Jared Chamberlain video blogs (vlogs) about his experience in a conversation with another realtor in calgary and how they thought that buyers needed to put down minimum 10% for a personal residence. Jared talks about how this is NOT the case and nothing of the sorts has been passed thus far. For any comments or questions or if you don’t care for Jared’s thoughts please email him at jared@tcgroup.ca and visit wwwChamberlainGroup.ca for more info.
Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010
OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
The ongoing global economic recovery is being driven largely by strong domestic demand growth in many emerging-market economies and supported in advanced economies by exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.
The level of economic activity in Canada has been slightly higher than the Bank had projected in its January Monetary Policy Report (MPR). The economy grew at an annual rate of 5 per cent in the fourth quarter of 2009, spurred by vigorous domestic spending and further recovery in exports. The underlying factors supporting Canada's recovery are largely unchanged - policy stimulus, increased confidence, improved financial conditions, global growth, and higher terms of trade. At the same time, the persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada.
Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity. The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess supply.
Conditional on the current outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.
The risks to the outlook for inflation continue to be those outlined in the January MPR. On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength of the Canadian dollar. The Bank judges that the main macroeconomic risks to the inflation projection are roughly balanced.
The next scheduled date for announcing the overnight rate target is 20 April 2010.
Jared Chamberlain video blogs about changes to the mortgage industry that will take effect on April 19, 2010. If you would like to leave a comment or don’t care for Jared’s thoughts, you can email him at jared@tcgroup.ca or leave a comment below.
A summary of the new changes introduced this morning by Finance Minister Jim Flaherty, to come into effect April 19th, 2010 are as follows:
1. Borrowers must meet the standards for a 5 year fixed rate mortgage even if they are choosing to sign onto a mortgage with a shorter term and lower rate.
2. When re-financing your home, you may only take out up to 90% of the equity instead of 95%.
3. A minimum down payment of 20% required for non-owner occupied properties.
Surprisingly to some, there were actually no changes to the minimum down payment as was previously hinted at. The current minimum down payment remains at 5%. The maximum amortization has remained at 35 years, also with no change.
CTV.ca News Staff Ottawa has tightened the rules for obtaining a government-backed mortgage, as it casts an eye towards expected future interest rate increases and the risks those pose for Canadian homeowners.
Finance Minister Jim Flaherty announced Tuesday morning that prospective homeowners will soon have to meet the requirements for a five-year, fixed rate mortgage -- as opposed to the three-year standard in place right now. The rule will apply even if they choose a mortgage with a lower interest rate and shorter term.
Flaherty told reporters gathered at an Ottawa news conference that the change will "help Canadians prepare for higher interest rates in the future."
"One must always guard against the temptation to take on more financial risk simply because interest rates are low. Our government is acting to help prevent Canadian households from getting overextended and acting to help prevent some lenders from facilitating it," he said.
Flaherty also announced Ottawa will also limit the amount of mortgage refinancing that homeowners can undertake.
"We will lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes," he said.
"This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up," he added.
"We are encouraging people to build equity over time, using homeownership as an effective way to save, rather than as a vehicle for quick cash."
The finance minister also announced that housing speculators will now have to put down a 20 per cent down payment on properties they will not be living in, to qualify for a government-backed mortgage.
But he said the government is not trying to crack down on investment properties such as rental units.
"What we're getting at is the speculation in multiple-condo markets, in particular," he said, making reference to incidents in the Vancouver and Toronto markets as examples.
Preventative measures
Flaherty said the changes, which are expected to come into force on April 19, were necessary to prevent future problems and he insisted they would not make it harder for Canadians to buy houses.
"The only restriction would be qualifying at a five-year, fixed-term basis, which is a credit qualification that a number of our chartered banks have already gone to," Flaherty said.
"I think that most prudent Canadians would want to have that level of ‘credit-worthiness,' of credit qualification, so that they could rest assured that their house would remain affordable -- and the mortgage remain affordable -- when interest rates rise, as they inevitably will."
