More Canadians locking in low-rate Mortgages

Highlights of CAAMP report:- 23% of mortgage borrowers voluntarily increased their regular payments - 19% made lump sum payments - 10% made both lump sum payments and increased their regular payments - 50% of borrowers pay at least $100 per month above their required payments - 74% of borrowers who renewed in the last year saw their rate decrease by an average of one-half percentage point - 83% of Canadians have at least 25% equity in their home Canadians have been taking advantage of record-low interest rates to lock in their mortgages, a new survey suggests.The Canadian Association of Accredited Mortgage Professionals, in its annual spring release, says among the 3.8 million Canadians with a fixed rate mortgage, 14% chose to lock in during the past year. "This data supports comments by lenders that they have high numbers of new borrowers who start with variable rate mortgages but soon opt for the security of fixed rates," says CAAMP in the report. Overall, 29% of those with mortgages have a variable rate leaving them with exposure to any changes in the Bank of Canada's lending rate which the prime rate — used in those loans — tends to track. The survey also found Canadians are making significant efforts to reduce their debt with 23% of respondents saying they voluntarily increased their regular payments, 19% making lump sum payments and 10% doing both. For those who increased their regular payments, the average amount of the increase was $400-$450 per month. With about 5.85 million mortgage holders in Canada and roughly 1.35 million increasing their payments, it translates into about $7-billion per year. Lump sum payments averaged $12,500, and with about 1.1 million people making these payments, that equals about $13.75-billion. "Despite daily warnings in the media about mortgage indebtedness — or maybe because of them — Canadians are making responsible decisions about their mortgages and they're exhibiting confidence in their own situations," said Jim Murphy, chief executive of CAAMP. "We should feel encouraged by this behaviour — it means Canadians are well positioned to weather a potential rise in interest rates." Overall Canadians have $994-billion in mortgages on their primary residences and $161-billion in controversial home equity lines of credit or HELOCs which allow them access to the equity in their home.The total equity takeout from residences was $46-billion in the past year with renovations accounting for $17.25-billion of the money used. Another $10-billion was used for investments and $9.25-billion for debt consolidation. Amortization periods, which have been legally shortened by Ottawa for insured government backed loans, are shortening. Lengths are down 20% but Ottawa legally reduced the length a mortgage could be amortized from 40 to 30 years over the past three years. Craig Alexander, chief economist with Toronto-Dominion Bank, said the locking of mortgage rates has protected consumers from future rise in rates. "It's a very positive thing that people are shifting to fixed rate because it provides greater security in protecting from upside risk in interest rates," he said. The survey also found despite the fact three of the major banks are either out of or backing out of the mortgage broker channel, it still is an important segment of the market. Brokers account for 26% of the market overall and captured 31% of activity in 2011. The report is based on information gathered by Maritz Research Canada in a survey of 2,000 Canadian consumers in April and May 2012. Source: http://business.financialpost.com/2012/05/30/canadians-locking-in-low-rate-mortgages-reducing-debt/

How is the Interest Rate Hike Going to Affect You?

Could your household withstand a 125-per-cent increase in interest rates? It's a question you should look beyond averages to answer, as it could mean the difference between living the homeowner's dream and having that dream turn into a cash-flow nightmare.

Read more...

