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Mortgage Industry Update MBABC Vice President Jared Dreyer

Created: 04 May 2012
Hits: 2029

A year can feel like a lifetime of change in today’s economy. The Canadian Mortgage industry is no exception. This past year we have witnessed vast shifts in the industry from the lenders, the regulators, the media to the end consumer.

Lenders

Our lending partners have been very busy trying to match their cost of funds, make a profit and still be very completive in the marketplace to attract mortgage business. My hat is off to them as this has been very difficult to do with the fluctuations of the Bond market (which control how fixed rates are determined). Last year we saw variable mortgage rates as low as Prime  -.90% disappear almost overnight. Now fixed mortgage rates have dipped to the lowest in history. 2.99% for a 5-Year fixed at the all time low in March. For the consumer this has been fantastic. 10,5, 4 and even 3, year fixed rate mortgage terms continue to sit at all time lows. Given the shift in the variable rates, we too have seen a broad movement from variable to fixed rate mortgages.

Regulators

In response to the global economy, Regulators and Government are more then ever actively involved in the mortgage process. Recently the Government announced that CMHC will now be regulated by OFSI (this is the regulator that oversees all the Charted Banks) and we should expect to see some changes to CMHC in the future. This will be good over time so long as everyone gets a voice in the changes and the consumer continues to have choice. We have many seen critical rule changes in recent years. Amortizations have been reduced to 30 years on insured mortgages and some lenders are following suit for conventional mortgages. Refinancing of existing properties is now set at a maximum of 85% of the home where previously it was 95%. In addition, if a consumer chooses to take less than a 5-year fixed mortgage term, they now have to qualify at the Bank of Canada set rate that is typically higher than posted lender rates. Secured lines of credit or HELOCs are now at a maximum of 80% of the value of the owner occupied residence where previously they were at 90%. We have also seen lender policy changes on self-employed/commission clients. Lenders have tightened the qualifications whereby 35% is required as a down-payment vs. 25% in the past. Lenders and insures have also tightened their guidelines on rental/investment properties 20% is required as a down-payment where previously it was 10%. As you can see, the landscape has changed and these changes are working through the system to create a stronger market for all Canadians. The goal going forward is to protect Canadians however we need to be cognisant that we don’t swing the pendulum to far the other way and limit homeownership and investment in this country.

Media

The media has gone mainstream on mortgage coverage. The have set up special columns, forums, blogs and twitters to discuss the condition of the mortgage environment. This has turned out in my opinion a double edge sword. It has been excellent educating the consumer about our industry and the benefits of using an independent mortgage professional however the flip side is there have been a lot of headlines and so called experts not consistently getting the correct facts before publication. At the end of the day, the Canadian mortgage industry is an extremely important financial pillar in the Canadian economy. Not only does it employ tens of thousands of people, it helps millions of Canadians every year, buy a home, renovate a home, purchase a vacation property, start a business, invest in a business and help manage their finances and debt better. Now more than ever, Accredited Mortgage Professionals play a critical role in ensuring the consumer has access to a broad range of mortgage products and options.

The Consumer

Clients are educated and armed with a stronger knowledge of what they want. This is great news. Coupled with an Accredited Mortgage Professional working to decipher the correct facts, offer guidance and choice, the consumer will only benefit and make the best decision based on their individual circumstances and needs.

As we move forward in 2012, my hope is that the Government and the Regulators, listen to all parties involved and that the right decisions are made to maintain a healthy, strong and choice-filled market for the consumer.

Jared Dreyer, AMP
Vice President Mortgage Brokers Association of BC (MBABC)
President VERICO Dreyer Group Mortgages Inc.