Monthly Archives: August 2011

Mortgage Monday Update-August 29th 2011

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The Canadian mortgage market is once again feeling the winds of change.  This past week brought us some unexpected changes on the variable front that left some home-buyers a little confused as to what mortgage product to pursue.

Fixed Mortgage Rate Outlook

Last week, we saw a hike in five-year Government of Canada (GOC) bond yields, finishing 13 basis points higher. The traditional gross spread level is around 150 basis points and if lenders were to use this benchmark, the current government bond yield suggests a 5-year rate of around 3.10% [1], which is currently the lowest 5-year fixed rate available. But for the moment, most lenders are making use of the extra spread and standing in unison to protect their profit margins.

Rather than decreasing the fixed rates, lenders chose to increase variable rates to address the increasing profit gap between the two.

Variable Mortgage Rate Outlook

Last week, RBC signaled that variable mortgage rates were too costly and cut their discount. Their 5-year variable rate now stands at prime – an even 3.00%. As expected, the big banks as well as smaller financial institutions followed suit and we saw an overall increase in variable rates over the course of the week.

For lenders, the profit earned on variable rates is a fraction of that earned on fixed rates. However, variable mortgage products have been consistently popular among borrowers in recent months. Consequently, lenders have been driven to increase the spread between fixed and variable rates, thereby making fixed rates look more enticing.

The growing popularity of variable mortgage rates may take a slight dip as home-buyers weigh their options and are forced to rethink their mortgage options.

If you’re considering a variable rate, cover your bases and get a rate hold as soon as possible. The prime rate is prone to fluctuations, but a 90 to 180-day rate hold can guarantee you the discount in relation to prime. Despite the increases, a variable rate may still translate to greater savings in the long run.

Economic Outlook

The Bank of Canada doesn’t intend to raise short-term rates in the near future and Finance Minister Flaherty is highly concerned about controlling consumer borrowing in the current extended low-rate situation. Lenders can justify their hike on variable rates, citing that this pre-emptive move may circumvent the need for a fourth round of mortgage rule changes, which would inevitably be more permanent [1].

On August 25th, Scotiabank released a global forecast update stating that due to a weaker U.S. economic performance and “a more cautious consumer”, they have lowered expectations for Canadian GDP growth. Now, output growth is expected to average around 2.6% in 2011 and 2.4% in 2012. This has reduced by 0.1 of a percentage point since the last prediction [2].
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Best Money Saving Tips

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Recently Ratehub.ca held a “Money Saving” contest on Facebook, where fans had the chance to win prizes by sharing their best money saving tip. The contest was a success with three runner-up winners taking home $15 iTunes gift cards and the grand prize winner walking away with a Sony Blu-Ray player! Now that the dust has settled, we’ve had time to look at the entries and analyze the data. The contest was fairly open-ended so we received all kinds of great advice from people.  However, we discovered most of the data fell under eight categories. They are as follows:

RE-USE

This included using the Freecycle network, buying used, shopping in thrift stores, garage sales, and utilizing your local library.

“Dryer Sheets! Cut them in half, do `em all at once, bit of a nuisance but worth it because they last TWICE as long, ie: you aren`t having to buy another box anywhere near as quickly. You will not notice any difference by having a 1/2 sheet in the dryer load as opposed to a full sheet ;-) ” – Debra Anderson

“Use the library. The latest books, DVDs and CDs are all available.” – Nancy J. Montgomery

BARGAIN HUNTING/SHOPPING AROUND

Most comments were centered around haggling, shopping in more than one location, and delaying “want” purchases.

“Don`t be afraid to ask for a discount – the worst that can happen is that you`ll get refused.” – Francine Fogel

SAVINGS

These tips involved utilizing smart withdrawals and rewarding savings accounts

“Have savings come out the same day you get paid – that way it`s like you never had the money to begin with!”- Tonya Wagenaar

SELF-CONTROL/BUDGET

This type of comment was the most popular.

“Write a list of savings goals you want to achieve, and then create a plan to get you there. Putting it down on paper will make it more real, and will increase the chances of you succeeding.” Give Me My Five Bucks Back

COUPONS

This is pretty self-explanatory.

