Edmonton Mortgages and CAAMP certification

If you are an Edmonton resident looking to obtain an Edmonton mortgage, your first step should be to choose a reliable, ethical and resourceful mortgage broker. Easier said than done, right? Especially for first time, inexperienced home buyers.
So how exactly do you know that the mortgage broker you are looking at is qualified, educated, experienced, and resourceful?
Answering the above question may be easier than you think, thanks to the Canadian Association of Accredited Mortgage Brokers, better known as CAAMP. CAAMP is a national association dedicated to educating and representing the Canadian Mortgage industry. CAAMP membership has well over 10,000 members. Ask your prospective Edmonton mortgages broker if they are one of CAAMP’s members.
According to CAAMP, if your mortgage broker is CAAMP certified, that means that they:

1. Are a CAAMP member in good standing and abide by the CAAMP Code of Ethics.

2. Have a minimum level of experience in the mortgage industry, demonstrate proficiency
AND provide proof of experience using Option 1 or Option 2 below

Option 1 - Proficiency Course
• Provide proof of at least two years of experience in the mortgage industry AND
• Provide proof of successful completion of the CAAMP Challenge Exam OR a CAAMP approved proficiency course.

Option 2 - Five Year Rule
• Provide proof of five or more years of experience in the mortgage industry AND
• Provide letters or e-mails of reference from two AMP members in good standing. The
References must recommend that the applicant be granted the AMP and may be included as one of the documents used to provide proof of experience.

3. Complete CAAMP's mandatory pre-accreditation course, Ethics and Responsibilities for Mortgage Professionals, either online or in seminar format

The above information is an excerpt from this CAAMP PDF

Independent Mortgage Companies Offer Flexibility

There is a common misconception among the general home purchasing public that traditional lenders, such as banks, are always the better way to go. This is not necessarily true. For people from all walks of life, independent mortgage brokers are often the better way to go.

Surprisingly, most people think they are out of options. Until, that is, they decide to see their mortgage broker. Reputable independent mortgage companies have a vast network of resources right at their fingertips. It is very unlikely that these resources would be available to the average homebuyer. This vast network usually means a better power to negotiate. In other words, mortgage brokers will negotiate a great deal and offer their clients very flexible terms.

On another note, an experienced independent mortgage broker can also provide assistance outside of the realm of first time mortgages. They will also people with financing, home equity loans, investment properties, and so much more.

Calgary Mortgages May Require Tough Negotiations

If you are seeking a mortgage in Calgary, you are likely aware that there are a lot of options. Some of these options are cost effective and some are costly. Of course there is a grey area when searching for the mortgage option that is right for you. It is necessary to do your research and to be prepared to negotiate.

If you are like most Calgarians, you are busy. You have a life. You do not have time to spend hours researching your mortgage options and even if you did, are you prepared to negotiate and haggle? This is why you need someone in your corner. Someone who knows everything you need to know about Calgary Mortgages and has all possible resources at his or her fingertips.

An experienced independent Calgary mortgage broker will be able to help you immensely in the mortgage application processes because they can negotiate on your behalf with several, perhaps a hundred or more lenders.

Call a trusted Calgary mortgage broker to ensure you are getting the best possible deal available to you.

Vancouver Mortgages Are Not Out of Reach

This particular entry is aimed at the population of Vancouver who, for whatever reason, may not fit into the desirable profile of a mortgage applicant at a “traditional” lender. Not sure if you fit into this category? Maybe you are:

· New to the country / lacking a credit history
· A commission based sales person / entrepreneur
· Stuck with a bad credit history
· Recovering from a bankruptcy

As the housing prices in Vancouver and surrounding areas seem to skyrocket and banks become more cautious, many “non-traditional” borrowers are finding that mortgages in the Vancouver area are a little out of reach. I feel, however, that if you do not fall into the “traditional” Vancouver mortgages applicant category, this does not mean that you are the problem. It simply means that a traditional lending scenario many not be in your best interest. My suggestion would be to call a resourceful and experienced mortgage broker in Vancouver. He or will likely have a vast amount of viable mortgage options available to you.

Shopping for Ottawa Mortgages Online

Thanks to the power of the Internet and flexible mortgage brokers, shopping for Ottawa mortgages from your home could not be easier.

An experienced and resourceful Ottawa Mortgage broker should now be able to help bring a abundance of tools and options right to your home office or favourite arm chair. They should also be able to answer whatever questions you may encounter during the home purchasing process. Are you wondering if your mortgage should go through a bank, a private company, or an investment trust? Simply ask your trusted Ottawa mortgages broker. While you are at it, ask about home equity loans for renovating your new home or investment property. You may be surprised to find that you might qualify for a home equity loan with as much as 100% financing!
If you are looking for a convenient, flexible mortgage and / or home equity loan, contact your online Ottawa mortgage broker!

Toronto Mortgages are Still Affordable

I am constantly hearing people opine about the Toronto housing market. There are a lot of misconceptions floating around and these misconceptions seem to be growing with every dinner party I attend.
One of the most common misconceptions I am hearing is regarding the affordability of mortgages. The truth is Toronto Mortgages are still very affordable. The same goes for home equity loans. If they weren’t, why would so many people you know be choosing now as the time to downsize, upsize, move to a nicer neighbourhood or closer to a school? Among my close friends, I can think of two who just moved (one downsized and one upsized) and one other person who is in the process of finding a new place closer to the downtown Toronto core.
Many Torontonians who have no plans of moving in the near future are still taking advantage of low mortgage rates in Toronto. They are purchasing investment properties and second residences.
So, while dinner party conversation may be interesting and entertaining, it is important to make your real estate and investment decisions based upon something a little more substantial. Contact your trusted Toronto Mortgage expert today.

Toronto Mortgage and Real Estate Markets Remain Steady

According to the Globe and Mail, prices of resale homes in the Greater Toronto area have been steady through to August (the last month for which data is available).
The average price stood at $376,236 in 2007, and has gone up 2.2 per cent to $384,605 for the

January-to-August period in 2008, according to the Toronto Real Estate Board. For new detached houses, the average price for January-to-August stood at $536,404 throughout Greater Toronto, up 4.9 per cent from the same period in 2007 from $511,322, according to CMHC.

An important indicator of local housing prices is the arrears rate:

The percentage of residential mortgages that are behind current payments by 90 days or more stands at 0.27 per cent, according to data compiled by the chartered banks and reported by the Canadian Association of Accredited Mortgage Professionals. This accounts for about 20,000 to 25,000 of residential mortgages in Canada.

To put things in perspective, during the last major recession in 1992 the arrears rate was 0.6 per cent.

Ask a Mortgage Broker About Deferred Mortgages: Short-term Gain for Long-term Pain

Jonathan Kesselman, an Economics professor at the University of British Columbia, proposes deferred mortgages where a government body would guarantee the mortgages against default for an insurance fee paid by the buyer. Prof. Kesselman’s idea is to soften the impact of high interest rates and inflation on young people presently shut out of the housing market. Presumably, the government body would be Canada Mortgage & Housing Corporation. Let’s examine Prof. Kesselman’s argument in theory and practice:

Theory: A young person’s income is low at the start of his/her career, but earnings are expected to increase over time if the person is a professional.In the first few years of the deferred mortgage, the buyer does not pay all of the interest to the lender. Postponed interest is added to the total outstanding mortgage capital. The interest increases as the mortgage ages, but the mature buyer is better able to handle the increase because he/she has an established career and earns more. The lender cannot lose on this deferment, because the Canadian government insures repayment.

Practice case study: Young Simon’s family gives him a $20,000 deposit for graduation. He purchases a small, 100-year-old house worth $120,000 in Hamilton, which he thinks is a viable commuting distance to Toronto. He is delighted that his initial monthly mortgage payment of $763.22 is less than rent on a Toronto apartment. However, he soon finds out the charming old property requires extensive modernization and maintenance. A $100,000 mortgage at 8% interest today rolls up to $147,000 by 2013, and $216,000 by 2018 through the magic of compound interest. Simple Simon has negative equity. He decides he no longer can stand the commute to and from Toronto, which eats four hours from his day in traffic snarls. He moves back to Toronto and rents out his Hamilton property. He can only charge the going rate of $800 per month, and continues to lose money on his rental property. Simon cannot sell his property for a profit.

While this scenario is not the debacle of an American subprime mortgage with balloon payments, a deferred mortgage is still not a worthwhile solution for young Canadian buyers. Talk to your mortgage broker about safer options.

Sunlife Financial and Manulife Take a Loss on WaMu

Toronto-based insurance companies Sun Life Financial and Manulife took a loss this week on Washington Mutual (WaMu) stocks when the U.S. bank was taken under control by federal regulators on Thursday. Sun Life stands to lose $919 million in the American mortgage crisis, but that is only 1% of its total investments. Manulife stands to lose $790 million in American mortgages, but that is less than 1% of its assets. WaMu will be sold to JP Morgan Chase & Co. When the business quarter closes on September 30, the two Canadian mortgage lenders will find out if they can recover any money.

