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

May 2011 Market Update

The Spring Market is underway. For those of you thinking about selling, it is important to realize how vital the Art of Pricing is to the sale of your home.

All sellers want the highest price possible for their homes, but the strategies to get there are not always intuitive. In certain circumstances, pricing low can be more effective than pricing high, while in others, pricing above market value can be a winning strategy. In most cases, however, the optimum pricing strategy is to price within 10% of market value and let the market decide. After all, the ‘list price’ comes with a caveat: Or Best Offer.

Top 5 Reasons for NOT Pricing High:

• 1. You lose out on potential buyers who put a price cap on their property searches.
• 2. Serious buyers question the motivation of a seller with an overpriced listing.
• 3. You provide a strong comparable for your neighbours who are properly priced. You are effectively selling other people’s well-priced homes.
• 4. Buyers assume that properties which remain on the market for long periods of time have something inherently wrong with them.
• 5. Other agents will be more hesitant to show your home.

May 2011 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

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

We are simply thrilled to let you know that we won the  Best Customer Service in Canada from an Individual Office for the SECOND year in a row!

Rumor has it  that all seven judges voted for us unanimously.  Whether that is true or not … all of our customers DID vote with their wonderful testimonials and stories.

THANK YOU!!  Every day we have the opportunity to be grateful for your phone calls, your support and your repeat business.

The CMP  awards  took place on April 29th  in Toronto.  It was one big party, with over 500 people attending the gala celebration.  Hosted by radio personality Maureen Holloway, the fun-filled Las Vegas-themed evening featured acrobatic performances, and live music at a party sponsored by Merix Financial (who also sponsored our award category).

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Merix Financial Best Customer Service,
Individual Office:

Averbach Mortgages,
The Mortgage Group,
Vancouver, B.C.

Check out some of the testimonials we have received.
And be sure to add your own!

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On March 11th an earthquake measuring 8.8 magnitude hit northern Japan and triggered a devastating tsunami. Within a day the markets tumbled around the world.

In Canada, the major banks reacted to the market woes by dropping their rates. As Japan fades from the daily newscasts, Canada’s banks have again reacted by raising their fixed rates.

Depending on the bank … 5-year posted rates are going up to 5.69%.

We are still able to get you better rates from many of our lenders, but if you plan on making a purchase or re-mortgaging within the next few months, give us a call for pre-approval or to lock in a good rate.

Contact us or give us a call at 604-736-1855

On March 18th the new Mortgage financing rules went into effect. We have been inundated with calls asking about the new rules and how they will affect different scenarios.

Here is a synopsis of the new mortgage rules.  We have highlighted the three most important areas and have provided our opinions on how the rules will impact  renewals, refinances and new purchases.

Maximum Amortization Period

In high ratio mortgages, where the down payment is less than 20%, the maximum amortization has been reduced from 35 years to 30 years.

In conventional mortgages, where the down payment is 20% or more,  the maximum amortization has been reduced to 30 years by the big banks. Thirty-five and forty year terms are still available from some lenders.

How does this affect the average consumer?

On a typical $400,000 – 5-year fixed rate mortgage at 3.94% the drop in amortization from 35 to 30 years increases the payment by $139.42 (1749.10 vs 1888.52) per month or put another way it will increase the monthly payment by $34.85 per $100,000 borrowed. (Check out our rates which are currently lower than the 3.94% in the example.)

Another way of looking at the affect on an average borrower making $60,000 per year is to measure the overall drop in their buying power.

Borrowing limit at 35 year amortization => $367000
Borrowing limit at 30 year amortization => $339000

The reduced amortization causes the borrowing power to decrease by $28,000 in this example.

Once you see the numbers it becomes obvious that the amortization rule change will not make or break most deals. It is unfortunate that most lenders are adapting the new 30-year amortization limit on all loans regardless of the Loan-to-Value ratio.  This industry is constantly evolving. I can remember the excitement during the introduction of the extended amortization rules … first 35 then 40 years. It will be interesting to see if the government eventually scales it all the way back to 25 years.

The good news is that we still have access to the longer term amortizations if our clients need or want them. In fact, a 40 year amortized loan is still available on conventional loans (LTV <80%)…and at some very good rates.

Refinance Maximum Loan to Value

The maximum loan to value for residential properties will be reduced to 85% from 90%.

How Does This Affect YOU?