“Extreme couponing !!!!! aww yea” – Kate Thomson
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Top Tweets of the Week August 22nd – August 26th

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A lot happened this week – Steve Jobs resigned, an earthquake hit Toronto, and Hurricane Irene is headed for the Northeast – but nothing was perhaps as newsworthy as MTV announcing Britney Spears will receive a Lifetime Achievement Award.

Clearly, her days of dancing with snakes in a schoolgirl skirts while JT cheers on are over. The end of an era.

Here it is, folks, the week in Tweets!

 

August 23rd

BuzzBuzzHome BuzzBuzzHome

WOW! Picture of the devastation after the earthquake in Toronto —> bit.ly/qjKs5Z

mortgagejake jake abramowicz

I thought the #earthquake was #mortgage rates going lower. (BAD BAD JOKE)

jameskwantes James Kwantes

As if the shakeup hitting Wall Street and markets in recent weeks wasn`t enough RT @hblodget: Our building is shaking

[You guys should start a travelling comedy troop]

moneyville Adam Mayers

Are you tired of paying more money than Americans for US retailers? J-Crew launches with higher Canadian prices mnyvl.ca/ovntrI

[YES! We are]

preetbanerjee Preet Banerjee

Study says 35% of Tablet Owners Use Them in the Bathroom, I say 65% of owners are lying on.mash.to/n75tYB

[As Tweeted from the toilet]

iSlutsky Matthew Slutsky

Amen. RT @jrdorkin: RT @mizzle: Trolls suck. They`re just sad, pathetic little people who need to be eaten by sharks. – I`m not a fan either

[Guys, come on, they’re forced to live under bridges. Isn’t that enough?]

BrianPersaud Brian Persaud

I just take orders from @WileyCanada RT @syladurantaye: Working late, because @brianpersaud is a slave driver.

[Just don’t take orders from the guy if he’s captaining a boat]

syladurantaye Steve Ladurantaye

@islutsky You`d be wise to keep @brianpersaud, @ratehub_canada and me off any boat, summit or no.

August 24th

BuzzBuzzHome BuzzBuzzHome by iSlutsky

FYI: this storm was sponsored by BuzzBuzzHome. We hope you are enjoying the show. #GTAstorm

[Those special effects striking the CN Tower must have cost a bundle]

iSlutsky Matthew Slutsky

Time for #SlutFest2011…wow, that hashtag looks bad on Twitter.

[Sounds scandalous]

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Housing Purchase Power Parity: Halifax

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The theory of Purchase Power Parity (PPP) states that goods should cost the same in different countries when you factor in the exchange rate. The Big Mac Index (PPP) was developed in the 1980’s to measure the value of different currencies, based on the common “good”, the Big Mac hamburger. As an example, if it costs $5 (USD) to purchase the famous treat in the US, then converting it to CDN dollars should buy us the same burger in Canada.1

If you’ve been following along with us during our little economics experiment, you are already aware of our RH Index, which we use to measure Canadian housing markets to determine its value. We’ve substituted Big Mac burgers for “Big Mac” homes. Our hamburger home is defined as a two-story, detached, three-bedroom, two-bathroom property.2

Let’s hit the fertile harbours of Nova Scotia and visit Halifax:

MLS®: 40389504, $290,000

Housing Purchase Power Parity

Notes

You can find this property in the middle of downtown Halifax, facing the harbour and only a short drive away from universities.

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GTA condo market is hot

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The GTA condo market is hot, but is it overheated? This is the question posed by a recent article in The Wall Street Journal, featuring quotes from our friend and GTA realtor Andrew La Fleur. The Journal looked to markets that spiked then cooled like Miami, and pointed to the likelihood of history repeating itself with Toronto.

Still, interest rates are low, home prices are high and the market is booming as new condo projects flood the market. Buyers might not be as aggressive if market drivers change, but there are other forces behind the condo boom, as visually represented by this un-BEE-lievable infographic presented by BuzzBuzzHome.

