In a report prepared for the Canadian Association of Accredited Mortgage Professionals (“CAAMP”), it was found that:

• There are currently about 9.3 million home owners in Canada, of whom about 5.55 million have mortgages.
• About one-quarter (24%) of home owners had some form of mortgaging activity during the past 12 months: taking out a new mortgage on a home that was newly purchased or which previously did not have a mortgage (7%), renewing, refinancing or transferring an existing mortgage (17%), or paying off an existing mortgage (3%)1. The remainder (76% of home owners) did not have any mortgaging activity during the year.
• The average outstanding principal is $138,000. Based on the survey findings, it is estimated that outstanding mortgage principals on primary residences total $770 billion. Mortgages that were originated during the past year have a current total principal of $127 billion; mortgages renewed, refinanced, or transferred have a total principal of $180 billion; and for mortgage holders who were inactive during the year the current total principal is $494 billion.

What I found amazing about this profile report, is that out of  the estimated 9.3 million home owners in Canada, 3.75 million do NOT have a mortgage.  I would never have guessed!

Because we are in the “mortgage business” and engage in “mortgage talk” all day long, we often forget that new buyers may not understand what we are talking about.  The other day someone asked, “What does locking-in mean?”   We’re glad they asked, because we regularly advise locking-in as a strategy for home buyers and for those who are considering refinancing to take advantage of lower rates. (Lock-ins are also known as rate locks).

We advise buyers to lock-in at several critical points.

• When they have been pre-approved for a mortgage
• When they anticipate a rate increase

After applying for a mortgage, a lender will make you an offer.  You can lock-in that rate to protect yourself against rate increases.  This gives you time to find and purchase your home, or decide whether to refinance your mortgage.

What if the rates actually go down?  You get the lower rate!  So locking-in gives you the best of both worlds.  It protects you against rate increases and gives you the lowest rate possible.

How long can you lock in for?  Lock-ins can be normally be held for 90 and some lenders allow 120 days.

Most of us are familiar with the concepts of fixed and variable rate mortgages.  A hybrid mortgage combines the features of both.

For example you might see a hybrid mortgage that is made up of:
60% – 3 year fixed rate
40% – 3 year variable rate

As interest rates rise, buyers might off-set their risk by choosing a hybrid mortgage.  Some experts predict that hybrid mortgages may be more popular in coming years, but at this point in time, there are not many lenders offering them, which ultimately means you do not have as much flexibility in choice.

As always, if you have any questions about getting a mortgage, or about renewing or refinancing give us a call at 604-736-1855.

The major news agencies reported record employment numbers with “the largest gain yet in absolute terms and the biggest percentage increase since 2002.”

According to financial experts this pretty well ensures that there will be a rate hike increase in June 2010.  The only snag could be a financial meltdown stemming from the Greek financial crisis.

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“Unless the world economy experiences serious contagion effects stemming from the European situation, a rate hike in June is a done deal in Canada,” said Yanick Desnoyers, assistant chief economist at National Bank Financial.

Along with flowers and new veggies, spring and summer seems to come with a list of renovation projects ranging from minor “paint the back door” type projects all the way to major renos such as roof replacements or deck additions.

Many home owners tackle projects that will hopefully increase the value of their property such as kitchen and bathroom fixes or even a new garage.

The Canadian Mortgage and Housing Corporation website has a number of really useful resources specific to renovations.  From guides, lists and checklists to over a dozen informational videos. If you are even considering a renovation project, their Renovation Guide gives you a great “before you start” look at what you are getting into!

As always, if you are looking for options for financing your renovation project … give us a call first.  604-736-1855

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Kristie Marsden, Jason Low, Sandra Ens, Jason Feinstadt and Jenny Stephanson.

May 2010 Market Update

Last week, the Royal Bank boosted its mortgage rates for the third time in a month. The move increased RBC’s posted 5-year closed rate to 6.25% (Note: the posted rate is rarely paid. A good mortgage broker or even your own negotiating skills will often result in a lower rate being offered by a bank) and this has come amid overtures that the Bank of Canada will be looking to raise its overnight rate starting June 1st. That said, as of this writing, there are still some very competitive rates out there.
Fixed vs. Variable

The reason that fixed-rate mortgages have moved up even though the Bank of Canada (BoC) has yet to increase their overnight rate is a function of how the Big Banks fund their mortgage products.

Fixed-rate mortgages are usually funded via the bond market, which fluctuates and is forward-looking, like most markets. Therefore, as prices for bonds increase in anticipation of the BoC’s expected rate increases in the summer, fixed-rate mortgages that rely on their funding via these instruments must also increase.

Variable rates, on the other hand, are funded via the BoC’s overnight rate and therefore follow its fluctuations. That’s why today’s variable rate has remained unchanged despite three hikes in its fixed-rate brethren.

So which instrument should you use?

This question effectively boils down to risk-aversion. Historically, since 1975, variable rate mortgages have proven to be more financially beneficial 82% of the time. Risk and reward go hand in hand, so if you are willing to take on additional risk and have the financial wherewithal to weather potentially higher interest rates, a variable mortgage may be for you.

If, however, you want cost-certainty in your life and have lower financial flexibility, it may be worthwhile to pay more in return for a full night’s sleep.

May 2010 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Kristie Marsden 778-836-4389

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911