30 Mar

Fixed mortgage trump Variable mortgage in todays economy….


Posted by: Nisha Lalwani

As the federal government warned it may again tighten mortgage rules, a Bank of Montreal Economist says fixed mortgages “clearly trump” variable mortgages in today’s economy.


There are two reasons for the change of heart by Douglas Porter, Deputy Chief Economist at BMO: the intense competition among lenders and the economic recovery in the US.


“While we have in the past supported going variable, and even though short-term rates are likely to remain low this year, current offers on long-term mortgage rates and the recent shift in bond market sentiment tilt the balance heavily in favour of locking in at this stage,” wrote Porter in a report, Time to Say Goodbye to Variable.


Click here for the full Vancouver Sun article.
With policymakers warning about rising household debt levels, a new survey shows that Canadians are both worried about what they owe, and in denial about how their debt compares to those around them.


The seemingly contradictory conclusion was reported on Monday by the Toronto-based online mortgage comparison service RateSupermarket.ca, which polled nearly 3,000 Canadians across the country about their feelings on household debt.


Despite the fact that 60.1% of respondents said they were not comfortable with their current debt levels, the majority – 50.3% – also believed their debt levels were below average.


A similar pattern emerged on credit cards. Plastic was by far the leading cause of debt concern among respondents, at 38.8%, with more than a quarter indicating that they owed more than $5,000 and nearly 10% owing more than $10,000 on their cards.


Click here to read more from HuffingtonPost.ca.


When I logged on to check my bank balance the other day, I noticed a message from the bank saying that I have ‘earned’ a one month mortgage payment vacation.


The reason for this break is that I have been paying off my mortgage faster by making increased contributions each month. My goal is to pay off our mortgage in less than 15 years, rather than the usual 25 or 30. If you do this, most banks will give you the option to skip a mortgage payment once your extra contributions add up to a full months’ mortgage payment.


Taking a break from paying your mortgage can give you some breathing room if you lose your job or decide to stay home with a new baby. But if you’ve been making extra contributions to your mortgage with the goal of paying it off sooner, skipping a mortgage payment will put you right back where you started.


Click here for the full article in The Star.


A monthly measure of Canadian home prices showed that year-to-year gains continued in January, albeit at a slower pace than in December.


The Teranet-National Bank house price index was up 6.5% from a year earlier. That was down from 6.8% in December.


While the index showed some slowdown in the rise of prices, it was still “surprisingly large,” said National Bank Senior Economist Marc Pinsonneault.


“If such increases were repeated over the next months, the federal government might react with stricter mortgage rules,” a possibility that has already been suggested prior to Thursday’s budget release, he said in a research note.


Click here to read the article from Canada.com.


Realtors are pushing for air quality standards to fill a regulatory vacuum involving former marijuana grow-ops put up for sale.


How to protect the health – and the investment – of homebuyers is just one of the issues delegates from the real estate industry, civic authorities and law enforcement, will discuss at a three-day conference that opened in Banff, Alberta Tuesday.


“There’s no way on Earth we’ll be able to manage the scope of this problem without the involvement and cooperation of the private sector,” said Staff Sgt Tom Hanson of Alberta Law Enforcement Response Teams (ALERT), a provincial umbrella organization of 400 investigators that targets serious and organized crime.


In 2010, ALERT seized 100,615 marijuana plants and 655 kilograms of harvested bud – much of it grown in operations concealed in homes.


Click here for full details in the National Post.


23 Mar

Canada’s Banking regulators clamping down on banks mortgage underwriting practices…


Posted by: Nisha Lalwani

OSFI, Canada’s banking regulator, is leaning on banks and other federally regulated lenders to clamp down on underwriting practices. It released these draft recommendations this week. 


After reading through 18 pages of changes, in detail, our immediate reaction was concern.


That’s not because the guidelines are greatly imprudent. Some are unnecessarily rigid, but most are sound policy. It’s because OSFI risks tightening too much, too fast. 


If the government also decrees new insured mortgage regulations (like these), and/or rates rise significantly, and/or unemployment unexpectedly spikes, it could form the proverbial perfect storm that blows over housing valuations. 


Click here for the full CanadianMortgageTrends.com article. 


For debtors, today’s historically low interest rates have constituted somewhat of a fool’s paradise. Central banks around the world, including Canada’s, have kept interest rates as close to zero as possible.


But if we thought we could keep our boat forever afloat on this sea of low rates, there are many lining up to convince us the time has come to get on dryer land.


Whenever they get a chance, Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty warn Canadians to get their fiscal houses in order. It’s not a matter of IF interest rates start rising, just a matter of WHEN.


And on Friday, TD Canada Trust Chief Economist Craig Alexander joined in, with a stern warning that debt levels have risen to “unsustainable” levels. He said without new mortgage regulations to temper borrowing, a correction in housing prices or a hike in interest rates would be “disastrous for the economy.”


Click here to read the Financial Post article.


Some 45% of Ontario brokers/agents are procrastinating on re-licensing.