Fifty-percent of condo buyers in the GTA are first-time home buyers, signalling this as a popular means to get into the housing market. Condos are less expensive than freestanding houses, conveniently located, and are low maintenance – all attractive criteria to first-timers, empty-nesters and regular ol’ buyers alike.

Check it out, the market as it stands:

GTA condos

Jason Friesen: Meet The Man Behind The Mortgage Rates

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Ratehub shops the most competitive brokers, lenders and banks in Canada to find the lowest interest rates and make them easily accessible to our consumers. This would not be possible without some of the great mortgage brokers that work with us. Today, we will learn a little more about one of those brokers. Jason Friesen, from the Calum Ross Team is one of our mortgage brokers in Toronto. Let`s get to know his story.

Name: Jason Friesen

Brokerage: The Calum Ross Team

Meet Our Mortgage Specialist

Jason Friesen - Mortgage BrokerWhat did you do before you were in the mortgage business? Any odd jobs?

I have worked in the mortgage business since finishing school. I started out with a mortgage company in the customer service department and worked my way up to Senior Underwriter before joining The Calum Ross Team

Fill in the blank. ‘If I weren’t in the mortgage business, I’d be `_____________’.

If I weren`t in the mortgage business, I`d be working in the music industry to some capacity.

What first got you interested in the mortgage business and how long have you been in it?

I have always had an interest in personal finance. I’ve been in the mortgage industry 12 years now.

Why do you think you’ve been able to achieve success?

We are always willing to go the extra mile to ensure our clients are informed, educated and save the most amount of money.  We spend a lot to better ourselves and continuing education is a big deal in our office. We are students of the mortgage and personal finance field and are always trying to improve what we do.

What’s your mortgage motto?

Do you want the lowest rate or do you want to save the most amount of money?

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Housing Purchase Power Parity: Saskatoon

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Purchase power parity (PPP) is a theory of economics that determines the value of goods in different countries – measured against the exchange rate. The modern derivative of this theorem is called the Big Mac Index (PPP) and it is quite ingenious. This index measures the price of the famous McDonalds hamburger in different countries and factors in the exchange rate to determine if a particular currency is under or over-valued. They use Big Mac sandwiches because it is product that remains relatively consistent across different countries.1

If you’ve been following along with us during our little economics experiment, you are already aware of our RH Index, which we use to measure Canadian housing markets to determine its value. We’ve substituted Big Mac burgers for “Big Mac” homes. Our hamburger home is defined as a two-story, detached, three-bedroom, two-bathroom property.2

Our experiment takes us to the province of Saskatchewan, where we will measure the housing situation in Saskatoon. Have a look at what we’ve found:

MLS®: 405601, $334,900

Housing Purchase Parity

Notes

This property is very central, located close to Saskatoon City Hospital, Midtown Plaza Mall, and Kinsmen Park.

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Paul Poirier: Meet The Man Behind The Mortgage Rates

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Ratehub brings the best mortgage rates from brokers, banks and other lenders to one easy-to-use platform. We have numerous partnerships to obtain such competitive rates and feature them on our website. Dominion Lending Centers Eagle Group Mortgages is a partner that falls into that category. Paul Poirier, a Vaughan mortgage broker, is one our top brokers with two Dominion Top Performer awards back-to-back in 2009 and 2010. Today, we will be taking a deeper look into his success story to get to know him better.

Name: Paul Poirier 

Brokerage: Dominion Lending Centres Eagle Group Mortgages

Meet Our Mortgage Specialist

Paul Poirier - Mortgage BrokerWhat did you do before you were in the mortgage business? Any odd jobs?

After university I worked at a couple of banks, London Trust and then Equitable Trust for a couple of years before I got into the mortgage business.

Fill in the blank. ‘If I weren’t in the mortgage business, I’d be _____’

If I weren`t in the mortgage business, I`d be managing rental properties.

What first got you interested in the mortgage business and how long have you been in it?

The mortgage business has been in the family for about 13 years. My dad and uncle are both involved in the business and I used to work for them in the summers while in school as a teenager.

