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Robert McLister
Canada
My wife and I are writers and professional Mortgage Planners passionate about helping Canadians navigate the mortgage market. Drop by and see us sometime at www.CanadianMortgageTrends.com
Interests: travel, blogging, stock trading, animal rights, reading, chess, poker, rollerblading, skiing, basketball, beach volleyball, backgammon, and of course, mortgage planning.
Recent Activity
Thanks Appraiser. Interesting stats. Maybe someday someone will have the political cojones to start a dialog around indexing the $1 million insurance cap in major cities. Barring that, CMHC's mandate should officially be changed to remove references to helping “all Canadians” “access a wide variety” of housing options. That clearly don’t apply to hard working Canadians trying to buy a single family house in Toronto or Vancouver.
Hi Jim, There are plenty of examples of government intervention in the mortgage market, including the CMB. But the CMB doesn’t create a slippery slope. There’s a fundamental difference between a parliamentary-authorized program and a politician arbitrarily calling up a business, misusing his regulatory position, and coercing that business into increasing its prices to some subjective number. The danger that creates should be obvious.
Hi Frank: New regulation has meaningfully slowed the market, compared to what its pace would have been without that regulation. If the goal is to force a correction, there are any number of further measures that could be implemented: lower debt ratio limits, higher credit score requirements, bigger down payment requirements, qualifying conventionally at a 25-year amortization, creating higher qualification rates, and so on. It's hard to know how much more regulatory weight the market can bear. Hi Reasonfirst: CMHC is not on a slippery slope. It's involvement in housing is declining by the year. In contrast, by tolerating direct government mortgage rate manipulation we clear a path for public servants to violate other fundamental commercial liberties. Regulators might as well set a maximum mortgage size of $300,000. That would slow the market. Where does it end?
Jason, Please email me at robert@canadianmortgagetrends.com so we can understand your concerns. The email address you posted with doesn't exist so I could reach you. Thanks...
Great to hear Ryan. Thanks for posting...
The details on membership dividends: http://duca.com/myMoney/Listing/Profit_Sharing/the_fine_print Note the 7-year full vesting period. There's naturally an opportunity cost to waiting for dividends versus getting a better rate up front. One option, however, is to use them for RRSP contributions and earn a return while waiting.
"...the manager also needs a strong mortgage background and that is a hard combination to find." So true Ron. You can often tell when a broker uses a social media manager because their Tweets, posts, etc. are highly generic. Or, worse yet, their mortgage-related comments don't make sense and damage the broker's credibility.
Thanks Appraiser Wonder if CAAMP's data captures that, specifically in this stat: "% of borrowers who increased their payment: 16%." Will have to ask Will. Did you hear that it doesn't? One side note: CAAMP finds that 65% don't make extra optional mortgage payments, but that's only measured over one year. Some of those people do make extra payments in other years of their terms.
Appreciate the post Al and I agree. That should be made more clear on our site.
Hi VB, That’s an noteworthy point and it’s good you brought it up. In our writing, we quote what qualified borrowers actually see and get from competitive providers. When estimating an "average discounted rate," that number will differ from the "average rate." RateSpy (where you took that quote from) defines “discounted rates” as those where the provider is offering discretion from regular rates. Those regular rates, as you correctly note, are in the prime - 0.50% area. It’s not a discount if the originator is merely quoting a lender's rack rates. Referring again to the source of that story, you'll see dozens of rates in the 2.35% range or less, and I assure you they’re not all from the same lender. :) This is the market. These are the rates hundreds of thousands of Canadians are benchmarking against. Consumers don't care if these are the lender’s normal or published rates. All folks care about is the rate they actually pay, which averages roughly 2.35% today on an discounted VRM. Cheers...
Hi Moneyman: This mortgage is portable. There are no blends and increases however. Hi AW & Robin: We're told by the company that conversions from variable to fixed are done at published rates. In our experience IG' published rates aren't so hot. This is only a factor when locking in. Most people likely won't convert but for those who do it's another consideration.