It has come down to the wire for nearly half of Ontario’s 12,000 mortgage professionals – who, with only a month left on the clock, had yet to complete that do-or-die re-licensing course.


“What can I say? That’s the industry,” Joe Rosati, IMBA Executive Director, told MortgageBrokerNews.ca. “FSCO told us that as of February 29th, only 55% of mortgage brokers and agents in the province had successfully completed the required relicensing course.”


That slim majority means as many as 5,000 mortgage professionals, nonetheless, have waited until the last month to take the course.


For IMBA and the three other course providers, that procrastination now translates into a flurry of activity in the last two weeks before the March 31st deadline.


Missing that drop-dead date has major consequences. Not only does the broker’s licence expire, but if he or she attempts to re-apply as a new agent or broker, they’ll be required to admit “non-compliance” and take the re-licensing education by June 30th, 2012. They’ll also have to dig deeper in their pockets and pay the $800 fee for a new agent or broker licence rather than the $700 fee to renew.


Click here for the full MortgageBrokerNews.ca story.


Fixed-rate mortgages are at historic lows but if you’re locked into a contract with your bank, those benefits may be yet elusive.


First you have to do the math to see if breaking your contract is worth the penalties you may face.


“There is no grey area,” says Cindy David, a certified financial planner at Dupuis Langen Financial Management Ltd in Vancouver. “It’s either worth it or it’s not.”


“We’re even seeing 10-year fixed-rate mortgages at 3.99%,” says David. “Think about that: Interest and principal at 3.99% for 10 years. From a financial planning perspective if any client approached me and said, ‘Should I look into breaking my mortgage?’ my answer would be yes.”


Click here for more from the Financial Post.


The financial crisis that began in 2007 with the breakdown of the US residential mortgage market still persists for millions of Americans who have lost their houses, their jobs and all hope of a secure retirement.


As a result, residential real estate prices in the hardest-hit areas such as California, Arizona, Nevada and Florida are well below replacement value (ie, the land is valued at zero), leading many analysts to conclude that prices must be near, if not already at, the bottom.


At the same time, the Canadian dollar remains very strong against the US dollar. Any investment in US assets is likely to provide a decent return over time based on foreign exchange gains alone.
Taken together, these facts seem to suggest that Canadians have a once-in-a-lifetime opportunity: To buy US real estate in desirable locations at historically low prices using cheap US dollars.


Seems like a slam dunk, right? Maybe. But there are a number of factors to consider before pulling out your cheque book and booking a flight.


Click here for more details from the Financial Post.


CMHC’s latest survey of Canada’s rental markets yields some surprising finds and some long-term winners.


Rental housing is a hot topic across Canada as house prices rise above what many people can afford, prompting first-time homebuyers to defer a purchase. Add in economic uncertainties, and both tenants and landlords want a property that makes the best use of their money.


For landlords, however, cash flow remains king. Some perennially tight markets, like Vancouver, have been in vogue with foreign investors who see good long-term potential in a market where new apartment blocks aren’t being built.


Many other markets in Canada are also seeing the purpose-built rental stock shrinking. (The total number of purpose-built rental units in Canada actually increased by 5,648 units last year, however.)


Click here to see Canada’s Top 50 Rental Markets from Canadian Real Estate Wealth.



16 Mar

RBC takes on BMO banks 2.99% offer…


Posted by: Nisha Lalwani

Brokers may ultimately have to thank RBC for shooting holes in BMO’s 2.99% – the biggest of Canada’s big banks running ads critical of the no-frills mortgage.


“What good is a low rate mortgage without the frills?” asks an RBC full-pager running in a national daily. “Switch to RBC Royal Bank and get a 2.99% fixed-rate mortgage with all the frills.”


Aside from that last bit – the plug for RBC’s four-year fixed – the message amplifies the one mortgage brokers have struggled to get out to consumers.


They’ve used it to retain clients looking for BMO’s same rock-bottom rate, but unaware of the even lower prepayment privileges and the restrictive 25-year amortization.



The Bank of Canada kept its benchmark interest rate at a record low last Thursday, but surprised with slightly cheerier commentary that has economists wondering whether the central bank has brightened up enough to entertain a rate hike sooner rather than later.


Mark Carney, Governor of the Bank of Canada, highlighted an improving near-term outlook in pretty much every category of concern in his January rate decision, including the European credit crisis, the US economic recovery, global financial markets and the health of the Canadian economy.


“The heightened uncertainty around the global economic outlook has decreased in the weeks since the Bank released its January monetary policy report (MPR),” the bank said in a release explaining its rate decision. “Recent developments suggest that the outlook for the Canadian economy is marginally improved from the January MPR.”


Carney said the economy will likely grow faster than forecast in the first quarter due to temporary factors, but underlying momentum still points to an expected year of middling growth.


Click here for full details from the Financial Post.


The coming 2012 federal budget won’t include any “draconian” measures because Canada is in a better fiscal position than many other nations, Finance Minister Jim Flaherty said.


