CMHC - Canada’s Breaking Point
November 8, 2009
Is there a housing bubble in Canada?
Below is are quotes from an article published by Jonathan Tonge of the America Canada Blog.
“Everyone here is probably very well aware of who CMHC is. For any international visitors, CMHC was formed as a crown corporation in Canada after World War II to address the shortage in housing. It’s mandate was to make home ownership accessible to all Canadians. CMHC primary deliverables is mortgage insurance and mortgage backed securities. Think Fannie and Freddie”.
“In 2008, Canadian home prices started to dip as affordability became the worst on record in many cities. CMHC admits that it was ordered to approve as many high risk borrowers as possible to prop up the housing market and keep credit flowing. 42% of all high risk applications were approved, a 33% increase over 2007″. ”Even at the zenith of the US housing bubble, prices peaked around $230,000 US while incomes were around $47,000 US. In Canada, incomes are $44,000 and prices are now at $326,613″.
Don’t handcuff your mortgage
June 16, 2009
Below is a Financial Post article by Garry Marr, published: Friday, June 12, 2009.
Would you like to pay an extra $300 per month on your mortgage? Not likely.
That hasn’t stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight.
A fear of rising rates is driving the rash decision. But if you’ve finally managed to pin your banker to the ground, why on Earth would you let him off the mat?
More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October of last year, chances are you are now borrowing money for as little as 1.35%. That’s based on deals that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%.
New 50/50 mortgage
Merix Financial and TMG have launched a brand new hybrid called the 50/50 “Wise” Mortgage. It lets borrowers lock in 1/2 of their mortgage at a 5-year fixed rate and 1/2 at a 5-year variable rate. The effective combined rate is 3.38% as of today.
Hybrid mortgages offer interest rate diversification that may be suitable for some home owners. When it is difficult for a borrower to choose a fixed or variable rate mortgage, choosing a hybrid mortgage may be the answer to some borrowers:
Some experts think hybrids are a great idea. Dr. Moshe Milevsky, a prominent mortgage researcher, in the past said that “People should strongly consider mortgages that are part fixed and part floating.”
For more info on 50/50 mortgage, follow this link here.
The Merix 50/50 “Wise” Mortgage
June 16, 2009
Vancouver Home Mortgage: the 50/50 mortgage
Hybrid mortgages offer interest rate diversification that may be suitable for some home owners. When it is difficult for a borrower to choose a fixed or variable rate mortgage, choosing a hybrid mortgage may be the answer to some borrowers:
Some experts think hybrids are a great idea. Dr. Moshe Milevsky, a prominent mortgage researcher, in the past said that “People should strongly consider mortgages that are part fixed and part floating.”
Merix Financial and TMG have launched a brand new hybrid called the 50/50 “Wise” Mortgage. It lets borrowers lock in 1/2 of their mortgage at a 5-year fixed rate and 1/2 at a 5-year variable rate. The effective combined rate is 3.38% as of today.
What is a 50/50 mortgage?
· 50% of the mortgage is at current standard 5 year fixed rate pricing (currently 4.44%)
· 50% of the mortgage is at current ARM pricing (currently prime + 0.45%)
· Effective rate is approximately 3.57% based on current rates!!!!
· One collateral charge is registered
· ARM is convertible at any time during the term of the mortgage to our best fixed rates. ARM must be locked in to remaining term so both portions mature at the same time
· Mortgage is portable either into a new 50/50 Balanced Mortgage or the borrower can lock in the ARM portion prior to porting and port the whole mortgage as a blended fixed rate.
The 50/50 Balanced Mortgage Borrowers that choose the 50/50 balanced mortgage will benefit from historically low fixed rates and low ARM rates now and have the opportunity to lock in their ARM rate to a fixed rate at any time during the term of their mortgage. Your borrowers will be protected by being locked into a low fixed rate now and by having the ability to lock in their ARM portion at our best fixed rates at any point during the term of the mortgage.
The perfect balance
Contact me at 604-721-4817 for more info, or email me.
Vancouver Mortgage News - Variable Mortgage Rates Coming Down
May 26, 2009
More Canadian lenders are expected to reduce their variable mortgage rates
On April 21, 2009, the Bank of Canada (BoC) announced their last rate drop (BoC rate announcement). This brought down the overnight rate to its lowest rate at 1/4%. The Bank of Canada announced to hold the rate until “the end of the second quarter of 2010?.