Hi Lior, It seems it would.
Hi folks, Thanks for the support and for sharing your perspectives. @Michael Curry The more qualified the borrower, the simpler the user interface (and the lower the barrier of entry for someone with resources). That's why competition in the "AAA"-credit space might get bloody in the next few years. But will DTC become mainstream? Absolutely not, at least not soon. This assumes one defines DTC as non-face-to-face online lender origination. @Jeff Re: "I certainly don't think that not posting rates automatically equals shady, deceptive, and unprofessional." Agree wholeheartedly. If I had to bet, we may see many more brokers pull rates off their sites because they don't want to appear less competitive than online discounters. That strategy has risks and rewards, but one thing is for certain: with no advertised rates, a broker’s site must convey a powerful call to action and a unique compelling value proposition. Otherwise it’s just an electronic business card. Regarding your idea of posting rate ranges (e.g., 2.84% to 3.19%), I love that idea. It's a great way to spark a client conversation. It does have technical challenges however. For one, most rate tables and rate sites are not designed to handle rate ranges. That’s far from an insurmountable obstacle, but it may slow adoption of range-based quotes. @Bruce Davison No doubt, definitions of full service will rapidly evolve. @Ron We’d all do well to remember this truism -> “…The way we think about mortgages is not always the way the consumer thinks about mortgages.” @Lior Banks as a whole are investing tens of millions in their online channels. They know that today online origination is the crumb that fell off the bread table. In time, it will be a slice. Give it 10-20 years and maybe it’s half a loaf. :) On buydowns, lenders already limit them. That move will cost them market share in time, so hopefully they reconsider. Don’t forget, though, many brokers offer cash back to lower the effective rate, and there’s no controlling that, other than refusing to deal with online brokers all-together. And that just doesn’t make business sense. Online will, in time, deliver huge volumes of AAA-credit borrowers to online-friendly lenders. Shutting that off would just benefit a lender’s competitors. As for FSCO, they do an amazing job protecting consumers but they understand the importance of maintaining competition and choice for borrowers. Hence, I doubt they’d derail the online model with onerous regulation. In the investment space, suitability is effectively addressed by every non-face-to-face broker in Canada (iTrade, Questrade, QTrade, etc.). That same model can exist successfully in the online mortgage space.
Hi everyone, Thanks for the questions. SSingh: 4.99% at the moment but please verify with Home Trust at the time of application. MortgageMan: Unfortunately not. The bundle solution cannot be used for condos. Interested in Refinancing: Not at this time.
Hi Lior, You’re an excellent broker and I’ve always appreciated your comments. But this makes three people now at Mr. Bargis’s firm that have positioned this issue unfairly. John’s point was clear so there’s no misinterpretation. That is, that the article “served as an unpaid advertising piece…and nothing more.” He has every right to that opinion. It just happens to be unsupportable and wrong. (For further background on this, call me any time at 416-913-0377.) Any suggestions that I somehow had any control over the copy of this story are absurd and reflect poor judgment on those making the accusations. Would I have written it differently? You bet I would. But if we’re being honest with ourselves, Carrick’s suggestion that compensation makes some mortgage advisors do the wrong thing is absolutely valid. Moreover, as you know, compensation and influence in this business is not limited to finder’s fees. Do all bankers and brokers fall prey to this practice? Certainty not, and that should never be suggested. There are so many amazing consumer advocate brokers in this business that it makes me proud to be a part of it. But Carrick's statement on its face is nonetheless factual. The biggest problem is that typical consumers often have no way of knowing who the “good guys” truly are. So it’s natural that some have interest in an option that assertedly takes potential conflict out of the game. Again, don’t get me wrong, we ourselves maintain a full-service operation where agents get paid finders fees and receive status benefits. But we put controls on it, for fear of even the appearance of recommendation bias. For those who are interested, I'm always happy to share how we do things. Call me any time...