It’s encouraging to see U.S. bankers are taking the initiative to save their jobs. Wachovia is meeting with Wells Fargo, Citigroup and Banco Santander about a merger. Perhaps if there are fewer American mortgage lenders, it will be easier to regulate them, and avoid another mortgage crisis in future.

The Democratic representative for Massachusetts, Barney Frank, is confident that Congress will have a mortgage bail-out deal ready for public consumption on Sunday. The main contentions now are that the Democrats want the crisis resolved with less tax burden to average Americans, and less sweeping government power to regulate mortgage lenders than Henry Paulson, Secretary of the Treasury, asked for in the existing bill. It’s only been eight days since the crisis came to a head, so the alacrity of the American response is quite impressive.

Correction in Canadian Market will be Good for Home Buyers

We keep hammering away at this point, but we think it bears repeating in order to be heard over the steady drone of bad financial news these days: Canadian banks and mortgage lenders are holding strong, and the real estate market is stable and healthy.

As reported in the Regina Leader-Post, Eugene Levy, the executive VP of Custom House Foreign Exchange, told the audience of a commercial real estate conference yesterday that Canada is due for a correction in the real estate market, but it will be nothing like the one in the U.S.

Expressing confidence in the Canadian banking sector, Levy noted that “[w]e have the safest banking system in the world.” He also noted that our country is considered a safe haven for investors around the globe.

Speaking specifically about housing, he admits that the Canadian real estate market is overvalued and that in markets like this, a correction is inevitable. But, as Levy and others have observed, lower prices and less inventory are not necessarily a bad thing. With other economic fundamentals strong, people are still ready, willing and able to invest in the real estate market – lower prices just make these investments even more attractive.

Low Mortgage Rates, Other Factors Helping Toronto Condo Market Stay Strong

This weekend we had yet another report to dispel the black clouds that some people claim are hanging over the Toronto mortgage and real estate market.

At a recent meeting of the Building Industry and Land Development Association the overall message was one of optimism. As reported in the Toronto Star, Jason Mercer, senior market analyst for CMHC, foresees positive job growth in the GTA (with the possible exception of the manufacturing sector), low unemployment and a tight labour market that will support “a healthy housing market”, all underpinned by continuing low mortgage rates.

Barry Lyon spoke at the same meeting and noted that the condo market is returning to “normal” levels from the record highs seen last year. His conclusion, based on condo sales and supply/demand ratios, is that the market is sustainable and on a sure footing.

Stable Toronto Real Estate Market is Good News

Despite all the economic turmoil in the news, the Toronto real estate market is showing itself to be remarkably resilient as the fall season starts.

In a press release issued today, the Toronto Real Estate Board (TREB) released sales figures for the first half of September. While sales activity in the GTA has declined 16% from the same time in 2007 (a record-breaking year), figures show the decline between this year and 2006 is only 6%. The number of sales may be down, but prices have experienced marginal increases in both the city of Toronto and the wider GTA.

TREB’s president, Maureen O’Neill noted that: “Although housing activity in the GTA remains moderate, we're continuing to see a consistent pattern, and this stability is certainly positive news compared to markets in other sectors and in other world cities.” She added that the increase in prices indicates that people still see real estate as a sound investment.

Good news all around for the real estate and mortgage industries.

Toronto Home Purchase Prices Fair and Balanced

We’ve all heard that real estate markets are due for a correction and that home purchase prices are set to drop. A new study from the University of British Columbia (UBC) states that housing in most Canadian markets is grossly overvalued, except for Toronto and Edmonton.

UBC professor Tsur Somerville authored the study. He analyzed the markets in Canada’s largest cities by comparing current prices to a “balanced market price”, determined by studying “the relationship between house prices, rents and the cost of investing in housing in each market.” Using these criteria, Somerville warns that homeowners in overheated housing markets should be ready for a rapid and steep decline or a long period of no growth.

Unlike other large cities, the Toronto real estate and mortgage markets have house prices in balance with rents. What this means is that the sudden plunge predicted elsewhere is far less likely to occur here. Translation – the Toronto market is stable and is a great place to invest.

Canadian Real Estate Market Still Healthy

August is traditionally a slow month for real estate sales, according to a recent article in the Globe & Mail entitled A Change in the Wind, but the August slump may be exacerbated by a growing discord between the expectations of Canadian sellers and Canadian buyers. This concern is brought home by near 15 % drop in existing GTA home sales this period in comparison to the less than 10% drop in the same time period last year.

As the American housing market continues to suffer and shows only slight hints of improvement on the horizon, Canadian buyers expect to benefit from a domino effect on their own turf. Sellers in the mean time are still expecting to be the ones holding the bargaining power. The result is dashed expectations, increased negotiations and a change in the way real estate agents do business. As an example, an experienced real estate agent in Toronto has begun advising his clients to sell their homes before purchasing a new one, according to the Globe & Mail. In times past, he did not offer this advice because of the favourable positions home sellers typically found themselves in.

The general consensus is that the Canadian real estate market is still healthy and thriving. Due to some changing trends, however, it is more important than ever to seek out expert home purchasing advice and to take advantage of increasingly flexible mortgage terms and conditions.

Mortgages - Consumer Confidence Slightly Improving

An article in the Globe & Mail today reported that consumer confidence in the US may be slightly improving. These findings are surprising to many economists and forecasters.

Slightly falling gas prices can be partially attributed to the slight boost in consumer expectations and causing a (very) cautious optimism among potential home buyers and mortgage applicants.

Thanks to record breaking low prices in the housing markets, frugal investors are venturing out of their shells to take advantage of “discount pricing”, leading to an unexpected surge in home sales this past July. Of course this has not led to a rise in home prices as of yet but many investors see hope. This is because, while housing prices continue to decline, the rate of the decrease appears to be slowing down. These findings are especially true in the single family sector. This particular market experienced a growth in sales of nearly 2.5%, according to Standard & Poor's/Case-Shiller U.S. National Home Price Index.

According to the Globe & Mail, Lynn Franco, director of The Conference Board Consumer Research Centre, believes this rise in expectations can be a sign of a healthier outlook on mortgages but “overall readings are still quite low by historical standards and it is still too early to tell if the worst is behind us.”

Toronto Real Estate - Time to Get Concerned?

The business section in last Friday’s Toronto Star included an alarming headline that likely struck fear into the hearts of prospective home buyers and current homeowners (and mortgage holders): “Toronto housing prices drop 1%”. The article goes on to say how the Toronto Real Estate Board (TREB) has not reported a decline in year over year prices “in a dozen years”. Readers could be left with only one conclusion - we’re all doomed.

Not so fast. If you can get past the negative news at the start of the article, you can see a few bright spots. For one, TREB is now tracking Toronto and the wider GTA separately. Prices in Toronto itself declined by 1%, but they increased by 2% in the 905. Put it all together to get the total for the whole GTA and we see an average price increase of 1%.

Speaking to the National Post about the report, TREB president Maureen O’Neill noted that prices in the City of Toronto remain 10% higher than in August, 2006,and that forecasts from the CMHC and the Bank of Montreal predict gains in 2009. She also stated that “…the facts right now indicate the sky is not falling in.’

The drive to the 905 and the popularity of lower-priced condos (discussed in a previous post) also go a long way toward explaining the drop in prices – people are not abandoning the real estate market; they are just seeking more affordable dwellings and lower mortgage carrying costs.

Small Rental Unit, Small Budget, BIG Impact

A properly furnished space can usually be rented out for more money per square foot than a similar unfurnished dwelling. An improperly furnished space, however, can make your rental unit less appealing and more difficult to rent out. We all know how much of a financial crunch an empty rental unit can cause, especially if we are relying on that rental income to help pay the mortgage. Luckily, it is not that difficult or expensive to furnish a small unit.

Here are 10 easy decorating tips to maximize your investment property ROI.

1. Avoid oversized, overdone furniture. Instead choose smaller pieces that can serve more than one purpose.
2. Properly placing mirrors and mirror finishes will reflect light, add dimension, and help the space to appear larger.
3. Do not use dark paints for the walls and avoid dark furnishings.
4. Open up as much floor space as possible by utilizing hanging shelves and, if budget allows, hanging a flat screen TV on the wall, and equipping the unit with a fold down desk or eating space.
5. Maximize your use of vertical space by hanging shelving over door frames.
6. Avoid flotsam and knick knacks which can be construed as clutter and may not be to your renters taste.
7. Try to make your rental unit as unified as possible. Breaking up your condo into visual sections can make your unit appear smaller.
8. Free up counter space in the kitchen and utilize kitchen specific organizers and storage items. Hooks, cupboard shelves, magnetic spice jars on the refrigerator are all great ideas that are quite inexpensive.
9. Proper lighting can go a long way. If natural lighting is scarce, compensate with plenty of electric lighting.
10. Lightly colored walls and furnishings do not necessarily translate to boring. Try choose bright accents or light wall colors that go outside the beige and cream palettes.