We see this rule change as an interesting social experiment. The Finance Minister Jim Flaherty is doing his best to stop consumers from bleeding all of the equity out of their homes. By reducing the LTV limit on refinances he is making it harder for borrowers to subsidize their lifestyles via the ETO (Equity Take Out) refinance loan.

While Flahety’s intentions are good, the question is will this rule change have the effect on consumer spending habits that he is hoping for? If it does, then this policy change will reduce additional spending (on average) and thus help to reduce Canadian debt levels in general.

Our fear is that people spend money without regard to higher level lending guidelines. We see it in applications that come across our desks every week. People buy cars, take vacations, and rack up credit card debt without thinking about the position they are putting themselves in.

The ETO refinance is the solution to the problem…it is not the cause! If a client can roll $30,000 worth of accumulated debt into their mortgage and drop the carrying cost from an interest rate of 18% to under 4% they are in a far better position. Our argument is that if we don’t let them do this refinance, they may be held prisoner to their debt load for many years.

We are not sure who is correct in this argument but it will be interesting to see if this rule change helps to reduce overall debt loads in Canada. It is possible that this rule change will reduce the net debt levels, but at the cost of also reducing the affordability of the debt already incurred.

Refinance of Current Mortgages

The good news is that renewals will not be affected by this rule change. If you keep the terms of the mortgage exactly the same,  the mortgage will continue at the original amortization. The only change you will notice is the change in your payments caused by the resetting of the interest rate … not by a change to the amortization.

Remember, if you change anything in the original mortgage you are subject to the new rules at the time of the refinance and thus will lose the longer amortization!

As always, should you have any questions or concerns, please do not hesitate to contact us.

CALL US NOW:  604-736-1855

The Bank of Canada’s decision to leave interest rates unchanged resulted in the loonie moving 0.18 of a cent lower to $102.66  US.  Even so, our currency is riding at a 3-year high.

The Bank observed:

The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of the anticipated rebalancing of demand.  While consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes. Business investment continues to expand rapidly as companies take advantage of stimulative financial conditions and respond to competitive imperatives.

Summing up its’ decision to maintain the rate, the press announcement stated:

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.

The next scheduled date for announcing the overnight rate target is April 12, 2011. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published on April 13, 2011.

I came across a great blog post about Truth in Advertising,  from the good folks at CanadianMortgageTrends.com Canadian Mortgage Trends is focused on providing information to mortgage brokers, but I thought that their recent post brought up some good points.

As a consumer YOU are protected from false advertising claims by:

The Competition Act

The Canadian Code of Advertising Standards

The Canadian Association of Accredited Mortgage Professionals’ Code of Ethics

and in British Columbia by the Mortgage Brokers Act, which prohibits brokers from making “false, misleading or deceptive statements in any kind of advertising.

As summarized by Canadian Mortgage Trends, the fines (and jail time) for violating the laws behind the acts are prohibitive and apply to individual brokers as well as  large companies and corporations.

. . .  a company alleged to have made false or misleading advertising could be investigated by the Competition Tribunal, culminating in a hearing before the Competition Tribunal or courts and a fine of up to $10 million for a first order, and $15 million for each subsequent order. For individuals, the fines can reach $750,000 for a first offence and $1 million for each subsequent order.

“Making a false or misleading representation, whether as a broker or any other advertiser, has very serious consequences,” Hearn told CMT. “Whether you meant the misrepresentation or not, if it’s out there you’re subject to that risk.”

If it’s proven that you made a misrepresentation to the public “knowingly” or even “recklessly”, the case becomes criminal and in a worst case scenario you could be open to heavy fines at the discretion of the criminal court, jail time and even a class action lawsuit for damage arising from the misrepresentation, Hearn said.

Those are some pretty harsh penalties, the threat of which keeps some brokers from going over the edge in their advertising.

It appears that the biggest challenge is in knowing whether or not you’ve “gone over the edge.” For example there have been some law suits against brokers who advertised amazingly low rates; rates that had their competition wondering. Turns out the brokers were subsidizing the loans which is an iffy and dangerous practice!

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To us, the most important reasons to stick to the “truth” in advertising are:

ONE:  Is is the right and morally correct thing to do. There is NO good reason to trick customers and falsify information.

TWO:  We have built our business on good customer service.  To us,  good customer service means being totally honest and above board.  We want (and insist) that our customers know what they are signing and committing to. When you are honest and tell your customers the truth (good or bad) they will trust you and come back again and again.