Bond Yields Break Out

Some of the most competitive lenders in the market are boosting fixed rates by 10+ basis points, effective tomorrow. It comes on the heels of today's upside breakout in bond yields. The 5-year government yield (which leads fixed rates) sprang up to 1.51% today. That's a 3½ month high. If the yield holds above 1.50%, five-year mortgages around 3% could be a bygone, at least for the foreseeable future.

Yields are rallying in response to: The Greek bailout deal, Net-positive economic data, Increased risk appetite (i.e., traders are selling "safe" bonds and buying other assets), and Technical selling (We're coming off an epic bond bull market. Some traders are selling bonds and locking in profits [bond prices and yields move inversely]).

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Two steady housing years ahead: CMHC

Canada's housing market has two good years ahead of it yet, Canada Mortgage and Housing Corp. said Monday, with low interest rates and a "moderately" expanding economy keeping price corrections at bay. The Crown corporation – which insures Canadian mortgages – has had a consistently rosier view of the market than many private sector forecasters. Canadian banks have recently issued reports probing the consequences of cheap money, and trying to predict whether there is a bubble in prices that will eventually pop and cause prices to crash. They are particularly concerned about Vancouver and Toronto, where some have predicted price corrections of up to 10 per cent because of overbuilding in the condo market. But CMHC said Monday Canadian markets would "remain steady in 2012 and 2013. "With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011," said Mathieu Laberge, deputy chief economist. Also in the forecast: "Housing starts will be in the range of 164,000 to 212,700 units in 2012, with a point forecast of 190,000 units. In 2013, housing starts will be in the range of 168,900 to 219,300 units, with a point forecast of 193,800 units. Existing home sales will be in the range of 406,000 to 504,500 units in 2012, with a point forecast of 457,300 units. In 2013, MLS sales are expected to move up in the range of 417,600 to 517,400 units, with a point forecast of 468,200 units. The average MLS price is forecast to be between $330,000 and $410,000 in 2012 and between $335,000 and $430,000 in 2013. CMHC's point forecast for the average MLS price is $368,900 for 2012 and $379,000 for 2013. The moderate increases in the average MLS price are consistent with the balanced market conditions that occurred in 2011, and that are expected to continue in 2012 and 2013."

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STEVE LADURANTAYE - The Globe and Mail

Banks Rolling Back Mortgage Discounts

The deep discounts seen in the Canadian mortgage market in recent weeks are beginning to evaporate, as Canadian banks pull back on the historic low rates they rolled out in January. Royal Bank of Canada announced Monday that it is raising rates on a four-year fixed-rate mortgage with a 30-year amortization, to 3.39 per cent. That is an increase of 40 basis points from the 2.99 per cent RBC had been offering. (A basis point is 1/100th of a percentage point.) RBC also increased the rate slightly on a five-year fixed rate mortgage to 4.04 per cent, an increase of 10 basis points. The move comes after Bank of Montreal recently ended a two-week push in late January that saw it offer five-year fixed-rate mortgages with a 25-year amortization at 2.99 per cent. The move was designed to drum up mortgage sales in an otherwise slow month, and forced other banks to match those rates on a variety of similar offerings. Since banks track each others' moves closely, it is expected others will likely follow with a similar increase in the days ahead, now that RBC and BMO are pulling back. When RBC announced it was dropping its rates Jan. 13, the bank intended to keep them in the market until Feb. 29. The price-cutting by the banks caught Ottawa's attention, as the Bank of Canada and the Finance Department both remain concerned about Canadians taking on too much household debt. Sources told the Globe and Mail last week that officials in Ottawa were unhappy with the price war that developed on mortgage rates in January, at a time when the government is watching the housing market closely, concerned about consumers taking advantage of low rates to pile on debt, which could result in problems in the future if rates begin to rise.

Globe and Mail Update | Published Monday, Feb. 09, 2012 5:03PM EST

The Home Buyers’ Plan

The Home Buyers' Plan (HBP) is a program for first-time homebuyers that allows you to withdraw funds from your RRSPs to buy or build a home. You can withdraw up to $25,000 tax-free ($50,000 for a couple). Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP. Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You'll have to repay an amount to your RRSPs each year until your HBP balance is zero. If you don't repay the amount due for a year, it will have to be included in your income for that year.

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Building Your Home-Ownership Budget

Making the transition from renter to homeowner is likely one of the biggest decisions you'll make throughout your lifetime. It can also be a stressful experience if you don't plan ahead by building a budget and saving prior to embarking upon homeownership. Budgeting is a core ingredient that helps alleviate the stress associated with money issues that can sometimes arise if you purchase a home without knowing all of the associated costs – including down payment, closing expenses, ongoing maintenance, taxes and utilities. The trouble is, many first-time homeowners fail to carefully think about their finances, plan a budget or set savings aside. And in this society of instant gratification, money problems can quickly escalate. The key is to create a realistic budget based on your goals. Track your spending and make your dollars go further by sticking to your budget once it's in place. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to invest in homeownership. Following are three top tips to help you prepare for the purchase of your first home: 1. Set up a savings account. You can deposit a predetermined amount into this account each pay period that you won't touch unless it's absolutely necessary. This will enable you to put money aside for a down payment and cover closing costs, as well as address ongoing homeownership expenses such as maintenance, taxes and utilities. 2. Save up for big-ticket items. As you accumulate money in your savings account, you will be able to also save for specific purchases to help furnish your home – avoiding the buy now, pay later mentality, which can have a negative impact on your credit when you're seeking mortgage financing. 3. Surround yourself with a team of professionals. When you're getting ready to make your first home purchase, enlist my services as a licensed mortgage professional and find a trusted real estate agent. Experts are invaluable as you set out on the road to homeownership because we help first-time buyers through the home purchase and financing processes every day. Experts can answer all of your questions and set your mind at ease. I have access to multiple lenders, and can help you get pre-approved for a mortgage so you know exactly what you can afford to spend on a home before you head out house hunting, while a real estate agent will be able to match your needs with a house you can afford. Both parties will negotiate on your behalf to ensure you get the best bang for your buck. And, best of all, these services are typically free. Experts will also be able to refer you to other reputable professionals you may need for your home purchase, including a real estate lawyer and home appraiser.

