Why I do what I do!

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The first question of a prospective clients mouth is “What is your best rate?”.  This always leads to a discussion and I never really answer the question right off the hop because I’m not wired that way.  I saw a recent stat that says 10% of consumers shop based on rate and 90% shop based on value, I need to hang out more at Starbucks because those consumers are looking for value, it’s definitely not price.

When I entered this business I came into it because I want to make a difference in people’s lives through education and communication of my previous experience and knowledge.    To me it’s not about the transaction of a mortgage it’s the life long relationship of purchasing a home and future homes, thereby fulfilling goals and dreams, I love this business.  I see many people advertise on a rate that seems unreasonable only to deliver no value, just a product.  If that’s what you as a consumer want, I’m not your guy, it’s the way I am wired.

I conducted my first Mortgage University course last night because it’s what I love to do, educate and inform consumers.  The best sense of accomplishment I get is when a consumer has had no surprises through the whole process.  So many consumers come to me with inaccurate information from family, friends, etc, that the best way to help them is educate them.  I plan to continue my focus on education so that I can “Make a Difference”.

I would like to thank a friend of mine who recommended a specific website that awakened and help me understand “why I do what I do”.  This website has a video which he recommended I watch.  He gave me enough teaser information to peak my interest.  This video is Anthony Robbins whom many people know.  I have seen him in person and never left with much information, I was unimpressed as he just seemed to try to motivate.  This presentation and video Anthony gave is the most relevant piece of work of his to me.  I hope you have the same takeaway.

Thanks Darren Sawchuk, a friend is someone who knows you better than you know yourself, for that I am grateful!

The party is over

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Based on some information from Benjamin Tal, Senior Economist at CIBC, shared with us this week, one thought remains…if Prime Rates increases by 2.75% to 3% higher (target rate 5-5.25% Prime rate) by the end of 2011 and the US housing market remains in the crapper, how can we have such a difference in Prime rates and still have a solid economy in Canada?   Benjamin said Canada will be going “solo”, not sure if that bodes well for us.

Other things I learned from Benjamin:

1)  Strategic Defaults – US homeowners not electing to pay their mortgages because their home value is lower than their mortgage.  The Americans always come up with terms to make lack of financial knowledge sound sexy.  Who remembers sub-prime, NINJA loans, and the list goes on)  Click on Strategic defaults to find out the size and magnitutude of this potential problem in the US.

2)  10 Millions (yes million) have a negative equity position of greater than 20%.  What this means is that if your home is valued at $300,000, over 10 Million would have mortgages over $375,000 and greater on that same home…yikes!

3)  US Labour Market is still a long way from full employment.  April stats show the U.S. at 9.9% unemployment rate and that is only for the reported ones.  The Canadian unemployment rate in April was at 8.1%, we aren’t much different here, but when you consider population differences here, there are alot of unemployed Americans, how long will it take to dig out of that one?

4)  Greece is an indication of what to expect for other countries, taxes will increase/government spending will reduce.  I knew I shoud have been paying attention in that Economics class, I would have never thought Greece would have such an impact on all of us.  There is no doubt all countries have been spending like banshees to keep their economies going, but like any good party, there is the next morning.  Benjamin is simply stating our “next morning” is coming, brace yourself for tax increases and reduced government spending.

5)  Average home prices are overshooting by up to 7%.  Let me think this through, when there are 20 people bidding on the same home, doing this for 2 years or more, the prices may be a tad bid inflated…I buy that.  Good thing it’s only 7%, not over 20% like 10 million Americans.  The good news for Winnipeggers  is our Average home price is $207,342 vs $341,893 for the rest of the Canada, large urban markets have seen huge increases in prices the overshooting might be more in those markets according to my opinion.

6)  53% of homes have a mortgage.  Funny thing is Will Dunning, Economist at CAAMP said that 60% of homeowners have a mortgage, with average equity of 53% in his recent report.  In any event, a lot of people don’t have mortgages, good news for those that will inherit these properties over time, bad news for economic activity as most are sitting on the “dead equity” in their home.  I have a mattress that could use some stuffing too!

7)  Supply is rising while demand is falling.  This is the part of the Economics class I wasn’t blipping in, I understand this.  The temporary euphoria of low rates to stabilize the economy created a lot of home buying to take advantage of these rates, it only makes sense that when all the talk about rates increasing comes along, demand starts falling as most have jumped in the pool already, those with their toes in the water will have to make a decision if they like the temperature very soon.

8)  The Bank of Canada is taking interest rates to normal vs worrying about target inflation rate.  With inflation at 1.8% vs a 2% target rate the Bank of Canada will make a decision next week for the short term on rates.  It is hard to remember normal when that hasn’t been around for close to 2 1/2 years.  Thanks for the wake up call on the word “NORMAL”.

Benjamin, thanks again, you are a wealth of knowledge always keen to share your insights and perspectives.  the message for all of us, get ready for interest rate hikes, the party is over!

Rates steady?

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The Bank of Canada has made it’s clearest statement yet, that the Bank of Canada Rates will be increasing, most likely on the next announcement Jun 1.  Fixed rates have jumped up recently up to .75% higher than their all time low.  Although the commentary is very positive to the the Canadian economy, there are some factors which Carney points out could have a drag on our economy and therefore rates.  He points out that the strength of the Canadian dollar, low gains in labour productivity and weak demand from a US market will act on drags on the economy.  Inflation is at the point where he needs to do something, the question in coming months will be, “How far will they go?”

New Mortgage Rules for Canadians

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There are a lot of rumours out there with a lot of consumers and I feel it is important to share the information direct from the source “The Government of Canada” on the new mortgage rule changes.  First time home buyers expressing confusion if it affects them shouldn’t be concerned unless they are looking at shorter term mortgages or variable rate mortgages.  If you are considering a 5 year fixed term, you are unaffected!  If you are purchasing a rental property or refinancing your home for most of your equity beware of the rule changes.  If you require clarification of these rules please contact me to discuss.  They come into effect April 19, 2010.

http://www.fin.gc.ca/n10/data/10-011_1-eng.asp

Bank of Canada Rate Announcement: Mar 2, 2010

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Bank of Canada holds rates steady today, howevever, This is an article that might be of interest to everyone. We now have experts making predictions when rates will increase in the wake of positive economic announcements for Canada ( + GDP growth). This article states we could start seeing rates increase as soon as June 1. More positive economic news will put pressure on the Bank of Canada to increase rates in coming months. The next Bank of Canada announcement is Apr 20/10.
http://www.theglobeandmail.com/report-on-business/when-will-mark-carney-hike-rates-and-how-far-might-he-go/article1487151/

Government of Canada makes changes

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Minister Flaherty listened to industry experts to make changes today.  There will be little impact for responsible Canadians looking at home ownership.  He made a good decision by not changing down payment requirements as this would have hurt the housing market.  Rates will increase at some point in time and we all need to be prepared.  Here is today’s announcement.

http://www.fin.gc.ca/n10/10-011-eng.asp

Mark Carney -in Winnipeg

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Mark Carney, the governor of the Bank of Canada was in Winnipeg today sharing the message of the economy and financial outlook for Canada.  He finished his speech with a comment about his comment about “target inflation” of 2% being the key for interest rates.  Through the discussion period he reiterated the strength of the mortgage and housing market in Canada and the need for Canadians to manage their household debt load.

Pending any other unforseen financial circumstances, inflation below 2% should continue to hold rates steady, no need to panic yet, but the message is clear, listen to inflation rates for clues on rate increases.

The attached recent article in Marketplace Jan/Feb 2010 is great information.

Mark Carney Article

Bank of Canada holds bank rate steady

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Good news for those of you in Variable Rate Mortgages, Bank of Canada continues to hold firm on Bank of Canada rate, meaning Prime remains at 2.25% until 2nd Quarter of 2010. The strength of the Canadian dollar, low exports for the economy and below target inflation help maintain the holding pattern. See release from Bank of Canada for more details.

http://www.bankofcanada.ca/en/fixed-dates/2010/rate_190110.html

Interest rates low risk for Canadians

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Will Dunning, Economist has done a great job capturing the elements of rising interest rate risk for Canadians.  In my experience on the front lines, I agree with all comments provided in this report.  Will does a great job of understanding how the mortgage market in Canada is priced and the impact on consumers.  The prudence of Canadians during a recession can not be lost.  I would suggest that the large majority of Canadians have done a good job of preparing and protecting themselves from increased debt loads and servicing  debt loads.  We must continue to educate consumers of the impact of higher rates to ensure this is not lost.

For details on the CAAMP Mortgage market report, please follow this link.

http://www.caamp.org/meloncms/media/CAAMP%20%20Winter%20Report%20Black_2.pdf

Housing Bubble?

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With all the talk about the housing bubble, have Canadians and their mortgage professionals really been that irresponsible.  I don’t think so, however, some so called experts do.  In order to really understand this impact, these are the consumers at risk:

1)  Consumers with high debt loads that recently purchased a home with little down payment.

2)  Future income potential is not apparent

3)  No plans to repay their mortgage in any accelerated way (i.e. no increase to payments or lump sum payments) over their term.

or

4)  Consumers who just went in to a Variable Rate Mortgage within the last year, and also may fall into any of the 3 categories above. 

If any of these apply to you, seek the advice of an Accredited Mortgage Professional to assist you with a communication and financial repayment plan to ensure you don’t get into trouble with your mortgage.

For all others,  check out Minister’s Flaherty comments back in 2008.    http://www.canada.com/topics/news/story.html?id=e7091819-8d24-44a2-840c-adefc49b2454 

In a more recent article, David Laidler, a former visiting economist and special adviser at the Bank of Canada and now a fellow at the CD Howe Institute, a Toronto research group said, ‘The worry has got to be that you might be getting a housing bubble out of this,’ Mr Laidler is a member of the institute’s Monetary Policy Council, which studies central-bank decisions and said in a Dec 3/09 statement that a ‘possible unintended effect’ of Carney’s commitment is ‘the buoyancy of mortgage lending, particularly variable-rate mortgages, and the housing market.’  If this is true it is those in Variable Rate Mortgages most at risk as the current rates are more like a good candy you just can’t give up.  At some point it will make sense to consider fixing a mortgage for a longer term (5 years or more), because when rates go up, they could go up fast.  Some experts are saying 2-3% in a short period of time. 

In the meantime if you in a variable rate mortgage, sit back relax, watch the news and read your mortgage brokers emails, so that you are ready to move when the time comes that rates will increase for the long run.