Major lenders reacted quickly to the base rate cut and announced a reduction in their standard variable mortgage rates. The latest rates reductions from lenders like HSBC and Merix brought their variable rate mortgages down to 2.75% (prime + 0.5%) and 2.65% (prime + 0.4%).
Fixed rate mortgages can be had for as low as 3.05% for 3-years and 3.54% for 5-year term respectively. Home owners who are locked in at 5.0% are seriously considering the cost savings to refinance their mortgages. If you are considering refinancing your mortgage, you need to find out how much it will cost you to break your mortgage contract.
If your cost saving works out to be much more than your penalty cost, you may want to consider refinancing your home. For more information on whether you should refinance your mortgage, you can contact me at 604-721-4817 or email me.
Steepest Fall In Canadian’s economy
April 24, 2009
The Canadian economy took a shocking fall during the first quarter, dropping at the steepest pace in at least 50 years. The central bank dropped the overnight target interest rate to 0.25 per cent, and committing to keep it there for a year.
Gross domestic product fell an estimated 7.3 per cent - the biggest contraction since 1961. The contraction in the Canadian’s economy is worse than the United States which showed a contraction of 3 per cent. The main reason is that U.S. weakness in the housing and auto sectors is hammering critical Canadian export industries - vehicles, parts and forest products.
If the low policy fails to stimulate growth, the central bank had in mind to injecting new money into credit markets through what it calls quantitative and credit easing.
1) Quantitative Easing
The more dramatic approach would be quantitative easing - essentially increasing the money supply to improve the availability and cost of obtaining credit.
This would flood credit markets with money, making loans more easily available to businesses and households and, given the law of supply and demand, less costly.
One of the Bank of Canada’s roles is to print money - there are about $50 billion worth of banknotes currently in circulation - but Carney said quantitative easing would be “an electronic fashion of creating new central bank money.”
2) Credit Easing
The second measure would be credit easing, a more targeted approach for the bank to enter specific stressed credit markets, such as commercial paper or car leasing.
“Credit easing does not need to be financed through an expansion of settlement balances (printing money),” the bank said. “It could, instead, be financed either by reducing holdings of other assets or by increasing government deposit liabilities, so that the monetary base remains unchanged.”
Will this be a protracted recession?
Until there are signs of recovery in the global economy, Canada will experience a protracted slow down. The depth of Canada’s economic despair is reflected in the Bank of Canada’s revision to its estimate for the Canadian economy in the first quarter to contract at an annual rate of 7.3 per cent.
An article by foreignpolicy.com - “The Worst Is Yet to Come” previews the next stage of the global financial crisis.
Choosing Your Mortgage: Fixed Or Variable Rate?
March 10, 2009
Fixed Or Variable Rate Mortgage?
Bargain basement borrowing costs are prompting many Canadians to opt for fixed mortgages even though variable products continue to be a money-winning option for the foreseeable future, industry observers say.
Currently, the Bank of Canada’s trend-setting overnight rate is at 0.5 per cent, and Canadian Banks’ prime rate is at 2.5%.
Canadian Imperial Bank of Commerce’s chief economist says variable rate mortgages should produce the greater benefit for the next two to 2.5 years, but be a wash over five years.
“If you’re really risk-averse, jump on those fixed-term rates because they’re extremely cheap,” Benjamin Tal said. “Going variable probably will give you good performance for the next two years or so and beyond that, we might see interest rates rising.” Inflation could ultimately lead to higher interest rates, but likely not before 2011, he said.
Variable rates remain attractive even though banks last fall eliminated discounts and began charging premiums for their variable mortgages.
Homeowners whose mortgages were booked at prime rate with discounts as low as 90 basis points below prime should just stay with their variable mortgages until the end of their terms. They should take this opportunity to pay down their mortgages.
Studies conducted by Mortgage expert Moshe Milevsky of York University have shown that variable rates have historically produced greater savings 88 per cent of the time. “In today’s environment, you’d be hard-pressed to make a case to continue floating,” he said, advocating a blend between fixed and floating rates.
For home owners who prefer the security of fixed mortgages, and owners of rental properties, fixed-rate mortgages may work better as they can better budget their rental income with stable mortgage payment.
Other factors to consider
A home owner should consider other factors in deciding whether to get a fixed or variable mortgage. What kind of mortgage to take should never be made in isolation of individual circumstances such as the amount of equity, value of the house, debts and risk aversion.
