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Mortgage Brokers More Valuable

Mortgage Rule Changes have made Mortgage Brokers even more invaluable

In October of 2016, the entire Country was surprised by reports of considerable changes to mortgage rules announced by the Canadian Government. The Department of Finance Canada announced new mortgage rules that have since had a tempering effect on the market. In late December, the Office of the Superintendent of Financial Institutions (OSFI), in follow up to the new rule changes, mandated a new capital framework for our three mortgage insurers.

In the span of three months – in an obvious effort to curb the extremely hot markets of Toronto and Vancouver, the government changed the rules of lending and borrowing across the entire country -and without consultation from any industry professionals to gauge the potential impact on the rest of the country. This has further complicated the residential mortgage world for all Canadian homeowners and want-to-be homeowners.

Mortgage Rules Have Made it More Difficult for Borrowers

Borrowers are required to have their borrowing capacity stress-tested, not against the lenders’ current mortgage rate offerings, but against a new qualifying rate, currently posted at 4.64% for insured high-ratio mortgages. A rate that is almost 2% higher than what they are actually paying. This has reduced every homebuyer’s buying power. Some homebuyers who may once qualified for a mortgage will now not qualify at all.

It has become more Expensive Across the Board

In addition, traditional lender funding mechanisms have changed, and low-ratio portfolio insurance premiums have increased. These changes have driven up interest rates for Canadian mortgage borrowers, some more than others. Since October, mortgage rates have gone up around 30-60 basis points with many lenders. This has impacted the borrower in two-fold – their purchasing power has gone down by an average of about 20% due to the “stress-test” while interest rates have gone up also, further reducing affordability.

You Need a Mortgage Broker More Than Ever

For all consumers, the recent changes represent a major step back, not only due to the fact that on average they can now afford less, but the additional layers of complexity of new and far more complex mortgage pricing structures, product surcharges, risk and Loan to Value (LTV)-based surcharges and new qualification methodology, it is doubtful that web-based direct-to-consumer or self-serve residential mortgage sites will be growing any time soon.

All of these changes mean that they need to find themselves a good Mortgage Broker to work with when looking for any sort of mortgage financing. Because the more complicated the mortgage market gets, the greater the need for home buyers and homeowners alike to lean on the expert advice of a professional mortgage expert.

Full-service mortgage brokers – the people who live mortgages every day as a sole source of income and are on top of the latest regulatory changes — can help homeowners navigate these increasingly complex waters. They understand the ins and outs of all the regulations; the strengths and weaknesses of the different financial institutions, from bank to non-bank lenders, trust companies to credit unions; and they look for a mortgage to suit the home buyer, a benefit that you simply will not get from anywhere else, especially your bank. Mortgage brokers don’t work for lenders; they work for the home buyer. So their advice is informed, unbiased and honest.

That’s why mortgage brokers have been getting a bigger share of the action over the last few years. As revealed in the 2016 CMHC Mortgage Consumer survey, “mortgage broker share of the market is trending upwards for renewers and refinancers, increasing from 21% in 2015 to 26% in 2016 for renewers, and from 33% in 2015 to 38% in 2016 for refinancers…. Market share is even higher among first-time buyers at 51%.”

Home buyers and homeowners can trust a pro to explain what the new mortgage regulations mean to them, and what their options are so that they can make the most informed decision.

A home is typically the biggest purchase people will make in their life. To buy a home without the insight of a professional, full-time mortgage broker just doesn’t add up.

There was a time when car owners with some mechanical aptitude could perform general maintenance on their cars and only needed to visit their mechanic as a last resort. Then car engines became more computerized, and car owners no longer had the specialized tools and skills. Mechanics became more sophisticated and knowledgeable, and demand for their skills increased.

Today, the inner-workings of a mortgage in Canada is much like the inner-workings of a car engine. Better off in the hands of an expert.

This blog post was inspired by an article originally published by Dan Putnam, AMP, Senior Vice President, Business Development, Residential Mortgages, CMLS Financial Ltd. – one of our valued lender partners- Thank you Dan for your insight.

 

BC Home Partnership Program
 

By now I’m sure that you have heard about the announcement by the provincial government yesterday surrounding down payment. This is some good news, although with some challenges that need to be addressed, and once the dust settles, will likely have a very small impact- but still good news nonetheless…

Did Buyers In August Overpay Just To Get a Low Rate?
 

I came across this article published in the Globe and Mail which I thought did a great job of explaining the phenomenon of people rushing out to buy a house to take advantage of lower rates. It just so happens that many people did this in August. Rates – when compared to historical levels…

 

Thank You for Paying it Forward
 

This year, I tried something a little different over the holidays. To each and every one of my clients, I sent out a $5 bill asking them to use this money towards doing something nice for someone….anyone, that they cross paths with – and encouraging them to “Pay it Forward.”

Mortgage Rule Changes – How they Impact the Consumer
 

All these changes impacted mostly those that have less than 20% down payment and therefore require default insurance (CMHC, Genworth or Canada Guaranty). Unfortunately, there are more changes to come. In fact, many of the lenders are already implementing these changes as I write this blog although these changes are mean to come into effect…

 

Bank of Canada Rate Announcement
 

Bank of Canada Announcement and Banks Announcing Mortgage Rate Drops is merely coincidence. Mortgage Rate Drops, independent of the bank of canada announcement, are expected in the near future due to spring market price wars. You have most certainly by now heard that about the Bank of Canada’s Announcement a couple of Wednesdays ago regarding their overnight lending rate drop.

Less Money Down Means Lower Rate?
 

Loan Mortgage Down Payment, Canada – I’d like to address something that has come up in my conversations with other experts in the industry, that being the topic of interest rates and their relationship with down payment. Although, it doesn’t make a whole lot of sense, what is happening is a lower down payment on a home…

 

Pre-Payment Penalty – Lenders Are Taking Action
 

The initial reaction of the lenders comes to no surprise. Many are putting up resistance and some of them are saying they are confused. The reality of the situation seemingly is that the lenders themselves were not quite sure how their penalties were being calculated. I witnessed this firsthand towards…

Mortgage Rule Changes
 

These are significant changes to Canada’s lending landscape and I’ll weigh in on the potential outcomes and implications throughout the day on my blog. As always, if you have any questions or concerns, I’m just a phone call away…

 

Collateral Mortgage vs Conventional Mortgage
 

What is a collateral mortgage? First of all, when you obtain a mortgage, you have to put up security, usually a property. A charge is put against the title of your property. The type of charge can be collateral, or standard. Most people refer to the standard charge as a “conventional” mortgage.

 

If you would like more information or a free consultation contact Aleem below, and as a Certified Mortgage Specialist let me help you get the home of your dreams. Great Mortgages, Made Simple
Aleem Peermohamed - Mortgage Broker BC


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