Pointing to mortgage changes the Conservative government instituted two years ago -- including a minimum five per cent down payment for new mortgages and a maximum 35-year amortization period -- Flaherty said they also helped Canadians avert the kind of housing crisis seen in the United States in the current recession.
Economists had previously called for the minister to be stricter about who can get new mortgages, but warned the government not to put on the brakes to strongly, in order to preserve the fragile economic recovery. On Tuesday, several said they favoured the new rules brought forward by the government.
"Given the prospect of higher interest rates and the recent run-up in housing prices in some markets across Canada, the measures announced today are prudent," Frank Techar, president, personal and commercial banking, BMO Bank of Montreal said in a statement.
Carleton University professor Ian Lee said he supported the changes, but said he would also like to see the required mortgage housing down payment doubled from five to 10 per cent.
"In my judgment, the most important predictor of risk in home ownership is the amount of down payment," Lee told CTV News Channel from Ottawa on Tuesday morning.
Lee said he was hoping the finance minister would increase the required down payment "to really take out that additional risk that is there, which is caused by the fact that interest rates are going to go up."
"And when they go up, some of these people will not be able to keep their house, because they will not be able to afford the payments," he said.
BNN's Michael Kane said Flaherty's position is that while there may not be a housing bubble immediately on the horizon, he wants to be proactive in preventing one from forming.
"What Mr. Flaherty is saying here, is that even though he doesn't see the bubble really forming at all, to put certain measures in place so one does not get the chance to build is the prudent thing to do," Kane said Tuesday morning from Toronto.
Overall, Flaherty said the Canadian housing market is "healthy and stable," with about two-thirds of Canadians owning their own homes.
"Our housing market… has been a source of strength for our country and a source of growing wealth for hardworking Canadians themselves," Flaherty said.
ING president speaks out against tighter mortgage rules
| Tuesday, 9 February 2010
After providing several comments on the potential housing bubble in Canada, ING Direct Canada president Peter Aceto told the Globe and Mail that Ottawa shouldn't tighten mortgage rules.
"High level, one-stroke fixes are too simple, and can have a very large impact," Aceto told the newspaper. "I worry about government-based tightening of the mortgage rules creating a much worse reaction - too fast of a cooling, which is not really good for anyone."
Aceto went on to say that banks can tighten rules themselves and do not need Finance Minister Jim Flaherty to "make the decision for them."
The comments come alongside a warning from Scotia Capital economists Derek Holt and Karen Cordes, who predicted a housing bubble forming in a report released late last year.
"You can't go from 100 km/h to zero in a nanosecond without suffering harsh consequences," they wrote, according to the Globe. "Newton's third law is the best caution that can be served up with respect to abruptly altering Canadian mortgage rules as per some of the whisper talk leading up to the March 4 federal budget after the currently government sharply liberalized the mortgage market in early 2007."
At some point every year, I have a lively conversation about interest rates with my uncle that always ends with a familiar line that goes something like, ” …but have you forgot when interest rates were 20%? It could happen again.”
Good drama, that is, as he always makes it sound like those were long, tough days, etched in his memory forever, and that we all suffered long-term psychological affects as a result of those interest rates.
The truth of the matter is that if you look back over the years, those incredibly high interest rates lasted only a few months before rapidly decreasing. Inflation was the culprit then, hovering in the 12% range for most of the early 1980s, a far cry from today’s core rate of 1.5%. However, while interest rates were that high for only short period, many people panicked and locked in to long-term mortgages, only to see interest rates fall in the following year – dramatically.
Let’s take a moment to better understand how inflation can affect interest rates in Canada. First off, the term ‘core inflation rate’ is likely one of the most misunderstood economic terms that is used by governments around the world. The core rate measures the price change in products and services that we purchase in our lives and excludes many items which have volatile price movements (energy and food products). Many of these volatile products are items a normal family buys each month.
Governments control our spending behavior by manipulating interest rates. When inflation is low, we can maintain low interest rates, which encourage consumers to spend which, in turn, should stimulate the overall economy.