Housing Affordability Slips

The costs of owning a home increased in most major cities across Canada after two consecutive quarters of improvement. According to the RBC Housing Trends and Affordability Report, Canada's housing affordability deteriorated slightly as homebuyer demand pushed home prices higher in the first quarter, driving the cost of owning a home modestly upwards. The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values. A rise in the measure represents deterioration in affordability. RBC's housing affordability measure for the benchmark detached bungalow was up 3.1 percentage points in Vancouver to 88.9 per cent, up 1.2 percentage points in Toronto to 53.4 per, up 0.9 percentage points in Ottawa to 41.8 per cent and up 1.2 percentage points in Montreal to 41.4 per cent. Calgary (36.7 per cent) remained unchanged, while Edmonton saw a drop of 0.4 percentage points to 32.4 per cent "It became a little tougher on household budgets to carry the costs of owning a home at market prices at the start of this year," said Craig Wright, senior vice-president and chief economist, RBC. "Strong buyer demand was a principal driver of the modest rise in homeownership costs. While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases." Looking ahead, the banks said it expects further challenges on the affordability front across Canada once the Bank of Canada begins raising interest rates in the fourth quarter of 2012 and assuming the European economy stays on the rails. "Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years," added Wright. "Affordability headwinds are likely to increase next year, as interest rates make their way towards more normal levels. We anticipate that the central bank will begin hiking rates gradually, however, which should help mitigate any widespread negative impact on the housing market. A gradual pace of increases will allow income growth to provide some offset." Stark regional divergences in affordability witnessed last year carried through to the first quarter of 2012. British Columbia's housing and, more expressly, the Vancouver-area market are situated at the weaker end of the affordability spectrum, while housing markets in Alberta and Atlantic Canada remain at the more affordable end. Local housing markets in Ontario had slightly less attractive affordability in comparison to the national average, while markets in Saskatchewan, Manitoba and Quebec were slightly more attractive. The Report: www.rbc.com/economics/market/pdf/house.pdf Source: http://www.mortgagebrokernews.ca/news/breaking-news/housing-affordability-slips/123780/

Weekly Rate Minder

May 29, 2012: This edition of the Weekly Rate Minder has the latest, best rates for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the mortgage that suits your needs. Best of all — our service is free.* It's the selected lender that pays us and YOU get the best rate. Please note that rates shown are subject to change without notice. The rates shown are  posted rates and the actual rate you receive may be different, depending upon your personal financial situation. Check with us for full details and to determine what rate will be available for you.*(O.A.C., E.&O.E.) Explore Mortgage Scenarios with Helpful Calculators at http://www.KupinaMortgage.com

Current Mortgage Rates

Term	Bank rates	Our Rates
6 Month	4.45%	4.45%
1 YEAR	3.20%	2.89%
2 YEARS	3.55%	3.09%
3 YEARS	3.95%	2.99%
4 YEARS	4.64%	3.25%
5 YEARS	5.44%	3.19%
7 YEARS	6.35%	3.99%
10 YEARS	6.75%	3.99%

Rates are subject to change without notice. *OAC E&OE Prime Rate is 3.00% Variable rate mortgage from as low as Prime