With these ten tips for decorating for small spaces, you should have no problem maximizing the return on your small decorating budget and your small investment property.or more small home decorating tips, visit our source for this article, Globe & Mail, Tricks to Make Small Spaces Seem Bigger

Moving Up? Keep Your Existing Unit as an Investment Opportunity

It is that time again. University and college students are frantically searching for convenient and stylishly small units that they can temporarily call home. This past week we had two colleagues in our office take time off to help their young adult children hunt for apartments near their chosen school. I am sure our office is not the only one to experience a flux in excited parents that are helping prepare their brilliant children for higher education.

So why is this news pertinent to a website that focuses on Canadian mortgage refinancing? This time of year presents the perfect opportunity for those of us who are considering moving up to a larger condo and keeping our smaller units as a real estate investment property, especially if the existing property is close to or easily accessible to a university or college. Due to the high amount of student renters, the transition from dweller to landlord can be almost seamless.

Bachelors and one bedroom condo units represent a great opportunity to earn a rental income. Many investment property owners believe that we can get the most “bang for our buck” with smaller units because they can inexpensively be “fixed up” with some new flooring and a fresh coat of paint. When compared to larger units, it can also be much less expensive to furnish a bachelor or one bedroom.

Tiny budgets can make a big impact when working with a small space, as long as your budget is spent carefully on items that are sure to attract tenants. To learn more about making a big impact with a small unit and budget make sure to read tomorrow’s post Small Rental Unit, Small Budget, BIG Impact.

Real Estate and Mortgage Comparison Made Easy? Not by Stats . . .

Real estate and mortgage comparison can be a tricky proposition - especially between markets and over time. Statistics do not necessarily make an objective analysis easy. Yesterday's housing sales and price numbers released by the Toronto Real Estate Board (TREB) are a case in point. When comparing markets over time, or between geographic markets, the same numbers can tell two very different stories.

"Prices remained stable throughout the GTA in July," according to the latest sales numbers from the TREB. "At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007 and nine per cent from the $342,034 figure of two years ago." So is the market relatively flat with a very modest 1% year-over-year gain over last year's record setting levels, or is it relatively healthy with an annualized 4.5% annual growth rate over the past two years?

The housing sales stats released yesterday by the TREB show a number of such often-contradictory indicators:

• In the City of Toronto, the average house price increased less than one per cent from July 2007, a record-setting month, but was up10 per cent from July 2006.

• In the 905 Region there was a 3% price increase from July 2007 and an 8% increase from July 2006.

• Overall sales declined 12 per cent from July 2007 record of 8,912 but increased 10 per cent from 2006.

The interpretation of such disparate statistics - what they mean, and what the driving forces behind the numbers are - is, of course, left up to the analyst doing the spin. The National Post's analysis is that the numbers for Toronto reflect the effect of the introduction of a new municipal land-transfer tax that encouraged buyers into the market before it took effect, and what we are seeing reflects the first-time buyers who would otherwise have postponed their purchases. Contrarian doom-saying political analyst and M.P., Garth Turner chastises the federal government and continues to predict that a 12% drop in sales levels from record-setting numbers a year ago is his long-heralded beginning of a U.S. -style housing meltdown.

Perhaps the best real estate and mortgage comparison analysis came from Canadian Real Estate Association president, Calvin Lindberg, in his comments last month on June's national real estate sales numbers. "In essence" says the CREA president, "Canada's housing market has pulled back from the record-setting pace set in 2007, but in most provinces it continues at or near sales levels set in the years before that. The increase in housing prices is also pulling back from the record-setting pace of last year, but we have yet to see any of the price contractions that have impacted the housing market in the United States."

If anything, the interpretation of the TREB's most recent sales numbers shows that real estate and mortgage comparison between markets and over time is a dubious and subjective interpretation. Purchasers are best served by doing the the research in their market at the time they are considering buying, and making decisions based on a long-term investment strategy, rather than speculating on the shorter term movement of markets.

Price First Mortgages and Avoid 'Bidding Wars' when Buying First Home

When pricing out first mortgages and looking at the homes those mortgages will be able to finance in the Toronto real estate market, first time buyers should not be fooled by house listings that are strategically under-valued - an all-too-common practice according to a recent article in the Toronto Star.

"Listing properties below the market value has become a common practice in the Toronto area over the past five years – creating a bidding-war mentality for buyers," according to the Star. "Even with sales down, the market cooling dramatically and active listings up by 22 per cent compared with last year, multiple offers continue in some highly sought-after areas."

"While houses sit on the market longer with more inventory available in the Greater Toronto Area, most of the multiple offers are taking place in pockets of the central city still coveted by buyers," reports the Toronto Star's Tony Wong. "But under-listing properties has created a backlash, not just among frustrated consumers, but also from some agents who say the practice is undermining the profession."

A recommended strategy that will save the time - and expense - of getting into opportunistic bidding wars triggered by the strategic undervaluation of a property for listing purposes is to first consult a mortgage broker to determine from a range of lenders the precise mortgage amount that fits your budget and with which you will be comfortable. With your bottom line firmly established, a reputable and well-resourced mortgage broker will likely be able to point you in the direction of a realtor who is savvy to both the market and to the market-ploys of real estate agents who seek to falsely inflate a home's value through an under-valued listing designed to promote a bidding contest.

Market research is perhaps the key when entering the real estate market for the first time. Researching the terms and rates for first mortgages from a wide number of lenders (with or without the help of an experienced and well-resourced mortgage broker), and working with an experienced realtor can help you avoid falling into common traps that can all too easily snare the first time home buyer - including getting caught up in the frenzy of a falsely-induced bidding war to get that "must-have" apartment or condo that other, less-wary buyers are feverishly bidding up the price on.

Home Financing Market in Canada 'Boring but Beautiful'

Anyone trying to figure out the difference between the disastrous housing slump in the United States and Canada's still-healthy housing sector, where house prices have kept their value and settled into what the Canadian Real Estate Association recently characterized as a "considerably more balanced" market, need look no further than the differences in our two home financing markets. The differences between Canadian mortgage and U.S. mortgage markets were clearly summarized in a recent analysis in the Financial Times, the U.K.'s leading financial paper.

Characterizing the Canadian mortgage market as "boring but beautiful", the FT listed the key differences between the U.S. and Canadian home financing practices that have translated into vastly different results for the banks, financial institutions and homeowners that have stakes in the market. Key differences are:

• "Delinquency and foreclosure rates have scarcely risen."
• "Risky subprime mortgages, the scourge of the US housing market, make up less than 5 per cent of Canadian housing finance."
• "In contrast to the uncertainty surrounding Fannie (Mae) and Freddie (Mac), the US government-sponsored mortgage agencies, demand for mortgage-backed bonds issued by the Canada Mortgage and Housing Corporation is at record levels."
• "Adjustable-rate mortgages, which have crippled many US homebuyers, are virtually unheard of in Canada." (Adjustable rate mortgages come with low interest rates for the first year or two, but with rates that rise steeply thereafter.)
• "The ratio of loans to home values is lower in Canada than the US."
• "(L)enders are required by law to take out insurance on all mortgages where the downpayment is less than 20 per cent of the value of the house. Insurance is provided by CMHC and by private insurers."

The Financial Times attributes these key differences to a deeply-rooted financial and investment culture that is, in contrast to other cultural values, much more conservative than the wide-open financial practices in the U.S. which triggered their current housing and home financing malaise.

"While Canadians may be more liberal than Americans in most walks of life," according to the FT, this does not translate into our core fiscal outlook. Witness the recurring federal government surplus in Canada versus the recently announced record setting half-a-trillion dollar deficit run by the U.S. government. "Canadian mortgage underwriting standards have tended to be more conservative," Dominion Bond Rating Service analyst, Andrew Fitzpatrick told the Financial Times. "I think it comes down to culture."

Real Estate and Mortgages Markets Adjust to New Conditions

Recent developments confirm that the markets for mortgages and real estate in Toronto (and for Canada, as a whole) have entered a new phase of the business cycle. Fortunately, Canada's markets seem to have settled into a fairly soft (if flat) landing, unlike those in the United States where boom went to bust as the collapse of the U.S. sub-prime mortgage market burst the bubble on a hyper-speculative U.S. real estate market, triggering a housing crisis and wider financial credit and banking mess that is only now coming to a head.

"Canada's housing boom appears officially over, as average resale home prices in June fell marginally below year-earlier levels for the first time in a decade" writes Adrienne Warren, Senior Economist at Scotiabank in July 18th's Weekly Trends. However, news of a first-in-a-decade housing price drop was tempered, Ms. Warren notes by exaggerated price weakness "in a handful of previous hot spots, most notably Calgary and Edmonton" where prices had climbed to unsustainable levels. "In most other major centres, prices are still rising," she notes, "albeit at a much slower pace than in recent years."