Flaherty was speaking to reporters in Ottawa after meeting with economists to solicit their opinions on a number of economic issues ahead of the budget.


He gave scant details about the 2012 federal budget, due to be released on March 29th.


“The government of Canada is in a relatively good fiscal situation, so we don’t need to be draconian. We’re not the government of the United Kingdom, we’re not in a situation thank goodness like Greece and Portugal and some other countries,” Flaherty said.


Click here for the CTV News article.
There’s one piece of good news about mortgage prepayment penalties: The cost of the penalty can be used as a tax deduction if you’re breaking your mortgage to move 40 km or more to be closer to work.


The Canada Revenue Agency has a provision that allows you to deduct the costs of moving if you’re doing so for a job or for full-time study at a university, college or other type of course at a post-secondary level.


You can claim other costs associated with selling your old residence as well: advertising, notary or legal fees, real estate commission as well as that dratted mortgage penalty “when the mortgage is paid off before maturity.”


Keep the receipts and fill out form T1-M Moving Expenses Deduction. For tax purposes, the mortgage penalties get lumped under “other selling costs, specify” on Line 16 of the T1-M form.


Click here to read more from The Star.


10 Mar

Three annoying things that banks do to customers……


Posted by: Nisha Lalwani

Three annoying things that banks do to customers are about to become history.


Following up on commitments made in the past two budgets, the federal government has announced measures that will stop banks from mailing unsolicited credit card convenience cheques to customers, and that will reduce the holding period on newly deposited cheques. The banks will also have to stop being so secretive about the penalties clients must pay when they want to get out of a mortgage early.


These measures represent some good work by a government that has been under pressure lately as a result of the robo-call affair. Strangely, the measures were announced on a Sunday and, therefore, didn’t get the initial attention they deserve.


The sharp decline we’ve seen in mortgage rates over the past few years has prompted many people to think about breaking their mortgages in order to lock in lower borrowing costs. A mortgage penalty must generally be paid in this situation, but it’s exceedingly difficult to find out how much it is and how it’s calculated.


Click here for the full Globe and Mail article.


Click here for mortgage prepayment bank requirement details from Ottawa.


Despite ongoing concerns about household debt, home ownership is becoming more affordable in Canada, not less, says new research by RBC.


RBC’s latest report says home affordability actually improved in the final months of 2011 for the second consecutive quarter, thanks to softening house prices and income gains.


Owning a home in Canada now takes up as much of pre-tax income as it did a year ago, even though household indebtedness has continued to rise and is now at a record high 153% of disposable income.


Ownership even became more affordable in the ultra-expensive Vancouver market, although it remains the dearest place in Canada to own a home.


Click here to read more in The Star.


Sluggish domestic growth and uncertainty about the global economy will likely keep the Bank of Canada from raising rates until the second quarter of 2013, according to a Reuters survey.


The Reuters poll of 42 economists and strategists released last week showed the median forecast for the next interest rate hike was pushed back by three months from the first quarter of 2013 projected in a January poll.


The results were similar to a February 17th poll of Canadian primary dealers, which forecast the next rate hike would happen in the third quarter of 2013.


The Bank of Canada’s target for the overnight rate has been at 1% since 2010.


Click here to read more from Reuters.


A BC real estate agent was fined $258,000 when he unilaterally cancelled a contract to sell a home and resold it to a second buyer for a higher amount.


Hwang Soo Lee of Surrey, BC, ended up having to compensate his first buyer for behaviour described by a judge as “high-handed and outrageous.” The lesson is that sellers who think they can change their mind and get out of a deal, should a better offer arise, must beware of the consequences.


In mid-January 2009, Lee signed a deal to sell his home in Surrey for $740,000. He needed to sell the house in a hurry, so the price was $26,000 less than he owed on the mortgage and the commission payable to the buyer’s agent.


But before that deal closed, Lee sold the home to a second buyer for $779,000, which would have covered all his costs. In an effort to get out of the first deal, he refused to let the buyers, Kundan and Puja Khullar, into the home to do a home inspection. Then he tried to change the terms of the deal by increasing the price, without any right to do so.


Click here for more in The Star.


Greece saw investors’ participation in a massive debt relief deal rise today, bringing the country closer to avoiding a default that would plunge it into financial chaos and re-ignite the European debt crisis.


About 24 hours before the deadline for acceptances, investors owning around half of Greece’s privately held debt had committed publicly to the bond swap, in which they will accept losses to avoid facing even bigger ones in the event of an outright default by Athens.


For the deal to work – and for Greece to secure a related €130 billion ($171 billion US) bailout – Greece needs 90% of investors to sign up. But a voluntary participation rate of around 70% could be enough to force most holdouts to go along.


Greece’s financial troubles are the centre of Europe’s two-year crisis, so successfully lightening its debt load is crucial to the overall plan of keeping the 17-nation euro currency afloat. The euro and stock markets rose today as confidence over the bond swap grew.


Click here for full details in the Globe and Mail.