In today’s real estate market where home prices are falling, seeking a long-term rate may be more important than the type of rate. There is a real danger that when you want to renew your 1 or 2 years mortgage, you may find that the mortgage on you owe is more than the value of your home.
Mortgage refinancing
March 9, 2009
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Mortgage refinancing
With interest rates at an all time low, homeowners are calling their mortgage brokers to inquire on refinance their mortgages at lower rates.
Homeowners who presently have fixed rate mortgages at 5.5% or higher are finding that they are better off refinancing their mortgages at today’s low 4.29% 5-year rate and pay the penalties, appraisal and legal costs. The cost benefit of switching to a lower interest rate in some cases are compelling.
Cost benefit analysis
A home owner with $342,200 mortgage (25 years amortization) at 5.65%, paying $2,167.92 a month will save $269.24 a month refinancing at 4.29%. With 3.5 years remaining on the mortgage, the saving works out to just over $11,300. Depending on the costs of refinancing, a home owner can decide if he or she should refinance.
If you are interested in refinancing, you should contact your curent lender to find out the penalty cost of breaking your mortgage contract. Your mortgage broker can work out the cost benefit and advise you whether you are better off refinancing or to stay put with your mortgage. Reinancing has to make sense, save you money or helps free up extra cash you need.
Should you refinance to make your home more energy efficient?
February 3, 2009
Refinance to make your home more energy efficient makes sense
The 2009 budget offers home owners up to $1,350 tax credit for energy efficient home improvements.
Here are the reasons:
* As part of the 2009 budget your client may qualify for the Home Renovation Tax Credit (HRTC) of up to $1,350 for renovations completed within the next 12 months.
* You can get a 10% rebate on the mortgage insurance premium if you refinance you home to make it more energy efficient? Plus, the extended amortization without surcharge may be available to your client. Note: this rebate also applies to customers who purchase an energy efficient home
* In addition to the 10% rebate, you may be eligible for additional federal and provincial grants of up to $10,000 under the Canada ecoEnergy Retrofit grant
Additional benefits of the above programs:
* Energy efficient improvements are attractive because they offer lower monthly utility bills
* This translates into income for you, allowing you to free up income to qualify or buy a more expensive home (increasing their borrowing power)
* You’ll increase the resale value of you home — an official EnerGuide label proves you’ve done the work
Details on the renovation tax credit.Return to Homepage.
Cut In Bank Rate
January 20, 2009
Mortgage news report by Vancouver Home Mortgage:
The Bank of Canada has trimmed it’s overnight target rate by 1/2%. That puts it at 1.00%, an all-time low.
OTTAWA – The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 1 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 1 1/4 per cent.
The outlook for the global economy has deteriorated since the Bank’s December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity. Heightened uncertainty is undermining business and household confidence worldwide and further eroding domestic demand. Major advanced economies, including Canada’s, are now in recession and emerging-market economies are increasingly affected. Energy prices have fallen as a result of substantially weaker global demand.
BMO, RBC, TD, CIBC, and Scotia Bank followed the rate cut in reducing their prime rates to 3.00% as well. This rate reduction will be be applauded by borrowers.
The Bank of Canada has now cut rates by a total of 3.50% in the last 13 months. The Bank’s next scheduled interest rate announcement is March 3.
Click here for current discounted rates available from The Mortgage Group.
Saving On Mortgage Interest Payment
November 9, 2008
How much can you save on mortgage interest payment?
Your savings can be as much as tens of thousands of dollars in interest payment. It is also possible to pay off your mortgage in about one-third the time on your 30 years mortgage. The great news is that you achieve this result by making the same regular monthly mortgage payment on your 30 years mortgage.
How come you have not heard of this?
Most home owners are already using accelerated mortgage repayment plan to pay off their mortgage. But, until now, no one has provided them with a “mortgage repayment accelerator” program that they can effectively take control of their mortgage repayment.
Smart Mortgage Management
Most home owners are concerned about the mortgage interest rates they are paying. Good mortgage management goes far beyond getting a good rate. While most home owners are aware and express the desire to pay off their mortgages early, a more disciplined approach and active management of their mortgages can help them save thousands of dollars in mortgage interest payments.
You can email me for more details on how you too can pay off your mortgage in one-third the time,and save thousands of dollars in mortgage interest payment.
