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Canada's mortgage market "boring but effective"
2010-03-10 | 15:13:53
Vancouver BC BrentIrving.ca: The Canadian residential mortgage market has been "boring, but effective" in recent years, according to International Monetary Fund economist John Kiff.
In a report released by the IMF - and referenced by the Globe and Mail yesterday - Kiff examines numerous nuances of the Canadian and American mortgage lending markets and concludes the two have noteworthy differences but remain competitive when it comes to rates and products.
"It's not hard to conclude that Canadian fixed-term rates on prime mortgage loans are quite competitive with their U.S. counterparts," he said.
One distinction noted in the report was that in Canada, the amount of mortgage-originating depository institutions has "increased significantly" while in the U.S., the deposit-taking institution share of residential mortgage loan holdings has dropped 75 per cent over the past 40 years. Kiff also pointed out Canada's percentage of securitized loans is less than half of the U.S.'s 60 per cent securitization rate.
In explaining why the U.S. foreclosure rate has gone up while the Canadian rate has not, the report said Canada's policy on mortgage insurance means that the full amount of the loan is covered as opposed to the U.S., where mortgage insurance only covers losses that exceed the LTV ceiling. Canadian lenders also have recourse to all the borrower's assets and income if their loan goes to foreclosure, whereas in the U.S., similar action is too expensive, impractical or legally impossible.
Another stabilizing factor for Canada, Kiff noted, was the option for borrowers to pick between weekly, biweekly, semimonthly, or monthly payment schedules, which he said have helped keep Canadian mortgage delinquency rates in check.
Brent Irving
Your friend in the mortgage business.
604-764-6336
Bank of Canada Keeps Rates Unchanged
2010-03-02 | 10:11:19
Vancouver BC www.brentirving.ca www.mymortgagebc.com — The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
The ongoing global economic recovery is being driven largely by strong domestic demand growth in many emerging-market economies and supported in advanced economies by exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.
The level of economic activity in Canada has been slightly higher than the Bank had projected in its January Monetary Policy Report (MPR). The economy grew at an annual rate of 5 per cent in the fourth quarter of 2009, spurred by vigorous domestic spending and further recovery in exports. The underlying factors supporting Canada's recovery are largely unchanged - policy stimulus, increased confidence, improved financial conditions, global growth, and higher terms of trade. At the same time, the persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada.
Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity. The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess supply.
Conditional on the current outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.
The risks to the outlook for inflation continue to be those outlined in the January MPR. On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength of the Canadian dollar. The Bank judges that the main macroeconomic risks to the inflation projection are roughly balanced.
Brent Irving
Your friend in the mortgage business!
604-764-6336
Changes with Canadian Mortgage Lending Rules
2010-02-24 | 10:07:50
Jim Flaherty, Minister of Finance, recently announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians.
"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."
The Government will therefore adjust the rules for government-backed insured mortgages as follows:
- Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
- Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
- Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren't willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families."
These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.
Brent Irving
Mortgage Expert
Your friend in the mortgage businessTel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
www.mymortgagebc.com
GST and New Homes
2010-02-01 | 12:43:43
The goods and Services Tax replaced Federal Sales Tax in 1991. Although the tax is collected at a rate of 7% on the sale price of goods and services, it doesn't apply to every type of home or every form of real estate service.
New home purchases are subject to GST but may qualify for a GST rebate. Resale homes are sold exempt from GST.
GST and New Homes
When you buy a newly constructed home, condominium or townhouse, the entire purchase price including land is taxable. If the property is to be rented to tenants, the full 7% GST is charged on the purchase price. However, if the home is gong to be your primary place of residence, it may qualify for a partial GST rebate, depending upon the sale price.
For primary residences costing $350,000 or less, you will receive a rebate of 36% of the GST paid, to a maximum of $8,750. That means you pay approximately 4.5% GST (not 7%) on the purchase price.
Example #1
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You buy a new home for $200,000. The 7% GST is $14,000, less a 36% rebate of $5,040. So, you pay $8,960 in GST
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The maximum rebate is $8,750. The rebate for new homes costing between $350,000 and $450,000 declines to zero on a proportional basis. Here is how it works
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For each $1,000 of purchase price above $350,000 the maximum rebate of $8,750 is reduced by 1%
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Therefore if your purchase price is $370,000 you are $20,000 over and must reduce the maximum rebate by 20%. As such the maximum rebate of $8,750 reduced by 20% equals $7,000.