The slowdown to a more sustainable level of price growth is welcome relief for home purchasers, and ultimately existing homeowners, wary of a runaway speculative fever that has brought the U.S. mortgages and real estate sectors virtually to their knees. If additional measures were necessary to take the excess starch out of Canadian markets, this was added by recently announced rule changes to federally-backed mortgage insurance. These rule changes, which come into effect October 15th, have virtually wiped out the market for extended, 40-year amortizations and zero-down payment mortgages in Canada.

"Ottawa's recently announced mortgage market regulatory changes," Ms. Warren notes, "including the elimination of 40-year amortization and no-downpayment options, are expected to add an extra constraint on demand, as is recent evidence of a softening in domestic labour market conditions." Coupled with rising resale listings, as well as continuing and sustained new home construction, this appears to have tipped the real estate market in Toronto and most other major centres across Canada from a seller's to a buyer's market.

The economists at Scotiabank, like those at the Bank of Canada, are optimistic (albeit guardedly so) that Canada is well positioned to weather the economic downturn in the U.S. that has spilled across global markets. In their latest Forecast Update, released July 21st, the Scotiabank's economics team, notes that unlike parts of Europe and Japan, "Canada's fortuitous position as a major commodity producer, its strategic advantage in government finance and its legacy of household caution with respect to leverage have helped to shelter domestic activity from the gathering U.S. storm."

Market forces it seems, together with proactive government regulatory and central bank monetary policy with respect to liquidity and interest rates, are working to keep our markets on track as here in Toronto, and across the country, we adjust to a new phase in the mortgages and real estate cycle.

Life for Zero-Down Payment Mortgages in Canada?

New rules for federally-guaranteed mortgage insurance appeared to be the end of the line for zero-down payment mortgages in Canada once the new rules come into effect October 15th. Already reports are surfacing that some of Canada's largest mortgage lenders (ING, BMO and CIBC) are moving to stop writing the 40-year mortgages and zero-down payments that will no longer be eligible for federally-guaranteed mortgage insurance from the Canadian Mortgage and Housing Corporation after October 15th.

Now reports are that the handful of private mortgage insurers that offer federally-guaranteed mortgage insurance are working to develop mortgage products that will allow lenders to continue to offer zero-down and 40-year mortgages after the new mortgage insurance rules kick in. (A handful of private mortgage insurance companies - Genworth Financial, AIG United Guaranty and PMI Canada - offer mortgage insurance that is guaranteed up to 90% by the federal government if lenders default while the CMHC, a federal Crown corporation, offers mortgage insurance that is 100% backstopped.)

"An industry source," according to today's National Post, reports "that the private mortgage insurers are looking into creating a product in which the first 95% of a mortgage is backed by the government with the last 5% securitized independently by the private mortgage insurers." PMI Canada is reportedly set to meet with federal Finance Department officials at the end of the month to further investigate how the new mortgage insurance rules will impact their ability to offer extended amortization and zero-down mortgages.

The new mortgage insurance rules were introduced by the Finance Department to ensure that Canadian lenders did not weaken their lending standards and qualify individuals with mortgages they could not readily afford. Ultra-lax lending standards in the United States and the proliferation of sub-prime mortgages and mortgages for individuals who were not required to show proof of income, employment or assets (so-called "Ninja mortgages', a now-naorious U.S.-industry acronym for mortgages written for individuals with "no income, no job or asets") are widely blamed for the collapse of a speculative housing bubble in the U.S.

Banks and other institutional lenders were able to write such high-risk mortgages by moving these risky loans off their balance sheets by leveraged securitizations. Individual high-risk mortgages were bundled together and shares in these securitized investments were sold as asset-backed commercial paper. When investors caught on to the risky nature of the loans underlying these securitizations last fall, the U.S. sup-prime mortgage market collapsed sparking the U.S. housing crisis and a global liquidity crunch that markets are only now recovering from.

Canada's financial markets and mortgage lending standards have and continue to be much more conservative thanthose in the U.S. The Finance Department's move to tighten Canadian mortgage insurance rules have only reinforced those standards. If the handful of private mortgage insurers are able to move to continue zero-down payment mortgages after October 15th by securitizing the remaining 5% of an insured mortgage that will not be federally backed, it is certain that the standards to qualify for such mortgage will be very high indeed. Without the highest standards for an extended amortization or zero-down mortgage there will not be a market for the securitizations necessary to float the mortgage products these private insurers are contemplating. In the wake of the biggest U.S. housing crisis since the Great Depression, investors who were burned by the sup-prime mortgage crisis in the U.S. are unlikely to risk being burned once again in Canada.

Toronto Mortgages Demand Will Push Markets In Run-Up to Oct. 15th Rule Changes

There is likely be a push to secure Toronto mortgages before newly introduced mortgages rules severely restricting the ability of home purchasers to secure zero-money-down and 4o year mortgages take effect October 15th. Changes to Canada's mortgages rules also include heightened credit score requirements that buyers will have to meet to qualify for high-ratio mortgages.

On July 9th, the federal Department of Finance announced that after October 15th it would stop guaranteeing mortgages with amortization periods longer than 35 years and would require purchasers to come up with a minimum 5% down payment in order to qualify for federally guaranteed mortgage insurance. The new rules will effectively eliminate the ability of a home purchaser to qualify for a zero-down payment mortgages and mortgages amortized over a 40 year period.

(Under the Bank Act, banks and other federally-regulated lenders must require borrowers to purchase mortgage insurance for high-ratio mortgages where the value of the mortgage is 80% or more of the value of the property being purchased. Mortgage insurance policies written by the Canadian Mortgage and Housing Corporation, a federal Crown corporation, are 100% guaranteed by the federal government, while mortgage insurance policies written by Genworth Financial Canada and a handful of other private mortgage insurers are 90% guaranteed.)

The move to tighten mortgage lending standards "has set off speculation that a surge of buyers, particularly those in pricier regions who have little money saved, could try to push into the market before the new rules takes effect," writes Lori McLeod, real estate reporter for The Globe and Mail. The impetus for prospective buyers with less than the 5% down payment that will be required post-October 15th will likely be greatest in markets like Toronto and Calgary where house prices have risen significantly.

Analysts and economist now expect home purchasing activity will spike in the run-up to the October 15th rule change, giving some additional impetus to sluggish real estate markets in Toronto and in other centers, but that demand is likely to taper off as mortgages become more difficult to secure after the new rules come into effect.

Affordable Ontario Mortgages Support Toronto’s Real Estate Market

Affordable Ontario mortgages are keeping Toronto-area real estate sales at a near-record level, despite a surge in listings, as the overall real estate market moderates.

The Toronto Real Estate Board released its June, 2008 numbers on July 5th. The TREB reports that the average price increase year-over-year has moderated to 4%, and that home sales had slowed and the number of listings had substantially increased, Yet, sales level were still at near-record levels when compared to other years “Sales were down 18 per cent from the 2007 total of 10,451, which was the best performance ever for that month,” noted TREB president, Maureen O’Neill. “Nevertheless, the 8,600 figure is the fifth best June on record, and indicative of an active, healthy market.”

“One reason for prices appreciating is that sales, while falling, are still comparatively high due in part to still historically low interest rates, says the Toronto Star. “Sales last month were on par with the 8,730 transactions in June, 2006, the previous record.”

The Star cites BMO Nesbitt Burns’ deputy chief economist, Douglas Porter, as forecasting “a soft landing for the area’s real estate market, with prices flat ‘or barely registering into positive territory’ in the short term.”

Canada's Mortgage and Real Estate Markets Differ Fundamentally from U.S. Markets

The market for a mortgage in Canada and the state of the Canadian real estate and housing markets are far different from those in the United States - and much healthier than some market followers give them credit for.

In an article in today's Globe and Mail, reporter Derek Raymaker, writing on the state of the housing market in the GTA raised shrill alarms that are not supported by what leading economic analysts are forecasting. Without citing any particular sources, and citing only the decidedly reduced home sale numbers across the GTA so far this year, Mr. Raymaker raises the specter of a U.S.-style housing crisis.

"Throughout Southern Ontario," Mr. Raymaker says, "the bad economic news from the United States, along with skyrocketing oil prices, has the housing industry holding its breath, waiting for the ripple effect to wash over the subdivisions of the Golden Horseshoe. Some think the other shoe could drop this year."

This analysis attributed to Southern Ontario's breath-holding "housing industry" does not, however, take into account a key difference between the Canadian and U.S. markets: In Canada, unlike the U.S., there was no overall loosening of our much more conservative credit requirements and mortgage lending practices. Canadian lenders could not and did not embark on the frenzy of sub-prime mortgage lending that U.S. lenders did, and consequently we are not facing the wave of foreclosures that Americans are dealing with. What we are facing is a slowdown in the housing market after record growth.