Inflation affects
I suggest to people that they measure their own inflation rate based on the products and services they buy. For example, buying a home in Toronto became more expensive in 2008 due to mayor David Miller’s new municipal land transfer tax, but this new levy does not apply to someone living outside of this city. Likewise, when the Liberals in Ontario pass the new harmonized sales tax (which sounds peaceful and serene) it adds an additional tax of 8% to all new homes over $400,000 in the province. This increase in price affects residents in Ontario only. The point is: where we live and how we live always dictates our personal inflation rate.
Over the past decade, we have witnessed large movements in interest rates and we have learned not to panic and make quick, short-term decisions. From 1990 to 2004, interest rates decreased to a low of 3.5% from a high of 12%. Since 2004, rates moved higher to 6.25%, only to fall again the following year. The long-term trend would suggest that Canada has wrestled inflation to the ground, which brought affordability to the market for the past eight years and has fueled tremendous growth in real estate values. We now are painfully aware that there were many other interesting factors at work that artificially fueled almost every aspect of our economy. But interest rates have actually decreased. When you really think about it, we have got ourselves into so much hot water that we cannot increase rates in fear of stopping what little economy we have going.
Our advice in this market is to stay calm and move away from sharp objects. Is now the time to lock into a long-term mortgage contract? Does a 4% five-year rate look pretty tantalizing? Well, how does 3% sound? As long as our largest trading partner, the US, is having problems, rates will remain low to stimulate our economies. Let’s be clear: every economist and business leader in the world anticipates that once the government stimulus begins to work its way through the system, interest rates will begin to rise to combat price pressure. But until then, now is a great time to enjoy the low rates and pay down your mortgage.
The good news for Canadians is that the prime rate in Canada will likely decrease again in the following months. Whether it moves to 0% like it has in the US, only time will tell. But this makes mortgages extraordinarily inexpensive in this country. Many mortgage brokers have long educated clients on the benefits of choosing a variable rate mortgage over a fixed product. The fact is that the prime rate in Canada has maintained a 3% band for the past nine years. We recognize that there is a comfort in knowing what your mortgage payment is each month, and variable rate mortgages are often associated with volatility.
Buyers should seek advice from qualified mortgage agents who represent the entire marketplace and have access to many different products and solutions. At the end of the day, the best lesson is that it is easier and less expensive to pay off your mortgage when rates are low. Now is your opportunity to start contributing to your bottom line and not your bank’s.
I came across this article today and thought that it is something that is worth sharing to all of you… If you are in the pre-approval process, this may help out!
Every year CMP conducts a brokers on lenders survey and this year’s results appeared in issue 4.7 (July), out this week. But there wasn’t room for all of the results for all of the lenders so we were only able to list the top ten for each category. The following is a complete alphabetical list of every lender that recieved more than 50 votes on this year’s survey, along with their scores, which were graded from one (very poor) to five (very good).
Abode Mortgage Corporation Approval/ loan turnaround times 3.47 BDM support 4.18 Broker support (training, information seminars etc) 2.95 Interest Rates 3.27 IT and electronic/ technology 2.86 Overall service level to brokers 3.45 Product Range 2.87 Satisfaction Index on Overall credit policy 3.54 Transparency of commission structure 4.08 Underwriter support 3.27 Overall Average 3.41
Bridgewater Bank Approval/ loan turnaround times 3.55 BDM support 3.89 Broker support (training, information seminars etc) 2.99 Interest Rates 3.01 IT and electronic/ technology 2.84 Overall service level to brokers 3.54 Product Range 3.44 Satisfaction Index on Overall credit policy 3.45 Transparency of commission structure 3.90 Underwriter support 3.51 Overall Average 3.42
Equitable Trust Approval/ loan turnaround times 3.58 BDM support 3.56 Broker support (training, information seminars etc) 3.04
Interest Rates 3.06 IT and electronic/ technology 2.66
Overall service level to brokers 3.40 Product Range 2.76 Satisfaction Index on Overall credit policy 3.26 Transparency of commission structure 3.67 Underwriter support 3.68 Overall Average 3.28
