Market Commentary

Earlier today, First National Financial, one of Canada's largest mortgage companies issued a market summary. This is what their economists predict will be happening for the rest of 2012. It's a guess, but it's an educated guess. Here's what they had to say. "The latest interest rate announcement and policy statement from the Bank of Canada make it pretty clear there’s unlikely to be any increase this year. While the economy appeared to be making all the right moves early in the first quarter, in the end, the results didn’t meet expectations. The resurgence of the Greek problem, the growing troubles in Spain (the euro zone finance ministers agreed to lend Spain up to $125-billion (U.S.) to shore up its struggling banks),slowing in the rest of Europe, China and the U.S., and weaker than expect growth at home have the central bank backing away from hints about a hike. Nonetheless the Bank remains concerned about the risk of a housing bubble and a high level of household debt." With rates this low, is it time for you to renew your mortgage early or consider getting a preapproval? Contact me to discuss your options. If you would like to get a weekly email with current mortgage rates click here and fill out your email address under Subscribe to News and Rates. David Cooke - your Calgary mortgage broker

More Canadians locking into low interest rates

An article in the Vancouver Province newspaper highlighted some changes going on in the Canadian mortgage market. People are slowly moving away from variable rate mortgages. At this time 29% of homeowners have variable rate mortgages but over time, they switch to fixed rates. Why? Interest rates are at all time lows, where will they be going? Up , of course. Another interesting trend is how people are taking advantage of pre-payment privileges. 23% of mortgage holders are increasing their monthly payments, and 19% of making lump sum payments. Is there an incentive behind this? Yes, every dollar that you pay down saves you $3. In interest over the term of the mortgage. Put down an extra $1000 from your Christmas bonus and save $3000. Canadians have also been bombarded by news reports about how average household debt is increasing. This is how many people are reacting. Personally I think that you should start with your high interest debts. Pay off your credit cards at 19% , follow that up with your car payments at 6-8% and then tackle your mortgage. You may wonder where you can come up with the money. Well, it's the time of year when we all get our tax refunds. Instead of spending it on sometime we don't need why not spend it on paying down debt and saving huge amounts of interest. That can be very rewarding and gratifying. Try it now and see how much more money you will have next year at this time. For more information on mortgages and credit visit visit your favourite Calgary mortgage broker at my website.

Crystal Ball Time - Calgary housing prices are going up

Today's Calgary Herald had an article about how MLS sales had gone up substantially in May. How much? 27.9% as of May 28th. Year over year we are up over 7% from 2011. What does this mean for the Calgary housing market? Housing prices have already started to go up and are about to jump. What makes me feel confident that this is about to happen? There are a number of factors which lead me to believe this. 1- oil prices are sitting around $100 +. This means that the oil sands projects are profitable , conventional oil is profitable and so there's cash being spent. We are already seeing news articles on a shortage of trained workers. This means we will see more British ex-pats and Americans coming to Calgary. They will need housing. 2- Jim Flaherty seems to feel that mortgages are bad debt and keeps tightening the rules. I heard that he is going to lower the maximum allowable amount for home equity lines of credit (HELOC's) to 65% from 80% Any tightening of the rules will make fence sitters jump. 3 - While there are new homes being built, if demand goes up too quickly, builders will not be able to keep up and existing homes will increase in value. 4- finally as values for existing homes near the 2007 peak, people who bought homes at that time who want to move will put their homes up for sale and look for new digs. Remember, in Calgary, your average person moves once every 3 years. There are probably thousands who are chewing at the bit and ready to move as soon as they see they wont' lose on selling their present home. What does this mean for you? If your mortgage is coming due in the next 24 months, it is time to look at renewing. Mortgage rules are tightening and interest rates are going up as soon as the Bank of Canada feels Canadians are confident and the economy is secure. If you want to apply for a early renewal or are looking for a pre approval so that you can go house hunting , click here . Approvals are quick and easy when you use David Cooke as your Calgary mortgage broker.

Canada is not the United States

Recently the Calgary Herald issued a story entitled. "Mortgage arrears rate highest in Alberta" . Reading this you would think that Alberta was going to be the next foreclosure capital of Canada. Following in the footsteps of our American brethren to the south with foreclosure signs on every block. The article goes on to say that the Canadian average for people who are in arrears which means they are 90 days behind on their mortgage payments, is .4%. That's 4 tenths of one per cent. Alberta is almost twice as high at .7% . Based on these numbers Alberta appears to be in trouble. However, if you look farther back you will see that arrears at their lowest in Alberta were at .35% in 2006 and 2007. While this is twice that number it is still below 1%. It should also be noted that the difference between the national average of .4 and the Alberta average of .7 is only .3 or 1/3 of one per cent. Now let's compare that to the US. The latest numbers for Nevada are from the last quarter of 2011. In Nevada in Q1, 19% of households were in arrears. Here's a graph

showing Nevada's arrears This means that someone in Nevada is 27 times more likely that an Albertan to be in arrears. It's time for people including journalists to take a chill pill and not over react to numbers. We are okay. If you want to know more about Canada's arrears or get help with your mortgage you can contact CMHC or contact me