TD Economics released a special report on June 26th entitled "Canada's Housing Boom Comes to an End." In it the TD Financial Group's economist give a fair and balanced report of the spike in house listings and its likely effect on house prices. Noting that, in fact, a housing slowdown has occurred and that housing price gains slowed to 1.1% from 8,6% in January, they forecast that "sales are likely to continue to decline in the coming quarters and price growth will slip to 2% on a national average basis in 2008 and rise only to 3.5% in 2009."

The TD housing analysts are, presumably, not amongst those "some" in "the housing" industry waiting for the other shoe to drop. Rather they attribute the rise in real estate listings to homeowners now cashing in the gains they have made on a decade-long housing boom rather than on homeowners selling in a desperate bid to stave off the foreclosure of homes they cannot afford.

"It should be stressed," the authors of TD's special report note, "that the rise in listings does not reflect homeowners of principal dwellings desperate to sell, and this is the dominant difference between the Canadian and U.S. experience. Indeed, the U.S. has been characterized by an abnormal rise in delinquencies and foreclosures or large negative equity positions. In Canada, speculators may be quickly dumping properties on the market to get out while the times are good, but individuals that have a principal dwelling are not under financial duress. This distinction is crucial to evaluating the impact of weaker home price performance on personal wealth and consumption."

Refinance Mortgage While Rates Are Low

Canadians who need to refinance a mortgage in the second half of 2008 should be comparison shopping for the best mortgage rates while interest rates remain low. What have been muddied economic waters look to be settling out, but the view isn’t all that good in terms of where interest rates are likely headed.

The consensus of the Canadian banks’ leading economists is that interest rates are heading higher by the end of the year and will remain there in 2009 as the Bank of Canada seeks to nip price inflation caused by high energy and commodity prices in the bud. “Most economists,” reports the Financial Post, “expect Bank of Canada Governor Mark Carney to keep interest rates at 3% in 2008 before hiking them in 2009 as inflation becomes more of a concern and the U.S. economy picks up.”

In a report that landed on the front page of the Report on Business section of the Globe and Mail, TD-Canada Trust’s economics branch, TD Economics, is forecasting that weak consumer demand will keep inflation down, thereby reducing pressure on the Bank of Canada and U.S. Federal Reserve to raise interest rates. Nonetheless, TD’s economists, like other industry analysts are now expecting interest rates to rise going into 2009 and beyond, as the Bank of Canada and the Fed “are both expected to begin a tightening cycle in the second half of 2009.”

Given the renewed emphasis that Bank of Canada officials have put on fighting inflation since their June 10th decision not to further reduce Canadian lending rates, it may be wise to expect interest rate hikes sooner rather than later. In which case, if you need to refinance a mortgage, now is the time to be looking at what rates are available, before rates do go up across the board.

Get Mortgage Renewals Advice Before Mid-July

Homeowners in Toronto and the GTA facing mortgage renewals should be talking to their mortgage brokers as we hit the dog days of July. Canada’s central bankers are in Switzerland this week at the annual meeting of the Bank of International Settlements, meeting with their counterparts from across the globe. In mid-July, the Bank of Canada will announce where Canadian interest rates are headed, and this may well impact your mortgage renewal decision.

Prior to June 10th, the Bank of Canada cut its main interest rate (the rate at which it lends money to the major banks, trust companies and financial institutions) six times in a row. On June 10th, the BofC shifted from cutting rates, holding its main interest rate at its current 3.0%. This surprised virtually all the analysts and banking insiders, but signaled mounting concerns about the rising price of gasoline and other commodities. Inflation has been the main topic at the meeting of central bankers in Switzerland. “Central bankers warn of inflation scourge,” is the main headline in today’s Toronto Star business section.

Of course, this doesn’t necessarily mean that interest rates will necessarily be on the rise when the Bank of Canada reconvenes to set its main lending rate on July 15th. But Bank of Canada officials have been banging the inflation drum of late.

For homeowners who need to refinance their mortgages and are considering whether or not to keep an open mortgage or lock-in at rates that are still very, very low historically, canvassing an independent broker’s advice about their renewal options before July 15th will help prepare them to make the decision that is best for their circumstances. Industry analysts are calling for the Bank of Canada to keep its main rate at its current 3.0%, yet both variable-rate and fixed-rate mortgages will be affected by the BofC’s interest rate decision on July 15th, irrespective if the BofC rate stays where it is or edges higher. So doing the legwork (or getting help doing it) will help you get the jump on the market. An independent mortgage broker will be able to help you make the decisions and find the mortgage renewal terms that best fit your financial profile and goals.

Toronto Mortgage Brokers Now Governed by New Act

Toronto mortgage brokers, and mortgage brokers across Ontario, are now governed by the Mortgage Brokers, Lenders and Administrators Act, 2006,which takes effect July 1, 2008.

The new Act requires that every company or individual who arranges or negotiates a mortgage on behalf of a borrower with a lender be registered with the Financial Services Commission of Ontario, the same government commission that oversees Ontario's trust and insurance companies. The new Act covers any business or individual that:

• solicits another person or entity to borrow or lend money that is secured against real property (i.e., a home or land),
• provides information about prospective buyers to mortgage lenders,
• assesses prospective borrowers for a mortgage lender, or negotiates or attempts to negotiate or arrange a mortgage on behalf of another person, or
  
• engages in any of the Acts other prescribed activities.
  
  

Ontario's Financial Services Commission estimates that 30 per cent of Ontarians use a mortgage broker when arranging mortgage financing. The new Act was put in place to enhance competition and professionalism amongst brokers. Borrowers can now go to the Financial Services Commission of Ontario website to ensure the mortgage broker they are working with adheres to the highest proessional and ethical practices in the industry.

Choosing the Right Mortgage Requires 'Financial Acumen' and 'All the Relevant Information'

Choosing the right mortgage can be a difficult challenge with the wealth of new and innovative mortgage products that have come onto the market in the past few years. The Bank of Canada's Deputy Governor, Sheryl Kennedy, in recent comments to the Investment Industry Association of Canada on the state of Canada's mortgages and real estate markets, stressed how important it is for Canadian home buyers to make informed and educated decisions when choosing from the variety of mortgage products that are now available.

"One of the best ways to avoid painful outcomes in the housing market," Ms. Kennedy observed, "is to have individuals making well-informed financing decisions." However, she cautioned that the need for "financial acumen" has increased in recent years, and that this need for greater financial understanding will only increase further.

"The good news about innovation in the mortgage, mortgage insurance, and home equity market is that people have greater choice in financing," Ms. Kennedy noted. "But," she cautioned, "Individuals need the financial literacy and all the relevant information from those selling mortgage products to make the choices best suited to their circumstances."

Of course, one of the best ways for obtaining "all the relevant information from those selling mortgage products" is to enlist the assistance of an independent mortgage broker. A mortgage broker is not the seller, but rather has access to and information about a whole spectrum of mortgage products from multiple lenders. A qualified mortgage broker can, should, and will educate a home buyer about the range of mortgage options and terms available, and will assist the home buyer in choosing the right mortgage for his or her circumstances.

"Most home buyers require financing," Ms. Kennedy noted, "and therefore the mortgage market and its increasingly innovative products can affect when people purchase a house and the type of house they buy." A well-resourced, knowledgeable and experienced mortgage broker will be able provide a home buyer with the financial acumen to make the right mortgage choice from among the many innovative mortgage products on the market.

Good Time for Buying Your First Home as Real Estate and Mortgages Markets in Toronto/GTA Moderating

If you are buying your first home in Toronto or the GTA, then numbers released on June 18^th by the Toronto Real Estate Board should be reassuring. “The Greater Toronto Area (GTA) resale housing market continued at a moderate but healthy pace throughout the first half of June,” TREB President, Maureen O’Neill announced yesterday.

While the number of houses on the market has climbed and the pace at which existing homes are selling has declined significantly since last year, it is essential for first time homebuyers in the market for real estate and mortgages to keep theses numbers in perspective. The Toronto/GTA real estate market set record numbers last year, following record-setting years in both 2005 and 2006. Consumer confidence in the real estate and mortgages markets quite naturally ebbed with news story after news story covering the sub-prime mortgage mess and subsequent housing problems south of the border.

Yet Canadians have largely been unaffected by events in the U.S. due to tighter lending regulations and conservative consumer borrowing patterns which have resulted in a much less speculative housing market here in Canada. A more conservative approach was demonstrated by the Bank of Canada’s decision not to cut interest rates further, against industry predictions, because of concerns that the economy will face increasing inflationary pressures. This has put upward pressure on fixed rate mortgages for homebuyers, yet it underscores a healthier attitude towards fiscal policy than has been demonstrated down south.