First National Approval/ loan turnaround times 4.48 BDM support 3.76 Broker support (training, information seminars etc) 3.44 Interest Rates 3.80 IT and electronic/ technology 4.38 Overall service level to brokers 4.22
Product Range 3.35 Satisfaction Index on Overall credit policy 3.87 Transparency of commission structure 4.26 Underwriter support 4.22 Overall Average 3.98
First Line Mortgages Approval/ loan turnaround times 2.04
BDM support 3.59
Broker support (training, information seminars etc) 3.42 Interest Rates 3.51 IT and electronic/ technology 2.99 Overall service level to brokers 2.72 Product Range 4.06 Satisfaction Index on Overall credit policy 3.06 Transparency of commission structure 3.66 Underwriter support 2.77 Overall Average 3.18
Home Trust Approval/ loan turnaround times 3.52 BDM support 3.41 Broker support (training, information seminars etc) 2.98 Interest Rates 3.50
IT and electronic/ technology 2.57 Overall service level to brokers 3.61 Product Range 3.36 Satisfaction Index on Overall credit policy 3.43 Transparency of commission structure 3.73 Underwriter support 3.72 Overall Average 3.39
ING Direct Approval/ loan turnaround times 3.56 BDM support 3.45 Broker support (training, information seminars etc) 2.84
Interest Rates 3.87
IT and electronic/ technology 3.03 Overall service level to brokers 3.51 Product Range 3.13 Satisfaction Index on Overall credit policy 3.42 Transparency of commission structure 4.13 Underwriter support 3.54 Overall Average 3.45
Laurentian B2B Trust Approval/ loan turnaround times 2.81 BDM support 3.06 Broker support (training, information seminars etc) 2.38 Interest Rates 3.37 IT and electronic/ technology 2.40 Overall service level to brokers 3.10 Product Range 3.50 Satisfaction Index on Overall credit policy 2.90 Transparency of commission structure 3.42 Underwriter support 3.04 Overall Average 3.01
Macquarie Approval/ loan turnaround times 3.39 BDM support 3.64
Broker support (training, information seminars etc) 3.13 Interest Rates 3.64 IT and electronic/ technology 2.91 Overall service level to brokers 3.48 Product Range 3.05 Satisfaction Index on Overall credit policy 3.25
Transparency of commission structure 3.74 Underwriter support 3.44 Overall Average 3.37
MCAP Approval/ loan turnaround times 3.60 BDM support 3.44 Broker support (training, information seminars etc) 2.93 Interest Rates 3.95 IT and electronic/ technology 3.60 Overall service level to brokers 3.45 Product Range 3.41 Satisfaction Index on Overall credit policy 3.31 Transparency of commission structure 3.83
Underwriter support 3.45 Overall Average 3.50
Merix Approval/ loan turnaround times 3.33 BDM support 3.91 Broker support (training, information seminars etc) 3.21 Interest Rates 3.94
IT and electronic/ technology 3.52
Overall service level to brokers 3.60 Product Range 3.34 Satisfaction Index on Overall credit policy 3.38 Transparency of commission structure 3.65 Underwriter support 3.51 Overall Average 3.54
National Bank Approval/ loan turnaround times 2.43 BDM support 3.03 Broker support (training, information seminars etc) 2.55 Interest Rates 2.50 IT and electronic/ technology 2.41 Overall service level to brokers 2.74 Product Range 3.12 Satisfaction Index on Overall credit policy 2.75 Transparency of commission structure 3.51 Underwriter support 2.77 Overall Average 2.78
Resmor Approval/ loan turnaround times 3.20 BDM support 3.32 Broker support (training, information seminars etc) 2.77 Interest Rates 3.14 IT and electronic/ technology 2.75 Overall service level to brokers 3.26 Product Range 2.79 Satisfaction Index on Overall credit policy 3.16 Transparency of commission structure 3.59 Underwriter support 3.26 Overall Average 3.13
Scotia Mortgage Authority Approval/ loan turnaround times 2.95 BDM support 3.20 Broker support (training, information seminars etc) 2.71 Interest Rates 3.43 IT and electronic/ technology 3.33 Overall service level to brokers 3.04 Product Range 3.85 Satisfaction Index on Overall credit policy 3.10
Transparency of commission structure 3.68 Underwriter support 3.33 Overall Average 3.26
Street Capital Approval/ loan turnaround times 3.49 BDM support 3.87 Broker support (training, information seminars etc) 3.15 Interest Rates 3.64 IT and electronic/ technology 2.75 Overall service level to brokers 3.47 Product Range 3.20 Satisfaction Index on Overall credit policy 3.35 Transparency of commission structure 3.73 Underwriter support 3.55 Overall Average 3.42
TD Canada Trust Approval/ loan turnaround times 3.01 BDM support 3.07 Broker support (training, information seminars etc) 2.77 Interest Rates 3.26 IT and electronic/ technology 2.87 Overall service level to brokers 3.06 Product Range 3.52 Satisfaction Index on Overall credit policy 3.27 Transparency of commission structure 3.73 Underwriter support 3.12 Overall Average 3.17
Buying a home that you can fix up and resell at a much higher price can certainly yield you worthwhile profits if you are aware of the market value of similar homes in the same area.
