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Spring housing market could trigger mortgage rate wars as Bank of Montreal lowers rate

March 18, 2013 Buying Real Estate, Mortgages and Financial Information, Real Estate Prices, Toronto Real Estate

Garry Marr – Financial Post

The spring housing market is expected to bring on a new battle from mortgage lenders as they compete for what has become a shrinking pie in the form of lower real estate sales.

Bank of Montreal struck first on Friday with a five-year closed mortgage rate of 2.99% – down from 3.09% and now the lowest published rate among the big banks – with sources indicating the financial institution’s mortgage specialists are armed with discretionary power to go as low as 2.89%.

As the banks battle it out for consumers skittish about jumping into what more than one analyst sees as an inflated housing market, lenders know their costs have dropped in the past few weeks. The Bank of Canada’s five-year bond rate is in the 1.3% range after being almost at 1.6% at the end of January.

Comment: One analyst. One. And we are giving him equal weight against the entire real estate industry with 100,000x more opinions to the contrary?

“Perhaps there is pressure to lower rates,” said Gregory Klump, chief economist with the Canadian Real Estate Association, about banks trying to capture customers in a slowing market. “It remains to be seen how much [the real estate market] is going to slow.”

While some predict a collapse in the housing market, so far prices have remained firm and sales have dipped only in the single-digit range from a year ago.

CREA said last month that January prices were up 2% year-over-year, while sales were down 5.2% during the same period. On a seasonally adjusted basis, sales actually climbed 1.3% from December to January.

Comment: Amazing, how the prediction of another ONE analyst of a market collapse did not come true. And the thoughts of 100,000 real estate professionals were shown to be correct. Why do we listen to the single crackpots anymore, seriously?

It’s unclear whether a new round of mortgage rate cuts will have an impact on consumers already used to a prime rate of 3% and long-term mortgage rates even below that.

“I don’t think low rates change their mind on whether they are going to buy or not,” Mr. Klump said. “What it does change is how much property they can afford. The most important thing at this point in the cycle is how confident consumers are of economic prospects going forward.”

The Bank of Montreal may catch some headlines with its new rate, but mortgage brokers have been offering deals as low as 2.84% on a five-year mortgage without any of the restrictions of the BMO mortgage. The rate on a 10-year mortgage is as low as 3.64%, say industry sources.

Comment: The rate change is not such a big deal. For a couple making $100,000 with $50,000 to put down, the drop from 3.09% to 2.99% increases their purchase amount by $3,000. Even dropping from 3.09% to 2.84% only adds $9,000 to the purchase price.

“You can’t break the BMO mortgage and transfer to another lender,” said Rob McLister, editor of Canadian Mortgage Trends, adding a customer can make a prepayment for only 10% of the value of the mortgage per year instead of the standard 20%.

Mr. McLister said if the bond market continues to go down, he can see rates falling even below the 2.99% threshold BMO establishing.

“They are going to try to keep rates as high as they can for as long as they can,” he said.

As bond rates have dropped, it is has allowed lenders who fund mortgage brokers to lower their rates, making them more competitive with the big banks.

The last time banks started cutting rates in a competitive battle, they drew the wrath of Finance Minister Jim Flaherty, who has repeatedly expressed concerns about the housing market getting overheated.

Mr. Flaherty has indicated he wants to avoid a crash and has brought in new restrictions – including limiting amortization lengths to 25 years today from as high as 40 years during the housing boom – to cool the market and ensure a soft landing.

“There is uneasiness at the federal level with banks competing on rates. [Ottawa is stepping in], but behind the scenes,” Mr. McLister said.

BMO warned that rates could be going up in the future, making locking in a priority. “There is always competition out there,” said Sameh Elrefaei, head of BMO’s home financing products. “The reason we are doing this now is essentially our customers have been telling us they like this product and they want the certainty of a lower payment and a better rate.”

Others banks appear poised for battle, with one industry source indicating customers can already get a six-month rate hold as low as 2.99% from one major lender.

Farhaneh Haque, director of mortgage advice and real estate-secured lending at Toronto-Dominion Bank, said her financial institution is ready to be competitive.

“There is a lot of margin pressure, but the reality is there is a spring rally and the reality is customers are out there shopping,” Ms. Haque said.