News that the Toronto/GTA real estate markets are settling into more moderate growth patterns - the current average resale home price is up three per cent from this time last year, while across the GTA’s 905 Region the average price is up four per cent – should be reassuring for first time homebuyers who are concerned about the possibility of a significant drop in housing prices like we have seen in the U.S. With mortgage rates likely set to rise by the end of this year and the Bank of Canada voicing concerns over high energy and commodity prices, news that gains in housing prices have slowed is an indication that our mortgages and real estate markets are on track. Therefore, now may be the best of times if you are considering buying your first home to be looking at you real estate and mortgages options.

“With employment and interest rates holding steady and a 17 per cent increase in available listings compared to a year ago, it is an ideal time to take advantage of all that the market has to offer,” Ms. O’Neill noted.

Market for Bad Credit Loans in Canada Drying Up, But Not Dry

The pool for bad credit loans in Canada is drying up, but isn’t dry. That is particularly good news for Canadians with poor credit ratings who are shopping for refinancing as their mortgage terms come due.

That the pool for Canadians with less than optimal credit ratings is smaller than it once was is largely attributable to the restructuring of the asset-backed commercial paper (or, ABCP) market in Canada, a market that was spurned by Canadian investors as being too closely parallel to the sub-prime mortgage market in the United States. Investors turned away in droves from Canada’s ABCP market late last year, as the U.S. sup-prime mortgage market largely collapsed, triggering a global credit crunch and a housing crisis that the U.S. is still coming to grips with.

As a result of the ensuing general tightening in credit markets, some Canadian homeowners are now finding it difficult to obtain mortgage refinancing due to past credit problems. “People with a shaky credit rating, who relied on so-called 'B' lenders for a mortgage, could be left scrambling to find a new lender if their mortgage is coming due soon,” notes the Chatham Daily News, citing the example of a local Chatham couple who had never missed a mortgage payment but yet are having difficulty getting refinancing for their home because of their poor credit scores.

Thankfully, there are credit sources in Canada that can be tapped for individuals experiencing similar difficulties in obtaining mortgage refinancing. The best advice for anyone facing these difficulties is to speak to an experienced and well-resourced Canadian mortgage broker who can help a poorly-rated homeowner tap into the dwindling, but not dry, pool for financing bad credit loans in Canada.

Lock up Home Refinancing Before Mortgage Rates Rise

If you are making home refinancing plans or looking at purchasing a home, now is the time to speak to your mortgage broker. Canadian mortgage rates are on the rise from their current near-record lows in the wake of Monday's Bank of Canada decision not to cut its main lending rate further than the current rate of 3.0 per cent. Monday's decision emphasized a renewed caution with respect to inflationary pressures brought about by high energy and commodity prices on the part of the Bank of Canada's new Governor, Mark Carney.

The Globe and Mail reports that mortgage rates are already on the rise, as the Bank of Canada decision to stay put with its main rate caught many industry insiders and analysts by surprise. As a result, the market price for five-year Government of Canada bonds has been on the rise since Monday, dragging up the interest rates that banks, credit unions and caisses depots are charging even their best customers for fixed rate mortgages.

"A five-year fixed mortgage will now cost half a percentage point more than it did Wednesday at many of the country's big banks," reports the Globe's Lori McLeod. Although, fast-acting customers currently shopping for a house or for home refinancing will likely have about a week or so to negotiate and lock into the current low rates, according to industry sources.

Canadian Mortgages Rates and Interest Rates Hold Steady For Now

Most industry analysts and those trying to decipher where the Bank of Canada was headed with its main overnight lending rate - the main rate that basically determines the dimensions of the playing field for Canadian mortgages and lending markets - got a rude wake-up call from Bank of Canada Governor Mark Carney today. Defying what had been the near unanimous view-from-the-street prediction that the Bank of Canada would lower its main rate from the current 3.0%, Mr. Carney and the fiscal watchdogs at the Bank of Canada instead elected to sit tight. The reasoning for this is, and has been, clear - at least for the last several weeks since the G7's central bankers met to discuss monetary policy in Spain and comments over growing inflationary pressure began to circulate.

Today's news was not unexpected. That the Bank of Canada would not lower interest rates further because of concern over rising inflation was not surprising for Canadians who have weathered the sticker shock of spiraling gas prices over the past weeks and know that the costs of goods moved by truck are following or soon will follow gas prices north. Indeed, the Bank of Canada cited its concerns over rising energy and commodity prices as a key determinant in its decision not to lower interest rates further. This marked the end of a string of six successive rate cuts, as well as a shift of emphasis from stimulating economic growth to nipping inflationary pressures caused by soaring energy prices in the bud.

In the Bank of Canada press release accompanying its announcement, the Bank restated its projection that "economic growth will pick up this year and accelerate in 2009, owing in part to a firming of U.S. demand and accommodative monetary policy in Canada." That's good news for Canadians and the Canadian mortgage, housing and financial markets. This left the BofC wrestling with the spectre of inflation, which is typically what keeps central bankers up at night. "If current levels of energy prices persist, total CPI inflation will rise above 3 per cent later this year," the Bank noted in its press release.

Clearly, for Governor Carney and the other monetary mavens at the Bank of Canada, ensuring that the Canadian economy stays relatively non-inflationary and hits the 2% targets for inflation the BofC has set for 2008 and 2009 is of prime importance. U.S. Federal Reserve Chairman, Ben Bernanke also spoke out again in today's Wall Street Journal over his concerns about the inflationary clouds he sees on the horizon of a U.S. economy still struggling to get out from under its domestic housing crisis.

This seems to indicate that there are no further rate cuts for Canadians on the immediate horizon this year. Expectations and pressure are likely to build for Governor Carney to hold the Bank of Canada main rate at 3.0% when the BofC reconvenes on July 15th to review its rates. However, unless some of the gas is let out of ballooning oil prices and there is some relief for Canadian drivers and the transportation sector at the pumps, it seems more likely that Canadians will be looking at some modest interest rate hikes - whether in July, or closer to year's end. That would seem to makes now an auspicious time for persons looking at the Canadian mortgages market and contemplating a home purchasing or home refinancing decision, or those who may be sitting on the fence with variable rate mortgages, to get with their Canadian mortgage broker and see what the costs of locking into the currently low Canadian mortgage rates would be.

Mortgage Investment Payoffs: City versus Suburbs Home Purchasing Decisions

Where have Canadians' investments in mortgages paid the best dividends? It's a mixed bag according to the numbers released by Royal Lepage Real Estate Services. The Royal Lepage survey results published in today's Toronto Star show that an investment in a single-family home in the city was the better investment choice over the past ten years versus a suburban single-family home, although both showed great appreciation. There was an 89.4% appreciation for a typical two-story family home in Toronto versus an 82.4% increase in 905 areas of the G.T.A. More interesting, particularly given some of the bad press regarding condominiums as an investment, was the trend reversal in city versus suburban condos.

The suburbs beat out Toronto in condominium price appreciation over the past ten years. "An average condominium is up 86 per cent in the suburbs to $280,447 compared with a 57 per cent increase to $366,000 in the downtown core," Royal Lepage reports. "One reason for the spike in appreciation," in the suburbs versus the downtown core, according to the Royal Lepage study, "is maturing baby boomers looking to downsize their empty nests to something that requires less maintenance" while remaining loyal to their suburban communities.

The Royal Lepage survey results are, of course, retrospective, looking back over the past ten years of a housing bull market. However, the analysis of the reasons for the value increase in suburban condos indicate that suburban condos will continue to be a good investment for couples and singles making their first home purchasing decision. The price push from baby boomers looking to downsize and stay in their communities is a trend that seems likely to sustain itself as the great boomer wave moves into retirement, keeping suburban condo prices buoyant against the rest of the housing market. First-time homebuyers looking to capitalize on their first mortgage investment could do well in putting their money in suburban condos and putting off the "lifestyle" move to the downtown core for a few years until they build up the equity under that all-important initial mortgage.

Mortgages Questions from The Morning Commute

Questions about where Canada's mortgages markets are headed naturally pop to the mind of morning commuters who are are making home purchase or home refinancing decisions when they are confronted with dire headlines about the Canada's economy in local giveaway commuter papers. (See, for example, the Toronto News Service article entitled "Recession looms", in today's Metro commuter paper.)

The trouble with such commuter pieces, however, is that while they give a synopsis of the news available in paid newspapers, they lack the depth of analysis in the paid papers' longer news coverage on the same subject. The Metro piece, for example, is based on the same recently released Statistics Canada data that was subject of much more in-depth analysis in the weekend papers. On whole, the coverage of the data in the weekend papers was much more balanced and less alarmist than commuter headlines would suggest.

Writing in the National Post's weekend edition, financial reporter Jacqueline Thorpe explains the genesis of the StatsCanada numbers that showed Canadian GDP shrinking by 0.3% in the first quarter of 2008 (versus its posting the very moderate gains that were predicted). "The big drag on the ecomomy in the first quarter," Ms. Thorpe writes, "was continued turmoil in the auto sector - sideswiped by the retooling of model lines and a strike at a major U.S. parts manufacturer, in addition to ongoing restructuring."

