A round-up of mortgage news and commentary from December…

General Mortgage News

• Scotiabank seems to have stopped competing for mortgage market share, at least temporarily.  That’s according to the Financial Post.  Meanwhile, Scotia’s mortgage volume is up 11% YOY in its last quarter. Scotia is the #3 provider of retail mortgages in Canada and generates about 40% of new mortgages through its mortgage broker channel.
• Finance Minister Flaherty on whether Ottawa will keep buying bank-held mortgages: “Generally speaking, if programs are not effective, you don’t continue with them.” (Hamilton Spectator)
• “The best product to choose in a market like this is a 12 month convertible mortgage,” says broker Peter Kinch. The convertible he’s referring to allows you to swap into a variable-rate mortgage anytime. That may be of interest to those waiting for variable-rate mortgage discounts to come back.
• Nova Scotia foreclosures are up 20% this year, to 438. That’s about 0.40% of the estimated 110,000 mortgages in the province.
• Borrowers took to Facebook to protest banks’ reluctance to drop prime rate in line with the Bank of Canada’s key lending rate. (CityNews Story)
• There are still ways to get 100% financing, but none of them make a lot of sense for most people. The “least bad” is getting a 95% LTV mortgage and borrowing the 5% elsewhere, but we usually don’t recommend it except for investors and/or those with sufficient assets. For most, it’s a risky market to have no equity in a home.
• CMHC’s minimum credit score when using a borrowed down payment is 650.
• 12 indicators of your property’s chances for price appreciation:  Post Story
• Variable rate mortgages are more popular among older buyers than young, writes CEP.  Only 19% of buyers 34 or less got variables in the last year, versus 30% of buyers aged 35-54, and 27% of those over 54.

Commentary

• TD’s Joan Dal Bianco on why the bank didn’t pass along the BoC’s full 3/4% interest rate cut December 8:  “We are still trying to earn something on this stuff. This has been quite the roller-coaster ride and it has not been too hot on the mortgage front. We just can’t take on the whole 75-point cut.” (FP)
• “The rate of [mortgage] arrears was about double [today’s] level in the 1991-1992 recession, and even then we didn’t see widespread foreclosures. Keep in mind, any significant increase in foreclosures in Canada would likely be related to job losses and a weaker economy, and not affordability issues.” – Scotiabank economist Adrienne Warren
• “The relatively low level of mortgage arrears in Canada is of no comfort to us. Delinquencies are a lagging indicator. Relying on them as a forecasting tool is like driving while looking in the rear-view mirror.” – Merrill Lynch economist David Wolf (CNews)
• In a bad recession, CTV says, “the number of Canadians who could experience a foreclosure would top out at about three per cent.” That’s according to Tom Velk, an economics expert at McGill University.
• CMHC CEO Karen Kinsley on the Globe’s risk mortgage story: Link
• “There may be some people who could have purchased with a 40-year amortization and will be unable to if they can only get 35 years, but their numbers will be very small,” says CAAMP economist Will Dunning. “Rather than getting knocked out of the market, people will adjust their expectations — instead of buying something for $200,000, they buy something at $175,000.” (Chronicle Herald)
• “Guidelines are no longer guidelines,” says Axioms’ Gord McCallum.  CMP reports that even though clients meet written lender/insurer guidelines, lenders are increasingly turning them down due for subjective reasons.
• The credit crunch isn’t the end of the world for those with good credit. “There is a plentiful supply at reasonable rates for any borrower who can qualify,” says CAAMP President Jim Murphy.
• “The people who are going to have difficulty in getting approved are the ones who have poor credit or a history of some late payments or collections. Note, I said difficult, not impossible. If your employment is such that your earnings come from self-employment, commissions, on–call and you don’t have a two-year history of income then your application will be more challenging, not impossible.” – Bob Quinlan, Mortgage Broker, Mortgage Alliance (Opinion250)
• MetroNews on mortgage brokers.
• The Edmonton Journal’s Gary Marr isn’t happy he chose a fixed rate. Story

Canadian Real Estate Trends

• Canadian home prices dropped almost 10% in November year-over-year. Sales were down 42%.
• For the first time in years, condo builders are thinking seriously about building rentals. (Globe story)
• Re/Max expects a 2% drop in home prices in 2009.  That’s it?
• “I also expect many will wait out the market until the spring, for general economic and financial market conditions to (hopefully) stabilize.” – Scotiabank economist Adrienne Warren
• This quarter is the first in 22 quarters where the absorption rate for big-city office space has fallen. (CEP)
• Canadian housing starts are at a 7-year low.
• Windsor, Ontario’s rental vacancy is 14.6%, followed far behind by St. Catharines-Niagara, ON at 4.3%, and Oshawa, ON at 4.2%. (CTV)
• Vancouver, by contrast, has under 1% rental vacancy.
• “There is no doubt the new City Land Transfer Tax introduced in 2008…had a negative impact on this year’s [Toronto real estate] sales. Only the politicians who imposed the tax seem surprised!” – Re/Max Condos Plus
• Vancouver home sales are down almost 70% YOY.
• Office space vacancy projections:  Colliers
• Housing costs by city, as a percentage of the typical person’s gross income.
  • Vancouver:  74.8%
  • Toronto:  53.3%
  • Calgary:  47.3%
  • Ottawa:  43.3%
  • Montreal:  40.4%

Miscellaneous

• Test your mortgage knowledge with this quiz from Genworth.  Only 25% of people get 80% or more.
• The average Canadian has 12 mortgages in their lifetime. (Source: Mortgage Architects)
• We all need to find a way to give back.  Chris Dopp, a mortgage broker in Collingwood, ON has his own way.  Dopp gave away 250 Christmas dinners to the needy last week.
• Contrary to the government’s moratorium, zero-down loans haven’t disappeared. They’ve “simply being replaced by other products that could, in fact, be considered more risky to the client.” (CMP) One example is when a homeowner borrows the 5% from a high-interest line of credit as his/her down payment. Another way is to get a cash-back downpayment mortgage. Both methods are higher risk than the insured 100% financing they replace.
• RBC Bank’s U.S. subsidiary provides up to 75% financing for Canadian’s buying in the U.S. They also recognize Canadian credit reports. (National Post)
• There was a mortgage broker in Halifax who was recently telling people with bad credit to sell their homes before their mortgage matured. Otherwise, he warned, skittish lenders may not renew them due to the credit crunch. Well, unless your situation is really bleak, panic selling may be extreme. Before you take action, speak with a mortgage planner four months before your renewal date to see what can be done.
• Buying a new home? Here are some fees to consider.
• InYourBestInterest.com’s Hank Cunningham has a new book out, familiarly entitled In Your Best Interest. Apart from great fixed income coverage, it discusses the ABCP and subprime mortgage mess and talks a bit about Canada Mortgage Bonds.