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Contact the Jeffrey Team for more information – 416-388-1960

Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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First-time Toronto homebuyers share their lessons

April 28, 2012 Bidding Wars, Buying Real Estate, First Time Buyers, Toronto Real Estate

Carla Wintersgill – Toronto Star

I spotted a gray hair in the mirror the other day. It’s not a coincidence its appearance corresponded with my first morning in our new home.

Last week, my boyfriend, Jesse, and I moved into a tiny two-bedroom, two-bathroom house in East York. Since buying our first home in late January, we’ve endured a bidding war, a termite scare, a tax surprise, endless paperwork and spent nearly every dollar we have to grab our own slice of Toronto real estate.

It’s a miracle all my hair isn’t grey.

It’s with 20/20 hindsight I can now see the things we should have done differently to make the process easier on ourselves.

The first would be to spend more time researching the process.

Buying a home means bouncing between three professionals — realtor, banker and lawyer — whose efforts you’re responsible for coordinating. It helps if you understand what’s going on. Often we didn’t, instead counting on the person we were dealing with to prompt us on the next step.

They say that ignorance is bliss, but, in our case, ignorance usually led to a series of frantic phone calls about something we should have taken care of sooner.

“Do your homework,” Mary Stergiadis of the Canadian Mortgage and Housing Corporation says.

She recommends attending a first-time homebuyers seminar, where potential purchasers are able to meet with realtors, mortgage lenders and real estate lawyers to get a better feel for what really goes into buying a house. It’s also a chance to become familiar with the real estate jargon that is a part of the transaction.

“Sometimes mortgage professionals forget that we’re dealing with first-time buyers,” she says.

Before even thinking about dipping your toe in the market, it’s important to understand all the costs of buying a home and maintaining the property in the future, Stergiadis says.

Websites of organizations such as the CMHC and the Canadian Real Estate Association are filled with factsheets, videos and toolkits for buyers to adequately prepare themselves for the process of buying a home.

The most embarrassing oversight Jesse and I made during the sale was not realizing there are both a municipal land transfer tax (in Toronto only) and a provincial land transfer tax. That’s a $3,400 miscalculation. And, because Jesse’s name is a on a family property, we don’t qualify for the first-time homebuyers land transfer tax refund.

We also didn’t realize all the land transfer tax would be due to our lawyer before closing. We ended up borrowing $600 from Jesse’s mother to make our closing costs because a cheque we deposited into our account hadn’t cleared in time to be included in the money order.

If you think you have enough money saved up for a house, save another $10,000.

Everywhere we turned, there was another service that needed to be paid for: electrician, locksmith, home inspector, furnace technician, looming property tax, etc. Not to mention the buckets and buckets of paint and supplies we bought to spruce the place up.

As our bank accounts were dwindling, we could have done more to find potential savings, Stergiadis says. I did qualify as a first-time homebuyer and could have taken advantage of the Home Buyers‘ Plan, which would have allowed me to withdraw up to $25,000 tax-free from my Registered Retirement Savings Plan.

I don’t have that much in savings, but I could have done what Stergiadis and her husband did when purchasing their first home. They deposited their down payment in an RRSP, collected a sizeable tax return to help manage closing costs and buy new appliances, and withdrew the cash when it was time to buy the house. The only catch to the Home Buyers’ Plan is that the RRSP must be paid back within 15 years.

Very smart. Too bad we didn’t think of that.

Lastly, if we could do it all again, we would try to relax a little bit more. The whole home-buying process was a series of snafus. But no matter how many mistakes we made, eventually the sale worked itself out. I couldn’t be prouder of our little house.

I may have grey hairs now, but the tradeoff was worth it.

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Contact the Jeffrey Team for more information – 416-388-1960

Toronto real estate market to stay hot in 2011

January 1, 2011 Buying Real Estate, Mortgages and Financial Information, New Toronto Condos & Lofts, Selling Real Estate, Toronto Real Estate

Tony Wong – Toronto Star

Ontario home sales will rise by 5% in 2011, while prices should hit a record high, according to a report on the state of the Canadian real estate market.

Central 1 Credit Union says a strong market in 2011 will also see housing starts increase by 9% next year, in what has been the most bullish forecast for 2011 so far.