So does this mean Canada is in, or risks, the painful consequences of a recession as the commuter headline would suggest? (To be fair Metro did note that technically a recession is two or more quarters in a row of negative growth in the overall economy, while we have experienced only one.) So . . . technically, no. We have only experienced three months of a very moderate decline in GDP - the economy shrank very slightly, by 0.3%, in the first three months of '08. Practically? . . . Also, likely no. As Ms. Thorpe notes, Canadian real income is rising at the rate of 3.7%, year over year, due to a 14% in the price of goods we are selling overseas and an 11% decline in the prices we pay for imported goods.

As far as mortgages and real estate markets go, Ms. Thorpe notes that growth in residential real estate spending did decline along with business spending, but only as a facet of the slowdown of growth in overall domestic consumption which slowed to 3.2% from an unsustainable (dare we say inflationary?) pace of 7.5% in the fourth quarter of 2008. Speculation amongst analysts, according to Ms. Thorpe, is that the economy's weak showing "would likely prompt the Bank of Canada to cut interest rates at least one more time at its next announcement on June 10th."

This is not necessarily convincing, however - at least to this writer - particularly given Bank of Canada Governor, Mark Carney's comments over the weekend about the difficulty in making predictions about inflation - which is usually a central banker's constant worry - given the volatility in energy prices. This may be the time for commuters who are gauging the temperature of Canada's mortgages market to talk to an experienced and trustworthy Canadian mortgage broker in order to see whether this is the time to lock into what are historically very, low mortgage rates,

Canadian Mortgages Survey Reports"Interesting" Statistics

There are very interesting statistics "out there" that were released in the CAAMP's (Canadian Association of Accredited Mortgage Professionals) Spring 2008 Survey Report. Two stats stand out particularly for those interested in Canadian mortgages and real estate markets generally.

First, according to the CAAMP's Spring Report, "2/3 of Canadians are neutral or pessimistic on whether it's a good time to buy a house right now." Undoubtedly, this is the fallout from residual fears brought on by Canadians witnessing the collapse of the highly speculative U.S. housing market - an issue we have addressed here before. Yet, the CAAMP's stats show that arrears on Canadian mortgages are miniscule relative to the mortgage mess in the U.S., where as of early spring one in ten homes had been in some stage of the foreclosure process during the preceding months. In Canada, the CAAMP notes, the rate of mortgage arrears at Canada's top seven lenders (defined as mortgage payments that are 90+ days overdue) is only 0.25% - one in four hundred homes in Canada versus one in ten homes in the United States. Clearly, if Canadians' concerns over the state of the mortgage market are premised on what we have seen in U.S. markets, their concern is misguided.

The second statistic that stands out - particularly if wary financial products consumers are in the belt-tightening mode the foregoing stat would suggest - is the underusage of Canadian mortgage brokers and their expertise. The CAAMP reports that only 34% of first-time home buyers utilized a mortgage broker. This number, on an intuitive level, seems low considering the magnitude of the financial undertaking and the wealth of varying products and pricing on the mortgage markets for first-time home buyers. Yet, this number pales in comparison to the 50 percent or so drop-off in use of a mortgage broker when it comes time for Canadians to renew their mortgage or refinance. Only 16% of Canadians used a mortgage broker's services when seeking a mortgage renewal, and only 17% turned to a mortgage professional when refinancing.

This begs the question: If Canadians are generally pessimistic or neutral about the state of the housing market, as the numbers suggest, why then are they not shopping around and getting independent mortgage advice from brokers when it comes time to renew or refinance their homes? Looking at this drop-off in using mortgage brokers' services when someone is already in the housing market, it would seem (as other statistics and analysts have pointed out) that innate pessimism in the Canadian mortgage and real estate markets is more the psychological result of our watching what is happening to our U.S. neighbours than it is the effect of a basic concern with our own market fundamentals.

Canadian Mortgages with Extended Amortization a Tool for Our Times

So what's the deal? From perusing Canadian newspapers and magazines, it would seem that mortgages designed with an amortization period longer than 25 years (the former industry standard) may be the most 'controversial' mortgages product. Rather than being seen as 'innovative' in the eyes of many industry watchers, extended amortization mortgage products seem to be viewed in some quarters as being somehow inherently 'evil'. I believe that sort of a judgment tends to tell more of the analyst and his or her preferences and perspectives and the audience he or she is writing for, than it does about the product or service under scrutiny.

Wealthy Boomer columnist, Johnathon Chevreau - questions, anyone, on Mr. Chevreau's perspective and audience? - in Saturday's Financial Post Weekend seems to suggests that a fourty-year amortized mortgage is more problematic than solutional for Canadians' long-term financial planning and wealth accumulation strategies. I suggest this is much more a reflection of the demographic Mr.Chevreau writes for, and the life perspectives he and they have formed over time, than it is on extended amortization mortgage products.

Mr. Chevreau's advice is aimed at wealthy boomers, those demographically fortunate many who were raised in and have ridden the crest of the great post-WWII economic expansion. For the rest of us - those making their first home purchasing decision, or needing to make a tough home refinancing decision in difficult economic times - a fourty year mortgage amortization - may make all the difference between home ownership and staying in, or going back to, the rental market. While the interest heavy, capital-light payments under a mortgage with an extended amortization period is perhaps less than ideal, it sure seems to me like a better option than continuing to pay someone else' s mortgage off with my monthly rent cheque - perhaps the mortgage on the investment property of yet another wealthy boomer who has reaped the windfall of the aforementioned fourty-year economic expansion.

The crux of the dilemna seems to be the assumptions as to why individuals choose homeownership over rental accommodation. After all there are tax credits available to non-homeowners, together with the time and money not spent on repairs, upkeep gardening etc. that are quite advantageous. For most of us, however, the security and future financial freedom envisioned when investing in a home remains tanatalizing alluring.

Mr. Chevreau quotes Mercer Consulting actuary, Malcolm Hamilton, as saying, "The idea of a 40-year amortization and making minimum payments for 40 years is just financial slavery. I don't see that as a foundation for any kind of sensible financial plan." Yet Mr. Hamilton almost concedes the point that is made statistically by others: Canadians do not sit idly by for decades paying off mortgages as slowly as possible. Unlike in the United States where interest paid on one's mortgage is tax deductible, in Canada it isn't. Most Canadians make periodic lump sum payments on their mortgage debt, and a majority of Canadians make their mortgage payments weekly or bi-weekly thereby effectively reducing amortization periods.

Having already "got theirs" so to speak. It is disingenuous for wealthy boomers and their advisors to discredit financial products and strategies that were not optimal (and therefore weren't used) when they were buying homes and raising families. It smacks of self-satisfaction for boomers, wealthy or not, to turn around and advise their kids and grandkids against products that they didn't need to use and were not available to them in the first place. Recommending that newcomers to the wealth accumulation game speak to a knowledgeable and experienced Canadian mortgage broker who can help the aspiring homeowner with the information and products to make home purchasing a reality in today's housing markets, would seem to be a more honest and broadly-perspectived approach to take rather than blithely revisiting and reviewing the strategies that worked for a generation of demographically fortunate individuals who are either now monied, or who are unlikely ever to be so at this stage in the game.

Canadian Mortgage Rates Drop in Response to Bank's Lower Costs

Financial institutions in Canada have begun slashing their Canadian mortgage rates to reflect their lower costs of borrowing. CBC News nicely summarizes the recent rate cuts introduced by leading banks, credit unions and caisses populaires in response to the lower costs financial instituions are facing in raising money on the bonds market as well as the increasingly competitive Canadian mortgage market.

While the Bank of Canada slashed its base, overnight lending rate by 1.5% in recent months (with the banks showing uncharacteristic initial hesitancy to immediately follow suit with their prime lending rates: see our analysis at the time), it hasn't been until this week that the full effect of the central bank's rate slashing has been fully felt in the Canadian mortgages market. "Until this week, cuts to fixed mortgage rates have been relatively modest," as CBC News observes, as commercial banks and other financial institutions have faced higher borrowing costs themselves due to the mess the U.S.'s credit crunch has made out of global borrowing markets.

With what looks like the worst of the sub-prime mortgage-inspired credit storm having blown itself by leaving Canadian waters only moderately choppy but with all boats still afloat, it seems Canadian financial institutions have finally gotten around to the more serious business of competing for our mortgage business. Now may be the best of times - with mortgage rates dropping and an extra-large inventory of houses on the resale block in most Canadian markets - to get with a knowledgeable Canadian mortgage broker to secure the best financing that's been out there for quite awhile if you've been putting off or waiting for the best time make a home purchasing decision.

