of massive deleveraging...Low yields are not expected to be around for long, and will probably end badly, as have all other bubbles.” –- Assante Financial Planner, John Lunam  (Bond yields are closely linked to fixed mortgage rates.)

Mortgage Industry and Products

• We’ve heard unconfirmed word that Scotia will be making their STEP mortgage automatically readvanceable in the near future. (Although we’ve heard that before)  At the moment, borrowers must manually request increases to their STEP line of credit after paying down $5000 or more in mortgage principal. This contrasts with popular products like FirstLine’s Matrix, where credit is readvanced automatically without borrower intervention or quirky minimums.
• "At this point, the margins of selling into the Canada (Mortgage) bond program are very good,” says Home Capital CEO, Gerald Soloway (FP)  That’s good news for non-bank lenders who rely on the CMB for mortgage funds.
• “There has not been a year in which residential mortgage credit has declined since 1969 (the earliest period in which data is available), including three recessionary periods.” -- Jennings Capital analyst, Marc Charbin (Globe)

Miscellaneous

• The top 5 reasons for mortgage defaults, according to AIG United Guaranty:
1. Over-extension
2. Reduced income
3. Job loss
4. Martial Breakdown
5. Fraud

Single-person applicants have the highest probability of default, and 95% of defaults occur in the first five years of a mortgage. (AIG)

• Can a lender take your house if you declare bankruptcy?  Barton Goth answers this question.
• Four things to know about U.S. delinquencies. (US News)  Unemployment is now the key down there.