Mortgage brokers warn about new Refinancing Rules

Canada's mortgage brokers are warning the banking regulator that its proposed mortgage underwriting rules could result in people losing their homes. The brokers are concerned about a number of the potential rules, but the one that worries them most outlines what banks would have to do when a consumer wants to renew or refinance their mortgage. The proposed rules suggest that banks recheck areas such as employment status, current income and the current value of the home for renewals and refinancings. "This would be a significant, significant change," Jim Murphy, the head of the Canadian Association of Accredited Mortgage Professionals (CAAMP). Currently, when mortgages come up for renewal, banks tend to focus on the borrower's payment history. They rarely appraise the property again and not all banks will check the borrower's updated income level, Mr. Murphy said. "CAAMP strongly recommends that this concept be clarified so that mortgages continue to be renewed at maturity without requalification," the industry association said in a submission to the Office of the Superintendent of Financial Institutions (OSFI). "If not, homeowners who have been in compliance may no longer qualify. This would result in a number of properties hitting the market at the same time and thereby driving down prices." Such a phenomenon could add further fuel to a real estate downturn if lower house prices and higher unemployment caused more people to lose their homes upon renewal, Mr. Murphy suggested. Household debt driven by mortgage credit expansion is the main threat to the credit risk profiles of Canadian financial institutions, Fitch Ratings said in a report Monday. OSFI unveiled the proposed new rules in March, and requested submissions from the industry. Rod Giles, a spokesman for the banking regulator, said it has received a significant number of submissions from trade associations, lenders, insurers and the brokers as well as private citizens. OSFI is still reviewing them, but hopes to release final rules by the end of June, along with a summary of the submissions and the reasons for its decisions. It released the potential rules after the Financial Stability Board, a global financial oversight body, called on all regulators to ensure mortgage lenders were adhering to certain underwriting principles. But, with Ottawa seeking to prevent a runup in Canadian house prices from leading to a crash, Canada's proposed guidelines go a bit further. OSFI has signalled it wants banks to limit home equity lines of credit to 65 per cent of a property's value. "Many borrowers use HELOCs to invest in capital markets or even for their own business purposes," CAAMP says in its submission. "In this way, many Canadians are using their HELOCs for retirement and job creation – a positive goal which the government is trying to encourage." Canada's six biggest banks held $912-billion worth of exposure to the residential mortgage market at the end of January, according to figures compiled by Fitch. That included $730-billion of mortgages and $182-billion of home equity lines of credit. The mortgage brokers would like to see people with good credit and income be able to borrow more than 65 per cent of the value of their home. One proposed rule that the group applauds would eliminate so-called "cash back" mortgages, which essentially allow a consumer to borrow their down payment from the bank. In 2008, Finance Minister Jim Flaherty changed the rules so that consumers had to put at least 5 per cent down (after a period of time during which Ottawa had allowed mortgages with a zero down payment). However, Ottawa left the door open for consumers to borrow that 5 per cent. The big banks subsequently came out with products in which they will lend a mortgage and give the borrower an amount equal to 5 per cent of the value up front (at a steeper rate). "Borrowers should have 'skin in the game,' " CAAMP said in its submission. Source: The Globe and Mail

Mortgage Terminology: A Simple Guide

Understanding the nuts and bolts of your mortgage may seem intimidating at first, but it's not as difficult as it sounds. Learning more about how mortgages work could save you thousands of dollars in interest or penalties. Read more ...

Nail the Right Term Length First ...

Finding a good mortgage rate online is a cinch. Anyone who has ever looked for rate comparison sites knows the Internet is packed with them. But determining the best mortgage term – the length of the mortgage contract – is trickier because up-to-date term comparisons are hard to find. Although mortgage terms are often overshadowed by the intense focus on mortgage rates, it pays to put a lot of thought into term selection. It's the No. 1 factor in determining how much interest you'll fork over to a lender. Read more ...

Weekly Rate Minder

May 1, 2012: This edition of the Weekly Rate Minder has the latest, best rates for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the mortgage that suits your needs. Best of all — our service is free.* It's the selected lender that pays us and YOU get the best rate. Please note that rates shown are subject to change without notice. The rates shown are  posted rates and the actual rate you receive may be different, depending upon your personal financial situation. Check with us for full details and to determine what rate will be available for you.*(O.A.C., E.&O.E.) Explore Mortgage Scenarios with Helpful Calculators at http://www.KupinaMortgage.com

Current Mortgage Rates

Term	Bank rates	Our Rates
6 Month	4.45%	4.45%
1 YEAR	3.20%	2.89%
2 YEARS	3.55%	3.09%
3 YEARS	3.95%	2.99%
4 YEARS	4.64%	3.25%
5 YEARS	5.44%	3.29%
7 YEARS	6.35%	3.99%
10 YEARS	6.75%	3.99%

Rates are subject to change without notice. *OAC E&OE Prime Rate is 3.00% Variable rate mortgage from as low as Prime

