Mortgage Rates & Mortgage Broker News in Canada

Banks Dominate in Australia, and Why It Matters

Australia’s conservative mortgage market is in many ways similar to Canada’s. For that reason, the Canadian mortgage industry often looks to Australia to spot mortgage trends that haven’t yet arrived here.

One Aussie trend that’s remarkable is the growing dominance of its banks. Banks account for a whopping 93.1% of mortgage market share, according to Phil Naylor, CEO of the Mortgage and Finance Association of Australia. That figure has been rising and is now at its highest on record. (By comparison, in Canada, banks control about 60-70% of the mortgage market.)

Most Canadians couldn’t care less about what’s happening in Australia’s banking sector. But here’s why it’s interesting…

CIBC IRD Penalty Case Update

Here’s the latest on the CIBC IRD penalty class action:

• CIBC reportedly just appointed its defence counsel in Vancouver.
• The lead lawyer fighting CIBC (Kieran Bridge) also sued Coast Capital Savings for ambiguous IRD contract language and for overcharging on mortgage penalties. Coast won the penalty portion of that case on appeal. It was a legal battle that spanned a number of years.

Broker Market Share—Now and Onward

In Canada, mortgage broker market share began at less than 1% in the 1980s, grew to 14% in the 90s, and peaked at 35% in 2006.

It has now slid to 22%, according to Yousry Bissada.

Yousry, who presented at last week’s Axiom Leadership Summit, is one of the most accomplished executives in the mortgage business. He’s held senior positions at Filogix, FirstLine, Paradigm Quest, Canadiana, and TD Canada Trust. His presentation was a fascinating overview of our industry.

Below, we’ve compiled a few of Yousry’s main points about the competition between mortgage brokers and bank mortgage specialists…

No Change for Key Rates

The Bank of Canada met today and saw no reason to move its key lending rate from 1.00%, where it has been for a little over a year.

That's precisely what the market anticipated and it means prime rate (which is the basis for variable mortgage rates) should remain at 3.00%.

The BoC’s decision comes amid ongoing economic danger in Europe, sputtering U.S. growth and surprising inflation here at home (core inflation hit a three-year high in September).

Here’s a sampling of the Bank’s commentary from this morning:

Less Broker in Your Broker

“There are lenders that are taking the brokering out of brokering” — IMBA President Albert Collu, via CMP

That line is symbolic of what’s happening in our business.

The face of mortgage brokering is changing. Lender policies meant to drive efficiencies are impairing brokers from doing their jobs.

This is no more evident than with volume minimums. More and more, lenders are electing to cut off brokers who don’t send them a minimum volume of business (such as one deal a quarter, $2.5-$5.0 million per year, etc.).

Lenders do this because they don’t want to expend limited resources on non-producing brokers. On the face of it, it makes sense. But it’s having undesirable effects.

2011 CRE Investor Forum

For those into real estate investing, Canadian Real Estate (CRE) is holding its West Coast Investor forum November 12 & 13 at the beautiful Vancouver Convention Centre.

The two-day conference has more than 30 prominent real estate speakers to learn from and network with, as well as a real estate expo and TV personalities from HGTV and W Networks. More info…

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For Brokers: There’s also a mortgage broker workshop covering Alt-A/non-prime lending, debt repair, private lending, and social media marketing. It costs $79 (an early bird discount until Sunday) and includes six AMP credits. More info…

30 Days Till the CAAMP Mortgage Forum

Canada’s biggest mortgage convention is a month away.

The CAAMP Mortgage Forum runs Nov. 20-22 in Toronto.

This year’s speakers include NFL legend Terry Bradshaw, CBC’s Amanda Lang, marketing sage Seth Godin, and Shark Tank’s Barbara Corcoran, among others.

Here’s the schedule. New this year:

Fixed/Variable Rate Scenario

Rate scenario spreadsheets are a handy tool in a mortgage planner’s tool chest. Advisors use them frequently to illustrate hypothetical cost differences between different mortgage options.

One common scenario is the 5-year fixed vs. 5-year variable comparison. We ran a showdown on these two terms when writing Monday’s story. (Click the chart below to enlarge it.)

The Incredibly Shrinking Variable Discount

Just weeks ago you could find variable-rate mortgages at prime – 0.80% (P-.80%) or better. Consumers thought they were here to stay, but the tables turned…fast.

Economic troubles and lender profit motives have shrunken variable discounts beyond expectations. Banks are now commonly quoting prime rate, for example, with little discounting.

Once the last few holdout lenders with P-.50% disappear, discounted variables could move towards P-.25%…or worse. Some lenders even suggest that prime or prime plus could be the new normal.

Meanwhile, aggressive brokers are selling five-year fixed rates at 3.25% or less. That’s an unusually low 50 basis point premium to a variable. A spread that tight doesn’t come around often, and it makes you rethink all of the research suggesting variables are the way to go.

5 Years

Five years ago today our little site was born. And by little, we mean little. It had virtually no content and in its first week CMT had all of six visitors.

1,587 mortgage articles, 11,809 comments, six million impressions, 1.35 million unique visitors, 1,437 tweets and 1,825 days later, there’s still no shortage of stuff to write about.

Aside from the “occasional” late nights where our laptops doubled as pillows, it’s been a great ride reporting on Canada’s mortgage world these past five years.