Kupina Mortgage

Beware of Mortgage Rate Fixation

There has been a lot of chatter surrounding ultra-low rates that were introduced by many banks early this year. But, it's important to look beyond mere rates into the bigger picture surrounding what's significant when it comes to your specific mortgage needs. While "no-frills" mortgage products typically offer a lower – or more discounted – interest rate when compared with many other available products, the lower rate is really their only perk. The biggest problem with looking at rate alone is that you may end up paying thousands of dollars in early payout penalties if you opt for a five-year fixed-rate mortgage, for instance, and then decide to move before the five years is up. No-frills mortgage products won't let you take your mortgage with you if you purchase another property before your mortgage term is up – ie, portability is not an option with this product. Portability is an important option that could save you money over the long term if the home of your dreams is within your reach before your mortgage term is up and rates have risen, which they have a tendency to do over a five-year period. This type of product is only plausible for those who have minimal plans to take advantage of benefits that will help pay off your mortgage faster – such as pre-payment privileges including lump-sum payments. Essentially, this product is only ideal for: first-time homebuyers who want fixed payments and have limited opportunities to make lump-sum payments during the first five years of their mortgage; and property investors who need a low fixed rate and aren't concerned with making lump-sum payments. It's understandable why these products may seem appealing. After all, not everyone feels they have the extra cash to put down a huge lump-sum payment. And who needs a portable mortgage if you're not planning on moving any time soon? But it's important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage. You could get transferred, find a bigger house, have babies, change careers, etc. Five years is a long time to be anchored to something. Many people won't sign a cell phone contract for longer than three years that they can't get out of, so why would they then sign a mortgage for five years that they can't get out of? The thing is, you can still obtain great mortgage savings without giving up the perks of traditional mortgages. For starters, many lenders are willing to offer significant discounts if you opt for a 30-day "quick" close.

Kupina Mortgage

The Sting of Bank Penalties

Lenders like to keep you in their web as long as possible. If you've got a closed mortgage and try to escape, they sink their penalty fangs deep in your wallet. To the surprise of many, there are dramatic differences in how those penalties are calculated, even at the same bank. CIBC, for example, sells mortgages under multiple brands, with CIBC and FirstLine being the most popular. Recently, we did an interest rate differential (IRD) penalty calculation for a FirstLine customer who wanted to refinance. This client was fortunate to have closed his mortgage at FirstLine instead of directly with CIBC.

Had that customer chosen a CIBC-brand mortgage instead, his penalty would have been $3,210 higher—even though it's the same parent bank in both cases.*

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A Wonderful Place to Call Home ...

Are you thinking of purchasing a beautiful, new home or upgrading from your current house? We welcome you to visit the new Landmart Homes Escarpment Estates site Grimsby. After one outing to this absolutely stunning sales center, you will be saying "Where do I sign!" This future community surrounded by lush, protected greenbelt amidst the natural landscape of the Niagara Escarpment is perfect for families planning to move in summer 2013. Situated in one of the most highly desirable neighbourhoods in Lower Stoney Creek/Grimsby area, this area caters to the discerning homeowner who yearns for a peaceful setting within convenient reach of the city. Escarpment Estates is the ideal community for anyone looking for a high-quality neighbourhood with effortless access to all the services the area has to offer. Amenities are well-suited for families with schools, retail corners, restaurants and a central park comfortably within reach, with the added benefit of the QEW right on your doorstep acting as a gateway to the GTA. Yet, the protected green spaces of the region, the area's natural amenities and the neighbouring orchards and vineyards make it seem a world apart. This Landmart Homes project is unlike anything else in the Niagara region. Inspired by a rich heritage, contemporary design and community values, the floor plans for this neighbourhood are based on Landmart Homes most popular homes to date. Featuring light, airy and modern interiors, distinct exterior elevations, quality appointments and all the space you need to live in style and comfort on lots ranging from 40 to 50 feet, Escarpment Estates is a genuine place for genuine families. For more information on the community and homes, contact Trisha at 289-235-8208 or visit the Presentation Center at 590 Main St. West, Grimsby, Ontario. Escarpment Estates offers you more than a new home; it's a new way of life. It is definitely a 'must see'. Ask us how you can save on your mortgage for an Escarpment Estate Home. Visit www.KupinaMortgage.com for further details.

Mortgage Lending Tightens...

It's going to be tougher for the self employed, new immigrants and higher-risk borrowers to get a mortgage as concerns continue to mount over the state of Canada's housing market. CIBC's wholesale mortgage arm, FirstLine, quietly announced Tuesday that it will no longer accept new applications from "stated income"; homebuyers who can't prove they have the annual net income to qualify for home loans. FirstLine also set a $1 million cap on what it will lend for a home purchase. The major change in policy, which is bound to pique the interest of other major lenders, came on the same day it was revealed that the Canada Mortgage and Housing Corp. could be forced to cut back on the mortgages it insures. The moves are seen as among the clearest indications yet that Canada's hot housing market and record levels of household debt are a concern far beyond just the Ottawa offices of Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney.

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