Why do you think you’ve been able to achieve success? What do most mortgage brokers find the most challenging about starting in the business?

I think the biggest factor is putting the customer’s needs first. This involves getting them the best deal and educating them about all the different options that are available to them. The biggest challenge when starting in the business is learning all the different lenders and which lender is most suitable for each type of mortgage.

What’s your mortgage motto?

The customer is always right. Don’t argue with the customer.

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Mortgage Monday Update: Aug 22nd, 2011

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Fixed Mortgage Rate Outlook

Last week, we saw five-year government bond yields drop 11 basis points. It appears investors believe we will experience lame economic growth in the coming future. What’s troubling for those in the mortgage-rate business, such as Ratehub, is the lack of movement in fixed rates. Canadian banks continued to stand pat as government bond yields dropped last week yet again. Sadly, there isn’t much to report until the banks make a decision to move posted mortgage rates in a particular direction. The inactivity in the face of dropping government bond yields remains baffling.

Variable Mortgage Rate Outlook

Since fixed mortgage rates continue to remain idle, the popularity of variable mortgage rates should continue to see a growth in popularity, especially when the spread (the gap between the two rates) remains favourable towards the variable rate. Some industry professionals believe that there’s still a possibility that the Bank of Canada will cut rates

Economic Outlook

The fallout of the American credit rating continues to haunt economic growth of our neighbours to the south. They face a long road ahead to recovery. In terms of Europe’s outlook, their situation only got bleaker as the EU’s combined second quarter GDP grew by only 0.2% overall. The German economy, which has been a pillar of European economic growth, barely moved the needle last week, growing by only 0.1%, which is still better than France’s economy which saw no growth at all. According to mortgage specialist, David LaRock:

“If the economic recovery continues to stall, short-term interest rates will be on hold for the foreseeable future and fixed-mortgage rates will continue to set new record lows. That said, it’s not all gravy for Canadian borrowers because if ultra-low rates continue to push consumer debt levels higher, another round of mortgage rule changes is inevitable. You can bank on it.”

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Top Tweets of the Week August 15th – 19th

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Glass is falling from the Toronto skyline and everyone’s a’Twitter. Luckily, life-threatening activity bore little on the humour of our community.

Here it is, folks, the week in Tweets!

 

August 15th

AndrewLaFleur Andrew LaFleur

Warren Buffet only paid 17.4% in taxes on his income last year. WHAT!?! theglobeandmail.com/report-on-busi… via @globeandmail

[Oh good, at least we know savings are going to those who need it most]

syladurantaye Steve Ladurantaye

At this point, is it fair to ask if all the glass panels falling from Toronto condos are being deliberately smashed?

[It is a fair question, and @BenjaminBach has an answer below]

BuzzBuzzHome BuzzBuzzHome

Do you feel safe walking beside condos with glass balconies, or do you cross the street?? —> http://ow.ly/63luj

[People that live in glass houses shouldn’t… walk under them]

VIRGINIAMUNDEN Virginia Munden

COURT ORDER!!! You are accused of crawling into my heart, hijacking my smiles with your cuteness & awesomeness. How do you plead? GUILTY?

[Guilty as charged]

August 16th

jennmae Jenn Lowther  by smartcookies

Pretty sure I`m watching a black market dom perignon transaction out of the back of a BMW x5 #fb twitpic.com/67a0rx

[That’s hard to swallow]

jameskwantes James Kwantes

Starbucks CEO has interesting ideas on U.S. debt, economic woes. Just beware of his fancy $5 coffees – Your Money: bit.ly/odaR7s

[Hey, the guy clearly knows how to collect money]

iSlutsky Matthew Slutsky

Why do people link their FourSquare to their Twitter accounts? I really don`t care if people are at Tim Hortons.

iSlutsky Matthew Slutsky

I am at my office. #FourSquare

[Thanks for the update!]

BuzzBuzzHome BuzzBuzzHome

Life of luxury: CBS rents a $2 million dollar mega-trailer for Ashton Kutcher —> bit.ly/oAWmqy

[Probably costs less than one night of expense charges by Charlie Sheen?]

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