Comment: This agrees nicely with what Remax said last week. It seems the people actually involved in real estate – realtors and mortgage lenders – say that we should see real estate activity in 2011 that is in line with the average values we have seen over the past decade or more. But the pundits who sit on the sidelines and do actually work in real estate always come up with predictions that are contradictory to what the industry workers say. And, oddly enough, the pundits seem to be wrong most of the time.

“An undersupply in the new home market will place upward pressure on resale home prices,” said Helmut Pastrick, chief economist with Central 1. “This will provide an incentive for builders to increase housing starts.”

Central 1 also expects house prices to increase by 4.5% in 2011 to $356,500, up by 4.2%.

The report is at odds with other economists who have forecast a far weaker housing market for 2011. It also underlines the difficulties that economists have in trying to read the volatile market moving forward.

While Central 1 says they expect housing starts to go up significantly in Ontario next year, hitting 66,000 units, the Canada Mortgage and Housing Corporation are forecasting that starts will decline to 55,000 units. The Toronto Dominion Bank is also calling for significantly lower starts of 47,000 units. The CMHC, like most other analysts is also expecting Ontario prices to remain flat or increase only slightly in 2011.

“The pace of job growth has started to cool, and we will likely see more cooling especially in the first half of next year,” said Ted Tsiakopoulos, Ontario regional economist for the CMHC.

“I’d say the momentum in Ontario real estate is in the other direction – activity has slowed,” said housing economist Will Dunning. “I would expect 2011 housing numbers in Ontario to be weaker than 2010.”

In order for housing starts, resale prices and sales to increase, you would have to see “a rapid pick up in job creation in Ontario which is not yet in evidence,” said Dunning.

However, the CMHC also released housing start figures for November on Wednesday which defied the expectations of most economists.

Toronto starts hit 51,100 seasonally adjusted and annualized units in November, up by 157% from a month earlier. The stellar figure means starts are now 14% higher this year than last year, and there is still one month to go.

The Toronto surge caught economists by surprise, pushing the national housing start figures to a much better than expected 187,200 units, representing an 11.6% increase.

“The gain was almost entirely driven by a bounce in Toronto multi unit starts…the bigger picture continues to one of more moderate and stabilizing building activity,” said BMO Capital Markets economist Robert Kavcic.

While Ontario saw a massive increase in starts because of the Toronto market, most other provinces saw a decrease.

“Residential construction activity in November was making up for lost ground in October with strong increases in apartment and town home segments of the market,” said Tsiakopoulos. “However, it is unlikely that this above trend pace will be sustained.”

Slower job growth, less first time buyer demand and more choice in resale markets will temper any increases over the short term, said the CMHC.

“The rapid pace of sales earlier this year has resulted in strong starts for November,” said Ontario Home Builders’ Association president Bob Finnigan.

And despite the upbeat tone of the Central 1 report, Ontario builders are not gearing up for a record year.

“Looking forward to 2011 we are anticipating the housing market to level out with a moderate pace of activity,” said Finnigan.

Finnigan said home builders are pushing for the government to focus on job creation in 2011.

“We are watchful of the job market, because employment is a key indicator of economic health and something that could dampen performance in the coming year.”

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Contact the Jeffrey Team for more information – 416−388−1960

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Laurin and Natalie Jeffrey are Toronto real estate agents. We would be happy to help you find your new Toronto home — be it house or condo or loft. We would also be more than pleased to help you sell your current Toronto property.

Century 21 Regal Realty Inc. Brokerage
1332 Queen Street West
Toronto Ontario M6K 1L4
Office Phone: 416−849−5360
Office Fax: 416−849−8987

Laurin Cell: 416−388−1960
Laurin Email: laurin@jeffreyteam.com

Natalie Cell: 416−318−7917
Natalie Email: natalie@jeffreyteam.com

The vast majority of content on this blog is not written by Laurin or Natalie Jeffery. It is written by many different authors, for many different publications and websites.

We re-print these articles here as a collection of Toronto real estate news and information. We aim for this blog to be a one-stop shop for people looking for information on Toronto real estate.

We do not claim any of the information we did not write as our own. We do not work for any publication, nor any builder. We are Registered Real Estate Sales People working for Century 21 Regal Realty Inc. Brokerage.