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For a home priced at $370,000 the GST payable, at 7%, is $25,900
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The adjusted maximum rebate is $7,000 so the GST payable is $18,900.
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Adjusting the maximum rebate continues until the rebate is reduced by 100%, there is no rebate, which occurs at homes priced at or above $450,000. New homes selling for $450,000 or more do not qualify for a GST rebate.
GST and the Resale Home
You don't have to pay GST on the purchase price of a used residential home. In other words, the purchase is "exempt" from GST.
Revenue Canada defines "used residential property" to include an owner-occupied house, condominium, apartment, summer cottage, vacation property or non-commercial hobby farm. They refer to "used" as residential property that has been occupied as a residence before you bought it.
Used property can also mean a recently built house that is substantially complete and has been sold at least once before you buy it. For example, if a new house is purchased and resold before being occupied, the home's resale price will normally be exempt from GST.
GST and the Real Estate Transaction
GST applies to most of the services provided in completing the real estate transaction. For example 7% GST is applied to the commission a Realtor charges for facilitating a sale. The tax is paid by the person responsible for paying the commission- usually the seller.
Realtor commissions are taxable even if the total GST owed is reduced by a rebate, or the sale of the property is exempt from GST. For example, if you sell a used home, the sale price is exempt from GST but the Realtor's commission is still taxable.
GST applies to many other services involved in the real estate transaction. These include legal fees, appraisals, surveys and legal assistance. Again, GST is charged on these fees regardless of whether the house you purchase is exempt from the tax.
GST and Rent
No GST is payable on residential rents. However, if you employ a Realtor or another professional to find and arrange a tenant for your rental property, GST applies to the fees and commissions they charge for providing this service. GST also applies to the fees charged to the landlord for property management, as well as repair and maintenance services. Monthly fees charged by condominium associations are not subject to GST.
Please don't hesitate to contact me should you have any questions.
Kind regards,
Brent Irving
604-764-6336
Mortgage Rate Advice For Home Owners and First-time Buyers
2010-01-21 | 11:32:03
BMO Offers Mortgage Advice For Home Owners and First-time Buyers
Vancouver, Jan. 21 /brentirving.ca/ - The Bank of Canada has signalled that its trend-setting interest rate will likely remain unchanged until at least the middle of this year.
"Recent comments from the Bank of Canada suggest little urgency to raise interest rates, given still weak demand in the U.S. and a strong Canadian dollar," said Sal Guatieri, Senior Economist, BMO Capital Markets. "The central bank's steady hand on the interest rate tiller could keep mortgage rates low well into the usually strong spring home selling season."
BMO Bank of Montreal experts have insights into the housing market given the current market conditions, and are available to answer top-of-mind questions including:
- What should new homeowners be looking for in a mortgage: fixed or
variable?
- What does this mean for prospective home buyers?
- What are the benefits of buying vs. renting?
- What does this mean for mortgage rates - which are near historic lows
today - and Canadians who are contemplating buying ahead of the
busiest part of the real estate season?
Brent Irving Mortgage Expert Your friend in the mortgage business
Tel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
Vancity plans to reach out to more mortgage brokers
2010-01-20 | 12:10:09
The director of mobile sales and brokerage at Canada's largest credit union, Vancity, says the company hopes to build its network of mortgage brokers in 2010 and plans to introduce a loyalty program in the next three to six months.
"Our broker division is not as big as it used to be and the goal is to ramp it up," said John Derose, in an interview with CMP. "I think we need to be in all the channels - the branches, our mobile team, and the broker channel."
Vancity sold the retail mortgage and loan business of its subsidiary, Citizens Bank, to TD Bank last August, which has meant several changes for the company. Derose said he is focusing on building up service levels before taking on more volume and added a loyalty program for mortgage brokers is in the works.
"We want to work with mortgage brokers, but we want to work with them beyond just that one deal or beyond just being an approval," he said. "We also want to put an emphasis on efficiency ratios because when closing ratios are low, it hurts our service."
Vancity lends in the lower mainland and interior B.C. as well as Vancouver Island.
Brent Irving
Mortgage Expert
Your friend in the mortgage business
Tel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
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