On behalf of our production family (Steve Huebl, Amanda Ayles, Elizabeth McLister, Leslie Blais, Melanie McLister and myself) we hope you’ve enjoyed what you’ve read and look forward to helping folks navigate the Canadian mortgage market for another five years to come.

Our never-ending thanks for reading…

Rob McLister, Ed.

Bozic on Rates, Strategy & Competition

The future of variable rate pricing; value versus rate; and competing to win.

These are topics that Merix Financial CEO Boris Bozic hit on in an informative webinar hosted Thursday by 180 Degrees Coaching’s Greg Williamson.

Boris’s position as head of a major non-bank lender keeps his finger on the pulse of broker performance, lender practices, capital markets and rate trends. He shared several candid perspectives and these were some of the important quotes and takeaways (our comments in italics):

Mortgage Rates

• “We’re going to be in an environment very shortly where we’ll be prime-plus on variable-rate mortgages,” Bozic said.
• “This is the new normal for the foreseeable future.”
• “The days of [prime – 0.60% or better] are behind us.”

Class Action Lawsuit Filed Against CIBC Mortgages on Prepayment Penalties

Consumers hate mortgage prepayment penalties, largely because they don’t understand them.

Now, there is about to be a high-profile challenge of how mortgage penalties are calculated.

CIBC Mortgages Inc., a subsidiary of CIBC bank, has just been named the subject of a pending class action lawsuit.

The intended suit claims that CIBC improperly calculated penalties for customers who broke their mortgages from 2005 to date.

The claim alleges that:

“CIBC applied terms and conditions to certain mortgage contracts to allow it unfettered discretion for calculation of mortgage prepayment penalties.”

“…the quantification of prepayment penalties applied by CIBC are in breach of the mortgage contracts.”

Mortgage Career of the Week

Company: Origin Home Financial Partners Inc.
Position Title: Mortgage Advisor
Experience: Min. two years as a mortgage originator
Licences: Sub-Mortgage Broker Licence required
Location of Position: Greater Vancouver, B.C.
Applicants may contact: Geoff Willis, geoff@origingroup.ca or by phone 604-742-3411

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Click on the position title above for more information.

Advertise your mortgage job opening today! Click here to post. Or browse CMT's Mortgage Jobs Database.

Interprovincial Mortgage Brokers

The Internet has made doing business possible across the farthest reaches of the globe. It’s not surprising then, that technology is fostering mortgage brokering across provincial lines.

More and more, we see out-of-province brokers advertising and quoting rates in other provinces. This is making the mortgage market more price-efficient and lowering costs for consumers.

While some brokers may resist this development (and disdain far-away brokers who compete in their vicinity), interprovincial brokering is here to stay and it’s a trend that’s growing.

Steve Jobs

Apple’s Steve Jobs, who died Wednesday, impacted hundreds of millions of lives in almost every industry, including Canada’s mortgage industry.

One small example was how Apple computers automated mortgage processing. Prior to the mid-80’s, brokers generally took mortgage applications by hand. Brokers would then often manually retype an application before faxing it to a lender.

“In 1985, the first application system (linked directly to lenders), was developed solely on an Apple platform,” say Bruce Davison, one of the original Mortgage Centre owners.

Rates-a-Changin

RBC has matched most of TD’s recent rate increases. Other banks may be close behind.

Here’s what’s happening at RBC, the nation’s top bank:

• 5-year posted:  Up 10 bps to 5.29%
• 5-year “special”: Up 10 bps to 4.09%
• 3-year posted:  Down 30 bps to 4.05%
• 5-year variable: Up 15 bps to prime – 0.10%
• Open variable:  Up 30 bps to prime + 1.00%

These changes happened to coincide with today's Canadian and U.S. jobs reports, which far exceeded forecasts. North America’s surprise employment growth is boosting bond yields (which reduces lenders’ profit on longer-term fixed mortgages, other things being equal).

Free Closing Costs on CHIP Reverse Mortgages

For the first time ever, Canada’s reverse mortgage provider (CHIP) is waiving borrower’s closing costs.

This is a limited time promotion that saves seniors $1,495 on legal, closing, and administrative fees.

The promo applies to 3- and 5-year terms only. Borrowers must apply by Nov. 30 and close by Dec. 31.

No Bubble, Says Flaherty

The government would need to see “clear evidence of a bubble in the housing market” to impose tighter mortgage rules.

“We have not seen (that),” Finance Minister Jim Flaherty told reporters Wednesday.

It would take “dramatic surges in prices in some part of the country” to constitute a bubble, he added.

TD Ups 5-year Rate, Cuts 2- & 3-Year Rates

TD Canada Trust is raising its posted 5-year fixed rate by 10 basis points to 5.29%.

Meanwhile, its 2- and 3-year rates are dropping 3/10ths of a percentage point. (See: TD’s Release)

TD last changed its 5-year rate two weeks ago when it dropped to 5.19%. Since then, the 5-year bond yield — which guides fixed rates most of the time—has been flat. As a result, today’s increase may surprise some.

CHIP Sees Traction With Brokers

25% of CHIP reverse mortgage originations have come from brokers this year, according to HomEquity Bank.

Last year it was only 15%.

There are at least five reasons behind this surge in broker referrals. Among them: