Mortgage for Change Blog

"Lack of awareness is major obstacle for the mortgage broker channel." This is how the last CAAMP homeowner survey results begin. (Consumer and Industry Perceptions).

Of 2,000 responses, just 5% of Canadians said they have a good understanding of what a mortgage broker does!

To nail this point home, I recently read a finance article published in a Toronto newspaper. The author wrote an entire article about the importance of going the trials and tribulations of personally shopping the banks for a good mortgage. She believes her time was best served and she got the best mortgage by personally visiting BANKS for rates. It seems she didn’t even consider speaking with a mortgage broker.

My take away? It seems that mortgage brokers need to take more responsibility for sharing what we do.

Just yesterday, I attended a professional development session hosted by FICOM. We were told that currently in Canada approximately 33% of first time buyers are using a Mortgage Broker to arrange their financing. Hmm... seems the younger crowd perhaps are more mortgage savvy than their parents?

So, if you are in the know, please tell a friend;

• Working with an Accredited Mortgage Professional (AMP) saves you time, hassle and usually lots of money.
• A broker shops the banks and lenders to find the best mortgage for you. Banks and lenders offer us their 'best rates' because - if they don't - their competitors will get all the broker mortgage business. (And that's a lot of business!)
• For a person with an average credit rating, it costs nothing to use a mortgage broker. Banks and lenders pay a fee to brokers for bringing them new clients.

We are seeing fixed rates continue to rise this week with the current best 5 year at 4.50% (available for rate hold - quick close specials are slightly lower).

Today's Financial Update:

• TSX -69.85  fell for a second straight day as worries over Europe's fiscal troubles outweighed a brief shot in the arm provided by a more upbeat U.S. Federal Reserve outlook.  Spain was hit by a credit rating downgrade, following downgrades to Greece and Portugal on Tuesday
• DOW +53.28 to 11,045 after the U.S. Federal Reserve left interest rates unchanged near zero and offered a brighter economic view. The U.S. central bank renewed its promise to keep rates low for an "extended period" and said U.S. consumer and business spending were picking up steam.
• Dollar +.86c to 99.13cUS   
• Oil +$.78 to $83.22US per barrel.  
• Gold +$9.60 to $1,171.80 USD per ounce  
• Canadian 5 yr bond yields +.06 to 3.08. The spread is back in the high end of the comfort zone expect rate increases. 
  
  http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

The rate of return on your bond, can be read through a yield curve, If the increase in bond yield  continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Currently lenders are looking for a spread between 1.35 and 1.60

Are Big Banks jumping the gun?

Rob Carrick
The Globe and Mail Published on Thursday, Apr. 29, 2010

Interest rates are rising – we all get that – but it looks like the Big Banks are pushing things a bit with mortgages.

After a pair of increases in the past two weeks, the posted Big Bank five-year fixed mortgage rate now stands at 6.25 per cent. Does that seem high? In fact, it’s just half a percentage point below the average level for the past decade.

We’re supposed to be in the early phase of what could be a long cycle of rate increases. The Bank of Canada hasn’t even started raising its overnight rate, which sets the trend for borrowing costs other than fixed-rate mortgages. The overnight rate could very well start rising June 1 (that’s the central bank’s next rate-setting date), but even then it’s not dead certain that rates will move.

Mortgage rates are linked to bond yields, which have been rising for a while now. But mortgage rates have been moving faster. full story

The Bank of Canada announced Tuesday that it is leaving its key interest rate unchanged, and repeated its commitment to hold the rate steady until the second quarter of 2010, conditional upon inflation.  

In its statement the Bank judges that the factors affecting its inflation outlook are "roughly balanced" at this time.  "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 also noted that "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."  

Pricing for loans that are typically linked to a lender's prime rate (such as variable-rate mortgages, variable-rate credit cards) is expected to remain unchanged in the wake of today's announcement.  

Pricing for fixed-rate mortgages is not directly affected by the Bank's key rate.