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Monthly Mortgage Update: March 2013

ING DIRECT Canada Closes Broker Business

If you’re shopping for a mortgage with the help of a mortgage broker, you have probably noticed that you’re no longer able to get a pre-approval from ING DIRECT Canada. In January, ING announced it was closing the doors on its broker business, and the final day to complete transactions was February 16th. While you can still obtain a mortgage directly from ING, you’re no longer able to do so with the help of a broker who could negotiate with ING for a lower rate. This is a direct result of Scotiabank’s purchase of ING back in August 2012, and is a major change in business strategy for ING, who used to obtain the lion’s share of its mortgage clients through brokers.

What does this mean for homebuyers in the market for a new mortgage? If you’re shopping for a mortgage with ING, you’ll potentially have to lock in at a higher rate, since the savings that brokers used to pass onto their clients are no longer part of the equation. To get pre-approved for a mortgage with ING, you’ll now have to submit the application to ING yourself – not only is this extra work, when compared to the benefits of working with a broker, you’ll also have to have your credit report pulled separately. When you’re shopping around with a number of lenders, each time you pull your credit report could result in a lower credit score.

While ING’s “no haggle” mortgage rates are a refreshing approach, since you always obtain their lowest rate, brokers remember the days where they could pass even more savings onto their clients who went with ING. ING was a favourite lender for a number of brokerages, because of its low rates and flexible prepayment privileges. What have brokers learned through ING’s shift in lending strategy? Similar to investing, you should diversify and spread your risk with lenders. During the transition, brokers are looking to refocus their strategy and look for new lenders that offer attractive mortgages similar to ING. In the meantime, will ING’s departure from the broker business result in higher mortgage rates for Canadians? That remains to be seen.

First-Time Homebuyers are Back

After a slow finish to 2012, 2013 is off to a strong start in Toronto. Although home sales were still down 1.3 per cent in January from a year ago, this is a welcome trend from the double-digit year-over-year sales decreases experienced in the latter part of 2012. This can also be seen as a sign that first-time homebuyers are returning to the market in droves. Months after Finance Minister Jim Flaherty lowered the maximum amortization period from 30 years to 25 years, making it so first-time buyers either had to buy cheaper homes or save more for their down payments, it seems they have finally rebounded and made their way into Canada’s housing market.

While sales were still down in January, home prices were up a respectable 4.3 per cent across the GTA. If you’re an existing homeowner, this should come as welcomed news. Despite many reports of a possible housing correction coming our way in the near future, an increase in home prices makes this prediction look less likely. For first-time buyers, on the other hand, an increase in home prices could make it more difficult to qualify for a mortgage. The one good thing that all buyers can look forward to is that mortgage rates are at or near historic lows. Yesterday, the lowest 5-year fixed rate of the year (2.79% in Ontario) was posted on our site, making 2013 a great year to get into the market.