Why brokers are better than banks

Recently, my wife was reminiscing about our first house. We had been married for about a year and decided it was time to buy a home. This was in 1986 but she has vivid memories of the experience. What she remembered about the home buying process was going to the bank to arrange the mortgage. She said that she felt like a criminal. The way they asked questions and would not assure her. The thing I remember was the computer screen. If a question came up and you tried to look at the bank employee's computer screen they would turn it away from you. Why? this is my information, what's the big secret? Years later when we had equity in our home, we applied for a home equity line of credit (HELOC) Although we had had a mortgage for over 20 years , and my wife had banked for longer with this bank, we were once again encouraged to apply but then treated like criminals. Were we worthy enough to get a line of credit? After making faces and without saying anything about what she was doing, the bank employee announced that we had qualified for the line of credit. Little did I know at the time, the rate she quoted me of 1 1/2% over prime, was high. If we were such good clients why were we being hosed? It was only after I did some homework that i was about to find out that we were paying more than if we had our line of credit with another financial institution. I called and asked for the lower rate and was told that I did not qualify because I did not have enough business with the bank. This is tied selling or relationship pricing and is illegal in Canada under section 459.1 of the Bank Act. As you can see, getting a mortgage and a line of credit took a lot of work, research and I had to put up with being treated like a kid. My revenge has been to become a mortgage broker. When I fill out an application with a client I tell them exactly what questions I will be asking and why. I then allow them to view the screen with me. Some people are so surprised. I 'm sure that they have had similar experiences at the bank. I also shop over 50 lenders to find the best rate for a product. I will offer the client a choice and explain the pros and cons of each product and let them make the decision. Most consumers ahve never had this experience before. They are used to a bank employee telling them what they need and sign here. Finally, financial documents can be difficult to read. I go over the documents line by line to help people understand what they are signing. Does this take a long time? Yes, but my clients are empowered and know what they are making a decision on. This is how I get my revenge on the banks for years of bad service. If you are tired of being treated like this contact me and I will assist you to gain control of your finances. My website

Overbidding on a house can backfire for the buyer.

We've all seen this before. A buyer is in a competitive situation with multiple bids on a house they overbid to get the property. The problem arrises when the offer to purchase is presented to the lender and the mortgage insurer, either CMHC, Genworth or Canada Guaranty. They review past home sales for the area and say that the house is worth ,say, $40,000 less. This means the buyer has to come up with their 5% down payment AND $40,000 to cover the shortfall. If the deal falls through, the buyer could lose their deposit which in many cases is $5000. This is a bitter lesson to learn. Here's an article on the subject. If you want to protect yourself, contact me for a preapproval. http://business.financialpost.com/2012/04/18/mortgage-wars-backfire/

Are 10 year Mortgage terms worth looking at?

Recently I have seen discussion on mortgage broker websites on the advantages of 10 year mortgages. This has not been a popular option over the years. I know that i have only done one 10 year mortgage deal in 7 years in the business.
Checking with CAAMP , the Canadian Association of Accredited Mortgage Professionals it turns out that nation-wide, only 1% of people go for this option.
What's changed? Well the 10 year rate has dropped below 4% and now sits at 3.89%. This used to considered a good 3 year rate a couple of years ago! What are the advantages of taking a longer term like 10 years? We know that rates are at historically low rates now. The only way for rates to go now is up. I recall getting my best clients into mortgages 2 years ago at 4.39%. This is now the interest rate some private mortgages are charging for people with bad credit.
We know that rates will go back up to 5-6% sometime in the next 2-3 years and stay there for a while. The advantage with taking a 10 year term at 3.89% is that you avoid all the rate hikes for the next 10 years. You get a really great rate under 4% which will beat rates over the next decade to be sure.
What are the disadvantages?
10 years is a long term. What if you want to get out of the mortgage or move? First - if you move, most lenders will let you port the mortgage. In addition, you can increase and blend the mortgage to account for any additional costs in the new home. The penalty is the tricky part. On a traditional mortgage you are charged 3 months interest or IRD, which stands for Interest Rate Differential. This is a tricky calculation that is in effect, pay us the interest you were going to pay us over the balance of the term. This can amount to $20,000 or more in penalties. This has prevented many people from renewing early over the past 18 months.
The new 10 year mortgages come with this feature; after 5 years you can break the mortgage with a simple 3 month penalty which figures out to about 1% of your mortgage. In a $200,000 mortgage this would be $2000. The savings will often pay off the penalty in a very short time.
So, is a 10 year mortgage good for you? It all depends on your situation and where you are in life.. It's best to talk to a mortgage professional like myself to see if this is a good option for you. Contact me today to discuss 5 and 10 year mortgages.