Save Big By Shopping at Renewal

While most Canadians spend a lot of time and expend a lot of effort in shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. Omitting proper consideration at the time of renewal costs Canadians thousands of extra dollars every year. It's important to never accept the first rate offer that your existing lender sends to you in the mail around renewal time. Without any negotiation, simply signing up for the market rate on a renewal will unnecessarily cost you a lot of extra money on your mortgage. It would be my pleasure to have the lenders compete for your mortgage business at renewal time to ensure you receive the best mortgage options and rate catered to your specific needs. After all, just because a lender had the best available product or rate for you when you obtained a mortgage one, three or five years ago does not mean the same holds true in today's market. With products and rates changing on an ongoing basis, you can't possibly know what the best offering is for your unique situation without having me – a mortgage professional – do some investigating on your behalf. It's my job to look at every rate and product change from each lender – including banks, trust companies and credit unions – every morning to ensure I find the best deals for my clients. I also have the inside scoop on specials available through dozens of lenders thanks to the large volume of business I fund through these lenders each year. Often times, your existing lender will send a highball renewal rate to their existing clients in the hopes that you'll simply sign the renewal form and send it back. Your best bet is to come to me prior to your renewal date or forward the lender's renewal offer to me before signing anything. That way, you can rest assure you're getting the best possible mortgage product and rate that suits both your current and future mortgage needs. Katarina

3 Reasons to Consider a 10 Year Term

The 10-year fixed-rate mortgage has generated renewed interest lately as borrowers look to lock in for the long term and enjoy the security and peace of mind this brings. With mortgage rates at all-time lows, it turns out that fashion isn't the only thing that comes back into style! In fact, 10-year fixed mortgage rates have never looked so tempting.

Following are three key reasons to consider a 10-year mortgage term:

1. After five years, you only have to pay three months' interest to get out of the mortgage. This is currently the lowest penalty available for a fixed rate – much more attractive than facing a much higher interest rate differential (IRD) penalty! 2. If you're on a fixed income, taking advantage of a longer term fixed-rate mortgage can definitely be beneficial. Currently, with our historically low interest rates, a five-year fixed rate is around 3.19% and 10-year is around 3.89%. So, if after five years rates have risen to 4.6% or higher (which is very likely), you would have been ahead taking the current 10-year at 3.89%. Instead of guessing how much longer rates will remain at historic lows, if you're on a fixed income, you know you'll be paying the same rate for 10 years. And, chances are, after 10 years are up, you'll be in better shape financially and have more equity in your home. 3. You don't need the equity out of your home for your next purchase as you can buy again with a 5% down payment. For instance, if you purchase with 5% down, your property would have to go up more than 25% for you to get equity to use as a down payment for a second home, which is not likely in five years. But, you can turn your current condo into a rental and buy your next home with 5% down (with a combination of savings or a gift). Rental mortgages usually require a 20% down payment, whereas primary residences typically require just 5% down. Purchasing a condo to live in until you're ready to buy another home, and then renting out the condo, is a great way to become a real estate investor without having to come up with a 20% down payment. The return of the solid 10-year means you have options. It may not be the best option for everyone, and the market may change in a few months to make it less attractive. Let me show you how all the products apply to your specific situation to ensure you receive the best product and rate to meet your unique needs. As always, if you have questions about mortgage terms, or other mortgage-related questions, I'm here to help! Mark  

Weekly Rate Minder

May 1, 2012: This edition of the Weekly Rate Minder has the latest, best rates for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the mortgage that suits your needs. Best of all — our service is free.* It's the selected lender that pays us and YOU get the best rate. Please note that rates shown are subject to change without notice. The rates shown are  posted rates and the actual rate you receive may be different, depending upon your personal financial situation. Check with us for full details and to determine what rate will be available for you.*(O.A.C., E.&O.E.) Explore Mortgage Scenarios with Helpful Calculators at http://www.KupinaMortgage.com

Current Mortgage Rates

Term	Bank rates	Our Rates
6 Month	4.45%	4.45%
1 YEAR	3.20%	2.74%
2 YEARS	3.55%	2.74%
3 YEARS	3.95%	2.94%
4 YEARS	4.64%	3.09%
5 YEARS	5.44%	3.29%
7 YEARS	6.35%	3.99%
10 YEARS	6.75%	3.99%

Rates are subject to change without notice. *OAC E&OE Prime Rate is 3.00% Variable rate mortgage from as low as Prime - 0.10%