John, The reality is that no trade association is everything to all members. This site has been both supportive of CAAMP (e.g., on its advocacy, education and research) and critical of CAAMP (e.g., on policing members and AMP qualifications). That was on the record far before this union was contemplated. Overall, however, acknowledgement of CAAMP’s advocacy and value proposition is amply justified, pun unintended. Editorial neutrality was something no one compromised on during the deal process. It’s unfortunate that some would conclude otherwise based on assumptions of what is “no doubt” to come. Either way, those speculations are out of our control so time will be the judge. Regarding rate sites, both their benefits and their “other side” have been covered previously. (Use the search function to find related stories.) Important topics like this can always be revisited if folks have a unique angle on them. Moreover, industry participants who can articulate on this -- or any other timely topic -- are always welcome to write guest posts. Regarding the Globe’s story, you’ve made some surprisingly inaccurate, almost reckless assertions. You’ve made them with no knowledge of the circumstances leading up to the story, seemingly no understanding of the person writing it and no assessment of the story’s arguments. That some brokers find the DIY concept (or their portrayal) displeasing is one thing. But arguing that it’s not newsworthy is frivolous, John. Self-directed mortgages (not the RRSP kind) are novel. Their implications for consumers and the mortgage establishment make them newsworthy by default. That would be just as true if anyone else launched this model. Lastly, on the topic of “advising…clients in much detail, and providing several options to choose from with full disclosure,” it’s commonly overlooked that these points can be addressed with well planned web-based interfaces, and supplemented by the application process and the client interview (during underwriting). It just takes a bit of lateral thinking.
Hi Will, Assuming a 200 bps hike, renewal risk would primarily apply to the minority who: (a) put down less than 9%, and (b) choose a 5-year term. Those are the homeowners who wouldn't be qualified at posted and who wouldn’t have enough equity at renewal to re-amortize. Of those folks, one must estimate how many might not have the capability to absorb 19% higher payments. Your research found that just 2,000-2,500 of 2010 insured buyers would have an extreme total debt service ratio (i.e., a TDS over 45%) if rates rose to five percent. That’s a drop in the bucket of Canada’s ~9,500,000 homeowners. The renewal risk discussion gets more play than it deserves. That is, unless one believes rates could fly significantly higher than 5.00%. And a sustained 5.00%+ average mortgage rate seems out of character with ~2% long-term GDP growth and 2% inflation targeting.
Hi Stephanie, When you refer to "your article" do you mean MoneySense's article or CMT's post above? Just checking :)
I think we need to know a little more about you. :)
Hi John, With a ~7yr amortization you're paying down principal quicker than most. That gives you a bigger buffer if prime rate jumps. Moreover you seem well qualified, are making prepayments and have a great rate. Barring what I don't know about your situation, you're likely on the right track to ride out the variable.
Thanks Ron, As they say, advice is often least heeded when it's most needed.
Hi UW, Re: "Why pay more for the unknown?" The short answer is that adverse rate movements can really hurt some people. These folks need to lay off that risk to the lender. The long answer will be part of tomorrow's story. Cheers
Hi Ryan, That's a good question to ask. The point that collateral charges don’t qualify for "free switches at most lenders" refers to how some lenders offer free refinance packages. In those limited cases, folks with collateral charges can move to another lender without legal and/or appraisal fees. In precise technical terms, however, I know of no lenders that do true "straight switches" (assignments) of a collateral charge. Cheers...
Hi IG, Just 2 years from mortgage freedom. If we could all be so lucky... :) Canada has no competitive 2yr variable rates so you'd be looking at a 2yr fixed. Rates for well-qualified borrowers are 2.59% or less. Check out Street Capital, First National, MCAP, London Life and CIBC. All have exceptional rates on 2yr terms. A broker is needed for the first three lenders. Good luck!