Canadian Mortgages and Real Estate: Bull-Market vs. 'Raging Bull-Market"

Insiders in the Canadian mortgages and real estate industries seem non-plussed by the wild swings in markets to the south of us. But if forecasts of the leading analysts are correct, it looks as if Canadian markets won't be seen swinging wild punches like Robert DeNiro playing the all-time great Heavyweight Boxing champ, Rocky Marciano in Raging Bull, but rather that the 'raging-bull' housing markets we've seen over the past seven years in Canada are more likely to settle into a more placid and domesticated 'barnyard bull market' rather than tip the scales and turn into a nasty 'bear' market as some doom-sayers predict.

Scotiabank economist, Adrienne Warren, writing in Scotiabank's Scotia Research Group Real Estate Trends report released May 15th and picked up by the Toronto Star states that, "There is now convincing evidence that Canada's housing market has come off the boil. Yet, Ms. Warren sees no evidence that Canada's cooling housing market is headed for the type of bear housing market that followed the last two booms in Canada's housing market cycles.

Ms. Warren notes that what we are seeing in today's market is "reduced affordability, limited pent-up demand and (an) increased supply" of homes on the market. And while Scotiabank's long-term housing price model shows that average Canadian home prices are marginally above their long-term trends, it is most probable that the market will go from a boil to a sustainable simmer instead of boiling over. Housing prices will continue to rise instead of collapsing as skeptics fear, albeit they will rise at a diminished rate.

Scotiabank, like the Bank of Canada and the Federal Finance Minister, seems to expect that normalized growth rates in demand for housing, housing sales that are 15% last year's record numbers and a reduction in new home starts reflected in the current falloff of demand for residential building permits will take up the current excess housing supply on the market and growth in housing price rates will return to a long-term balanced and sustainable level through 2008 and into 2009. (Interestingly, and counter-intuitively, even south-of-the-border new home construction starts posted their biggest increase in two years, despite that country's housing woes.)

The analysis coming out of Scotiabank's Scotia Research group is based on economic modeling that tracks home prices over time, and which shows that average Canadian housing (except in the most grossly distorted areas of the country, Calgary and Edmonton are mentioned) average housing prices are not close to the distortions of 12% and 18% above long-term market trends that peaked out in 1976 and 1989 when previous bull housing markets turned bearish. Canadian mortgage brokers and real estate professionals, as well as new and existing homeowners should be buoyed by this latest anlayis coming out of Scotiabank. It looks as if this 'raging-bull' may be able to be domesticated instead of its having to be put down.

Toronto mortgage seekers reassured by federal Finance Minister

Torontonians who have licked their fingers and stuck them in the air trying to gauge the economic winds in which to make their home purchasing or home refinancing decisions - be they first-time homebuyers, homeowners who are thinking about upsizing or downsizing, or just those of us who are very comfortable with where they live ("thank-you-very-much") but are looking at their options as it comes time to renogotiate their mortgage - caught a welcoming fresh breeze from federal Finance Minister, Jim Flaherty, yesterday, as he gave a state-of-the-markets speech at the Economic Club of Toronto.

Summary of Mr. Flaherty's key points, as reported by Eric Beauchesne of the Canwest News Service: "Canada is in good economic and financial shape to weather the challenges it faces.... Jobs are still being created, unemployment remains near its lowest level in a generation, incomes are rising, inflation and interest rates are low, and Canada has the largest budgetary surplus and lowest debt burden of the major major industrial countries."

Good news, I say! And although it comes from a politician, it seems to be bourne out by information that streams past me in the papers and online. (Also, the front of my moistened index finger seems to be much cooler than the back, although I'm not sure how reliable that economic indicator is.)

Maybe because he was speaking in Toronto, where the numbers coming out of the real estate numbers have been mixed in the first quarter of '08, but Mr. Flaherty took special care to highlight key differences between Canadian mortgages and real estate markets and those south-of-the-border, where the winds are not so fair . . . . to put it mildly.

"Although our economy is closely tied to the United States," Mr. Flaherty said, "We are not the United States" (emphasis added). "The factors behind the current American malaise are not likely to be duplicated here."

Addressing American housing woes brought about by the collapse of the U.S. sub-prime mortage market and the bursting of the American real estate bubble, Mr. Flaherty noted that our housing market remains solid, and our exposure to the U.S. sub-prime market is low. Only 3% of Canadians' outstanding mortgages are sub-prime versus about 43% to 48% in the U.S. at the height of their speuclative housing spree, depending on how sub-prime is defined.

"We are not the United States," Mr. Flaherty cheers. "We are Canadians!" we roar back! . . . . Now, I'll hoist a Molson's to that. . . . . Canadian, anyone?

Home Equity Loans or Second Mortgages as Diversification Strategies

Recent buzz in investment circles has been about utilizing a home equity loan or second mortgage to extract some or all of the existing equity that has built up in your home and utilizing the money freed up to invest in a conservative, diversified investment portfolio spread across a number of markets. That way the assets that are locked up in your home are spread across a number of markets and less susceptible to any market adjustments than are assets which are solely invested in Toronto's real estate market.

While the Canadian and the Toronto real estate markets continue to weather the storm that U.S. markets are suffering through as a result of lax lending policies and overwrought speculative fever, ensuring that all of your nest eggs are not necessarily in one basket is always a prudent move. There are a number of analyses available which set out the the benefits of this diversification strategy, as well as the tax advantages a homeowner can tap into by going this route.

Home Equity Loans and Other Canadian Mortgage Products to Finance Your Home Renovations

There are an array of financing vehicles for home renovations, ranging from home equity loans, to secured lines of credits, to mortgage refinancing options, that can help everyone from first-time home buyers to "empty-nesters" improve and secure the value they have invested in their biggest financial "nest egg" - their family home.

When contemplating home renovations - whether major or minor renovation jobs - the scope and timing of what, when and how renovations will be done, whether by you or by a professional, will depend largely on how you plan to finance that renovation project. If you are just installing a new tub-surround its fairly easy, dip into your wallet, your savings account or pull out your wallet, give up your weekend, and this sort of minor renovation is done. Small project, minimal planning and a little bit of work, and your project is complete. (Well, perhaps its more than a little work - depending upon how comfortable you are with drywalling, plumbing, and following the "simple instructions" included with the tub-surround kit. You know, the "easy-to-do-it-yourself" step-by-step instructions that were actually written by an anonymous committee of dyslexic, mechanically challenged technical writers in Urdu, and then translated into a whole host of indecipherable languages, including an incomprehensible English translation. Or, worse yet, no translation - just the annoying little Swedish cartoon guy on the Ikea instructions who, invariably, leads me down the garden path to thinking, "I, too, can do this simple installation in just a few hours.)

When it comes to major home renovations, however, careful consideration of your financing options will save you money, as well as major hassles if you or your contractor run into unforeseen time delays, complications or problems. When contemplating any significant home renovations it is prudent to talk to an experienced Canadian mortgage broker to understand what your best financing options are.

Check out our recent article, "How To Finance Your Home Renovations - Whether To Dip Into Savings Or Secure A Home Equity Loan", to get a basic understanding of some of the options that are available to finance your renovation project.

Canadian Mortgages as Wealth Management Tools: Diversifying Your Home Equity

Homeowners with Canadian mortgages can utilize their homes' equity to create solid, tax-effective investment portfolios. In her Q&A piece in the Mortgages supplement to today's Globe & Mail, Royal Bank of Canada mortgage specialist, MaryAnn Pohl, discusses how homeowners can leverage equity under their existing mortgages to create effective wealth management tools. Utilizing a home equity loan, a homeowner can create an equity mortgage plan that effectively allows an individual to convert the equity they have in their home - as it builds up - to the point where his or her entire mortgage is effectively tax deductible.

The key is in diversification - taking the equity that currently exists in your home (the security of which is entirely dependent upon the market value of your home, and hence the variability of the real estate market) and withdrawing it through a line of credit secured on your home to invest in diversified securities that allow you to expand your investment portfolio. Interest paid on the home equity loan is tax deductible since it is used for generating investment income.

With a home equity loan plan, Ms. Pohl explains, "You can now apply once and have access to equity up to your approved limit. Your available credit increases as your mortgage is paid down, so you have access to funds when you need them." She points out that mortgages, being secured, are "the most economical way to borrow". By accessing the equity that accumulates as your mortgage is paid off through a secured credit line and re-investing it in a diversified portfolio, "you immediately enjoy the benefits of a 100-per cent tax deduction on the interest expense on that line of credit". If one does this consistently and effectively, month after month, under a properly tailored home equity plan, it is then possible to convert the entire mortgage on your home over time into a tax deductible investment vehicle. Repeat this strategy "each month until your entire mortgage is tax deductible," Ms. Pohl observes, "and you'll also have grown your net worth to include a retirement investment portfolio."

Ms. Pohl's insight into the way that mortgages and home equity can be leveraged into wealth management tools illustrates the benefits of working with a mortgage specialist or experienced Canadian mortgage broker who can help you reap the benefits and security that should come with home ownership - even in times when real estate markets may be hesitant or settling.