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Mortgage Bytes


  • Housing-Boom RBC is the latest to proclaim Canada’s housing boom is over.  They say “higher loan-to-value ratios and longer amortization periods prolonged the housing cycle” but will “not prevent Canada’s housing markets from cooling off.” They also warn that “the longer-term effects of higher leverage heighten the risk of default.”
  • “Unless you see the arrival of 60-year mortgages, then you’ve got a household sector that’s really backed itself up against the wall.” — This is the view of Scotia’s Derek Holt with respect to how 40-year mortgagors would fare in the event of adverse employment, interest rate, or commodity price shocks.
  • “The [credit] market turbulence that began last summer has eased in recent weeks.” — Bank of Canada’s Mark Carney
  • Four Pillars says don’t knock people just because they’re buying with $0 down.

Interest Rate Trends

  • Bond-traders-2 Earlier today, 5-year bond yields had their biggest 2-day increase in five weeks.  The 5-year is now at 3.30%. RBC fixed income analyst, Mark Chandler, says, “We are seeing tremendous inflation pressure building up. We could see upward pressure for the yields going forward.”  CIBC’s Avery Shenfeld says, “Unless the [Canadian] currency manages to duplicate [last year’s performance], or Finance Minister Jim Flaherty has another GST cut up his sleeve, inflation numbers won’t look nearly as good next year.”
  • Seven of that 14 economists that Bloomberg surveys expect the Bank of Canada to lower rates 1/2% or more in the third quarter.  But that’s far from a given.  Consumer prices rose twice as much as expected in April.  If higher inflation is indeed on the horizon, further rate cuts will be minimal. The Bank of Canada’s Mark Carney says, “Everybody is aware that commodity prices have risen substantially…we will certainly take into account what has happened…”
  • “While the Bank of Canada may still deliver another rate cut, reflation will compel it to raise interest rates by at least 100 bps next year.” — Jeff Rubin, CIBC

Mortgage Broker News

  • CanEquity’s Anthony De Almeida estimates 15-20% of first-time buyers are choosing 40-year mortgages with no down payments.
  • First National has launched a new Self-Employed (Alt-A) program.  It’s a CMHC insured stated income mortgage that replaces First National’s old Excalibur BFS product. Borrowers need a 600+ credit score for a 75% LTV, or up to a 700 score for a 95% LTV. Qualification is based on income as stated by the borrower and must be reasonable based on the size and type of business. Verification of self-employment must be on one of the following: a business license, articles of incorporation or T1 Generals.
  • Lehman Brothers is reportedly planning to offer mortgages to Americans buying homes in Canada.  Lehman Brothers Resort Home Lending will enter the Canadian market later this year.
  • Xceed’s minimum Beacon score has been lowered to 600 for it’s best-rate AAA mortgage.
  • Filogix now offers a way to print out solicitor letters from Expert’s forms screen.
  • The Globe ran this positive story on Home Trust (and parent Home Capital). The Globe says customer deposits have helped HomeTrust weather the subprime storm better than many competitors. Home Capital’s net income rose 18.9% in its latest quarter. During that timeframe it originated $867 million in new mortgages, a 58.7% increase year-over-year.
  • CAAMP has written a letter to FSCO with support and recommendations for Ontario’s upcoming broker act.  CAAMP raises concerns about FSCO’s new fee disclosure rule, as well as the ability for “mortgage specialists” (at banks for example) to refer clients to other lenders without being licensed.
  • Ontario’s new broker act will prohibit up-front fees from being charged on residential mortgages under $300,000.  Currently the threshold is $200,000.
  • CAAMP‘s November 30 – December 2 National Conference in Vancouver will feature Deepak Chopra, Ben Stien, Benjamin Tal, and a host of practical mortgage speakers. Bravo for this.  A mortgage conference must have hands-on mortgage seminars to add real value.  This is something we love about IMBA‘s annual conference, and something we missed about last year’s CAAMP event.
  • Merix has launched EXPLOREmobile, an application for Blackberry. It lets brokers on the run check deal status and interest rates, and communicate with BDMs and underwriters.  Cool stuff!

Housing Market

  • MLS listings surged to a new record in April.  Scotia now predicts Canadian home sales will plunge 15% from last years record level. Nonetheless, nationwide prices are expected to rise 5% in 2008.
  • Luxury real estate could be insulated from an economic downturn in certain Canadian markets.
  • Canada’s average house size fell to 1900 squa
    re feet in 2007, from a high of 2000 sq. ft. in 2006.


  • Million Dollar Journey writes about the interest disadvantage of the Manulife One mortgage.
  • Investor-owned mortgages account for roughly 2% of the
    Canadian mortgage market, versus 10% in the U.S.  RBC