This can be difficult when you do not know what to look for. Below are a few tips you should follow when trying to determine your target price for your fixer upper home.
Initial Considerations Before Buying
It is important for any fixer upper that you purchase a home which needs only cosmetic repairs. Unless such work is your specialty, you do not want to deal with a house requiring major repairs that will cost in supplies and labor as much to fix up as buying a new home.
Small repairs can add a lot to the value and eye appeal, thus helping you to realize a profit much more quickly than if you need to replace roofs and plumbing damage.
A house that only needs cosmetic repairs – such as paint, fixtures, and new kitchen cabinets, for example – will take less time to fix up and often look much better to both the buyer and seller.
Maximizing Your Returns
By renovating the home, you have already taken the first step toward earning a profit. However pricing the home for resale can be the greater challenge.
You need to have a home that is almost ideal after renovations as well as having an attractive price to go along with it. Setting a target price for your home can be something of a gamble.
First, by the time you renovate the house, the real estate market may be changing for the worse. And second, the buyers who are willing to pay your price may not be looking to purchase a renovated home at the time you are selling.
However, by setting a price that is beneficial for both you and the buyer, you will most likely be able to sell quickly and make a tidy profit at the same time.
A Little Investigative Work
Simply by doing some basic research, you can determine your target price more easily than you might think. This investigation includes assessing not only the home, but the general location as well.
You want to know what types of people will be interested in your home, and whether you prefer to cater to families, young professionals, or singles. That will provide you a good indication about the price at which you need to sell the home.
Location is the number one factor that draws interested visitors and eventually sells a home. So the more appealing the location, the more you can ask for the house once it is remodeled.
Setting a price that will earn you maximum profits while simultaneously selling quickly can be a challenge, for sure. However if you follow these tips, you will find it easier to determine a terrific price that brings a smile to both you and the buyer.
When all is said and done, if you are wanting to buy a fixer upper to live in vs. a flip, it may be better to live in it for a while as a possible exit strategy as the markets are still a bit unsettled… Food for thought!
The Chamberlain Group is a full time real estate team working at RE/MAX Mountain View in Calgary Alberta. There are many contributors or 'Experts' apart of this blog, and each one makes up a vital part of our, and your real estate team if you work with us to sell your home in Calgary. All views and opinions written within these pages are simply that, views and opinions. We look forward to helping you in any way with your next real estate transaction. Click here to find out more about The Chamberlain Group.
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At some point every year, I have a lively conversation about interest rates with my uncle that always ends with a familiar line that goes something like, ” …but have you forgot when interest rates were 20%? It could happen again.”
Every year CMP conducts a brokers on lenders survey and this year’s results appeared in issue 4.7 (July), out this week. But there wasn’t room for all of the results for all of the lenders so we were only able to list the top ten for each category. The following is a complete alphabetical list of every lender that recieved more than 50 votes on this year’s survey, along with their scores, which were graded from one (very poor) to five (very good).
Buying a 