Mortgage News - January 2013

1.    What’s Next With Mortgage Rates
No Need to Panic Over Mortgage Rule Changes
 Saving up for a down payment? The young adult's struggle
   Why Everyone Should Be Using a Mortgage Broker!

 Today’s Rates
Dec 4th, 2012

 1 year     2.74% 

 2 year     2.69%

 3 year     2.89%

 4 year     2.99%

 5 year     2.94%

10 year    3.95%

 5 year    P-.35%


Doug Lifford & Associates Wins Award!

Yup - our sleepy little office here in Mission took home Reliable Mortgage's Top Producer Award at the River Rock Casino in Sept 2012. It was quite an honor to receive this award in front of 60 or so of our peers, many of who are themselves top producers and nationally ranked.  Many people forget that we arrange mortgages for our clients throughout BC.


Mortgage Brokers are paid by the institution for arranging your mortgage.  Since all institutions generally pay us the same, we are not beholden to any one lender – rather we represent and look after one person – you!

Guess Who Joined Doug Lifford & Associates Inc.?

Brad or…….

Terry Enns?

Nope – the correct answer is Terry Enns!
Terry brings 12 years of lending experience to our growing team.  Sorry Brad – experience counts here!

Join my Mom and her friend on my facebook page – Terry Enns

1.    What’s Next With Mortgage Rates
Well - the good news is that the current choices are between cheap and cheaper! It's never been less expensive to choose the wrong mortgage term.

With the US economy showing the slowest recovery since The 1929 Great Depression, and US Federal Reserve’s Ben Bernake's comments that US rates will stay put into 2015, Bank of Canada’s Mark Carney is handcuffed. If Carney raises rates too fast and out of sync with the US, the CDN$ could go to $1.10-$1.15 per USD$.  When the Canadian dollar is higher than the USD, this immediately hurts our exports to the US markets and other trading partners who pay in US dollars – essentially increasing the cost of Canadian goods. 

In addition, Europe’s economic debt crisis is nowhere close to being fixed and will continue to drag on the global economy for years to come.

I just don't see how those higher rate forecasts will come to fruition in the next two to three years? Japan has been at near zero rates for nearly 20 years. Who's to say the US and Canada can't stay at near current rate levels for the next 5 years? Canada is viewed as a safe haven out there in the world and countries will continue to buy our bonds and keep fixed rates low for the foreseeable future.

2.      No Need to Panic Over Mortgage Rule Changes

You would have thought that Canada’s Minister of Finance, Mr. Flaherty, was announcing the arrival of the Four Horsemen of the Apocalypse when reading the reactions of most mortgage industry insiders to the recent mortgage rule changes.

Here are the rule changes along with why I think these aren’t bad for Canadians:

* The maximum amortization on a high-ratio mortgage will be reduced from 30 years to 25 years.

This change has the same impact on mortgage affordability as a .95 per cent rise in interest rates. That said, while 40 per cent of high-ratio borrowers opted for a 30-year amortization over the last year, the vast majority of these borrowers could have qualified using a 25-year amortization anyway, so this change should only affect marginal borrowers who would have been the most vulnerable to rate rises in future.  Keep in mind that this change is happening when mortgage rates are at an all-time low, as opposed to bringing these changes onboard when rates are at more historical norms i.e. 4.19% Nov 2009.

* Mortgage refinancing will now be limited to a maximum of 80 per cent of the value of a property (down from 85 per cent).

 The decision to stop offering high-ratio mortgage insurance on refinance transactions is an attempt to reign in the conversion of credit-card debt into mortgage debt. This practice was commonplace during the U.S. housing bubble run-up and exponentially increased the long-term damage done to the U.S. economy when real estate prices corrected. Home equity extraction has been steadily rising in Canada over the last decade and the federal government is wise to take steps to limit the potential damage it can cause.

* High-ratio mortgage insurance will no longer be offered on properties valued at over $1 million.

 History has shown that high-value properties are subject to greater price fluctuations when real estate markets soften and as such, highly leveraged high-end properties come with an inherently higher level of risk. Requiring a minimum down payment of 20 per cent is a way to help mitigate this increased marginal risk.

* The maximum gross debt service ratio will be limited to 39 per cent and the maximum total debt service ratios will remain at 44 per cent.

 Until now, high-ratio borrowers with excellent credit scores could have their gross debt service ratios waived altogether. This has meant that their mortgage and other basic property costs could total 44 per cent of their gross income if they had no other debt. Now their mortgage and other basic property costs will be capped at 39 per cent, regardless of whether they have any other debt, and that slightly reduces the maximum mortgage amount for the relatively small sub-group of borrowers who have no other debt.
3.   Saving up for a down payment? The young adult's struggle

For today’s highly leveraged consumer, saving the required 5% down payment isn’t as easy as it was in the early 1980s when personal savings rates exceeded 20 per cent.  The national average purchase price for a first-time buyer has soared to roughly $295,000. That means the average first-time buyer would need to save more than $16,000 to cover the minimum 5 per cent down payment and closing costs. How long does it take young people to scrape together that kind of money?

The rate of savings has been trending near 4 per cent and the median family income is just shy of $70,000. The median family would, by this measure, be saving about $2,800 annually.  The annual cash savings of first-time buyers – who are on average 34 years old, according to CMHC – would be somewhat less than the median family.  And understandably, socking away a good chunk would be even harder for a single person. I would suspect that on a median basis, just to get in the housing market (with 5 per cent down), would take about four to five years of saving.

If you know of someone in this boat, suggest that they give us a call.  If they have good income and credit, often times we are able to arrange a low interest loan for the down payment.  And with interest rates at historical lows, now might be the time to buy.
4.  Why Everyone Should Be Using a Mortgage Broker!
Banks have been getting slammed with regulatory changes happening this past year. Tightening rules for self-employed, exclusion of child tax benefits, restrictions on down payment, increased scrutiny of past and length of credit, and reduction or elimination of rental suite income are just a few of the tightening policies felt by lending staff.  Fortunately, no two lending institutions have the same lending policies.  In fact, most consumers would be shocked at how lending policies differ from not only institution to institution, but from branch to branch.

Experienced Mortgage Brokers know each lending institutions mortgage policies inside and out – and that means we not only help our clients by getting them a better rate than they could on their own, but by placing them with the lending institution that best fits their specific needs.



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