Feb 27

Forecast-Slow Growth & Stable Interest Rates-Winter 2012

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Benjamin Tal Deputy Chief Economist CIBC World Markets

After bleeding workers in recent months, Canadian factories boosted headcount in December, helping employment register its first positive reading after two straight losses. Canadian jobs edged up by 17,500, led by hiring in the manufacturing sector. However, we don't expect a renewed pick-up in manufacturing hiring as that sector continues to struggle with the pain of an elevated Canadian dollar that's inflating the wages of manufacturing workers relative to global competitors.

US in somewhat better shape as 2011 came to a close
In the US, employment gains are putting more money in household pockets, but we expect only a slightly stronger than consensus retail report for December. All told, not enough here to change the prevailing view that America's economic engines were in somewhat better shape as 2011 came to a close.

December's pace of hiring in Canada, taken together with the last few months' employment reports, still suggests a weak deceleration in job creation and economic growth. That's consistent with our view that Canada's fourth quarter Gross Domestic Product (the size of our economy with inflation factored in) scaled down to around a 2% annual pace.

In December, we forecast that the Bank of Canada would likely continue to hold interest rates steady through to the end of 2013. Governor Mark Carney's "flexible" targeting approach gives the Bank some latitude in responding to inflation. Notwithstanding the risks created by payroll tax wrangling in the US, we're sticking with that rate forecast.

Using your mortgage to help manage post holiday debt
If holiday spending has made it expensive to maintain your credit card debts, your mortgage broker may be able to help. It may be possible to refinance your mortgage and consolidate household debts at more affordable mortgage rates, resulting in significantly lower monthly payments.

Oct 19

Benjamin Tal Economic Buzz – Fall 2011

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Benjamin Tal Deputy Chief Economist CIBC World Markets

Accidents can happen to any economy.
Temporary troubles in energy and autos hit exports hard during the second quarter, which was enough to push Canada's Gross Domestic Product (the size of our economy with inflation factored in) into a decline—even though demand was healthy at home. This made the quarter look worse than it really was, and a rebound is therefore likely in the third quarter. Indeed, June's monthly data showed a decent 0.2% gain as a signpost of an upward trend.
Aside from January's strong growth, Canada's GDP has been essentially flat for five months. Flat economies don't inevitably signal a recession—both Canada and the US have gone through many extended flat stretches which were followed by growth. However, with the US economy so fragile, it won't take much of a miss to find the US and then Canada in recession or something close to it. Plus, there are enough clouds on the global horizon to be concerned about the next several months.

The Bank of Canada is no longer as worried about inflation
Until the global economy is on a more solid track, the Bank of Canada is being very patient in raising rates. It hinted at rate hikes for July and September, neither of which materialized. Now the Bank is no longer as worried that low interest rates will trigger inflation, and therefore the need to withdraw monetary stimulus has diminished.

Smart mortgage strategies for covering education costs
The cost of post-secondary education continues to rise every year. If you’re finding it a challenge to cover your children’s current or future plans, talk to your mortgage broker today. It may make sense to refinance your mortgage so you can fund their education at affordable mortgage rates, instead of paying for expensive consumer loans.
 

Oct 18

Broker or Bank Mortgage Specialist?

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Larry Brinkworth AMP, SFC

It seems that a number of Bank Mortgage Representatives (Specialists) have been holding themselves out to be "Mortgage Brokers". This week, one Bank Representative in Toronto sheepishly and without comment, withdrew the "Mortgage Broker" title from his website after being challenged by an industry publication.

Another trend in the unregulated world of the Internet is for some lenders to include the term "Mortgage Broker" in their key words so that when searching for a Mortgage Broker on Google, their link will show. In a way, that can be flattering to the Broker industry.

Discounting the fact that in most Provinces it is misleading and unlawful to call yourself a Broker when you are not, is there a difference between Bank Mortgage Rep's and Mortgage Brokers? You bet there is!
 
First and foremost, a Bank representative is authorized to present only their employer's products. A "Broker" on the other hand is not allied with any Lender, but is free to shop the entire market for the best deal for his client. It follows then, that the Broker is not conflicted between the interests of the lender and the borrower. The Bank Rep, on the other hand may be incented financially to offer higher rates or to recommend other of his employer's products to maximize Bank profits. Is that a conflict? You decide.
 
In our admittedly biased view of things, a Mortgage Broker is better equipped to serve your needs with wider range of products and solutions not available from a Bank Representative.
 

May 24

Reverse Mortgages

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Larry Brinkworth AMP, SFC

From time to time I am asked about Reverse Mortgages and how they work. Our main partner in this product is 'CHIP' or Canadian Home Income Plan.

In order to qualify for a CHIP Reverse Mortgage, both you and your spouse must be at least age 60. The typical borrower who benefits from this program either has his home paid for or has substantial equity. With CHIP, the maximum available mortgage is limited to 40% of your home's value and the older you are, the greater the percentage you can borrow.

With a Reverse Mortgage, you make NO PAYMENTS! That's right, the interest portion is added to your balance and you and your spouse can live in the home until you decide toCHIP Logo sell or the surviving spouse passes away. This type of mortgage is generally suited to the borrower who needs cash but either cannot, or would prefer not to make payments in their later years.

Interest Rates are quite affordable with CHIP and are generally speaking, very close to Bank Posted Rates. For updated rates and terms and general information, click here.

A Reverse Mortgage is not for everybody, but your Mortgage Professional at The Mortgage Centre will help if this plan is right for you. We'll give you the valuable advice you need to make a decision about this innovative product and walk you through the process of applying for and completing your CHIP Reverse Mortgage.

May 11

Stability In The Canadian Mortgage Market

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CAAMP LogoThe Canadian Association of Accredited Mortgage Professionals (CAAMP) just released their Spring Survey Report on the Canadian Mortgage Market (Published with permission). The report was penned by CAAMP's Chief Economist, Will Dunning. Here are some of the conclusions of that report:

  • There is currently $855 billion in mortgages on principal residences and $215 billion in Home Equity Lines of Credit (HELOC)
  • Individuals with HELOCs only have an average 65 per cent equity in their homes
  • HELOC prevalence is highest among middle age homeowners
  • Equity takeouts amount to $26 billion annually, with most funds used for renovations ($9.4 billion), followed by investments ($5.0 billion)
  • The average down payment for a home purchased in the last 12 months was 30%, up from 26% for homes purchased two years ago
  • Among all borrowers, 63 per cent have fixed rate mortgages, 30 per cent have variable rate mortgages and 6 per cent have a combination of both
  • Less than a quarter (22 per cent) of all borrowers have amortization periods longer than 25 years
  • 34 per cent of those who most recently renewed or renegotiated their mortgages did so before their term expired.
  • The average time to pay off a mortgage is 7.4 years less than the original amortization
  • 200,000 homeowners paid off their mortgages in the last 12 months
  • The average mortgage interest rate discount is 1.44 per cent for those who chose a five year fixed rate mortgage in the last twelve months with the average mortgage rate being 4.04%
  • Of those who renewed their mortgages in the last twelve months, 65 per cent are paying lower rates than previously
  • 66 per cent of all mortgage borrowers can tolerate a monthly mortgage increase of $300 or more
  • Among borrowers who took out a new mortgage in the last 12 months, 27% obtained it from a mortgage broker.
  • Overall mortgage broker share stands at 23%
  • Canadian appetite for home buying has returned to pre-recession levels, following a slide over the past three surveys.
  • Almost 60 per cent respondents thought that now was a good time to buy
  • Optimism is returning to the market with almost half (46 per cent) of those questioned saying that they expect prices to rise