Rising Prices, Mortgages Making Real Estate Unaffordable For Many: RBC

RBC’s latest research on the portion of average household income needed to maintain a home shows that affordability deteriorated over the summer, the second consecutive drop in as many quarters.

OTTAWA—Higher prices and an increase in mortgage rates have made home affordability more of a problem for the average Canadian family, says a new report from the Royal Bank of Canada (TSX:RY).

RBC’s latest research on the portion of average household income needed to maintain a home shows that affordability deteriorated over the summer, the second consecutive drop in as many quarters.

The level of deterioration differs from region to region and between types of homes, but for the average bungalow the affordability measure rose 0.7 of a percentage point to 43.3 per cent nationally in the third quarter, after a 0.3-percentage-point gain in the second quarter.

That means the average household would have needed to devote 43.3 per cent of its pre-tax income to service the cost of owning a bungalow at current market values, including mortgage payments, utilities and municipal taxes. The higher the rating, the less affordable a home is to any particular family.

For two-storey homes, the affordability reading rose 0.6 or a percentage point to 48.9 per cent in the July-September period.

Owning a condominium was the most affordable option, with a cost measure of 28 per cent of pre-tax income, and the most stable, up just 0.1 of a percentage point from the previous period.

RBC chief economist Craig Wright attributed the deterioration in affordability to higher prices and what has been a tightening mortgage market reacting to an expectation of firming interest rates.

“By the third quarter, strong resale activity across Canada heated up home prices a few degrees,” he explained. “At the same time, Canadian bond yields rose in tandem with those in the U.S., climbing in anticipation of the Fed (U.S. Federal Reserve) tapering its bond buying program.”

The most recent Canadian Real Estate Association report pegged the average resale price of a home at $391,820 in October, 8.5 per cent more than a year earlier.

Wright said recent months has seen a divergence in prices for Canadian homes, with price gains for bungalows and two-storey structures outpacing condominiums.

Affordability deteriorated in many of the large markets, but while the average number is only moderately higher than historic norms, RBC notes there is a wide disparity in the associated costs depending on markets, with some appearing out of reach of the average family.

It would take 84.2 per cent of an average household’s pre-tax income to maintain a home in Vancouver, a rise of two percentage points from the second-quarter reading.

In Toronto, the affordability measure rose 1.3 percentage point to 55.6 per cent, the second worst in the country.

Most other major markets had affordability scales that were closer to historic norms: Montreal rose 0.3 of a point to 38.3 per cent; Ottawa was up 0.4 of a point to 37.3, Calgary up 0.7 of a point to 33.7 and Edmonton up 0.5 of a point to 32.9 per cent of household income.

The report says the biggest risk to maintaining manageable affordability levels would be a sharp rise in interest rates, but many analysts believe that is unlikely to occur as long as global economic growth remains moderate and inflation pressures soft.

The RBC says it does not expect the Bank of Canada to start hiking rates until sometime in 2015 as bond yields, the main driver of fixed mortgage rates, are projected to drift only “gently” upwards in the next year or so.

24 Sussex Drive Worth $7.2 Million, U.S. Real Estate Firm Says

OTTAWA - Call it fake estate.

An American real estate company has done a fictional listing for 24 Sussex Dr.

California-based national brokerage Movoto says the home of Canada’s prime minister is worth $7.2 million.

Movoto does legitimate work for publications such as Forbes, but its fake listings are gaining in popularity. Previous faux listings have included Wayne Manor in Gotham City, Superman’s fortress, Sesame Street and The White House.

The firm is clearly familiar with Canadian stereotypes. The 24 Sussex “listing agent” is identified as “The Mountie” with an accompanying photo. It also includes a testimonial quote from Stephen Harper.

"The Mountie was always there when I needed him, hot poutine at the ready!"

Funny, eh?

Local elite real estate agent Marilyn Wilson of Dream Properties claims 24 Sussex is worth far more — as long as the home is torn down first.

Looking over the municipal property assessment, Wilson figures the property itself — minus the buildings — would go for $12 million even though it’s assessed for $7.9 million.

"It would be worth more as vacant land," she said. "A buyer would want their own style. It’s not formidable, it’s lacking great bones. It wasn’t built to be a prime minister’s residence."

She says the cost to renovate would be prohibitive.

"It would be cheaper to demolish it and perhaps reuse the stone," she said. "Do it over in a new style, to 2014 standards."

Canadian Home Prices In For A Soft Landing, Overvalued By 26 Per Cent: Fitch

TORONTO - Sky high prices in the Canadian real estate market won’t be climbing for much longer, says a report by global rating agency Fitch Ratings.

The agency forecasted Tuesday that home prices across the country are in for a “soft landing” and will either flatten out or slightly decrease over the next five years. It estimates that current prices are overvalued by up to 26 per cent in some regions and could fall by as much as 10 per cent in some places.

Fitch Ratings said the Canadian economy will be exposed when this happens, as many homebuyers have financially stretched themselves to borrow for their home purchase and will be in for a shock once interest rates start to climb.

It noted a downturn in the housing sector will also impact jobs, as companies have scrambled to build new homes and push construction to record levels in recent years.

"With a high level of employment and individual net worth tied to the value of the housing stock, a housing downturn could have serious consequences for the overall economy," it warned in the 12-page report.

Fitch Ratings said home prices have surged more than 130 per cent since 2001, outpacing income growth by more than 80 per cent.

Despite the anticipated decline, the agency said there are several factors that will lessen the impact on the Canadian economy, including the overall low levels of unemployment and proactive government policy.

In July 2012, federal Finance Minister Jim Flaherty introduced tighter rules for mortgage lenders and borrowers — a change that industry says accounted for a slowdown in residential property sales that began the following month and continued through the first part of 2013. The efforts were aimed at avoiding a housing crisis like the one seen in the United States.

Although the policies have been successful at moderating mortgage debt, Fitch Ratings says housing prices still continue to rise.

"Government awareness has appeared to be high, and if the proactive policies specifically targeting a soft landing are successful, then flattening growth or modest decline scenarios become increasingly likely," it said.

Meanwhile, another report released Tuesday by the Conference Board of Canada also predicted that the housing market will be shielded from a hard landing.

"A crash would require a significant negative surprise like an interest rate spike or employment collapse. Since no such shock is in the cards in Canada, a housing crash like the one in the U.S. is nowhere near a possibility," said Robin Wiebe, a senior economist at the board’s centre for municipal studies.

Its Autumn Metropolitan Housing Outlook found that stability in the housing sector is can be attributed to supply continuing to be in line with demographics.

Last week, the Canadian Real Estate Association reported that home resales dipped in October for the first time since February, which some saw as a sign that the housing market is in for a correction.

Transactions fell 3.2 per cent in October from September on a seasonally adjusted basis. But the number was also an 8.2 per cent hike compared with October 2012, when home sales dropped following a tightening of federal mortgage rules.

The association’s national home price index also rose 3.52 per cent from October 2012 and the national average price for homes sold in October was $391,820, up 8.5 per cent from a year earlier.

Toronto, Vancouver and Calgary were responsible for much of the increase in the national home price last month. If they were taken out of the equation, the average price was up 4.9 per cent rather than 8.5 per cent.

CREA also said that the hottest markets in Canada so far in 2013 have been Calgary, Edmonton and Vancouver when judged by total sales volumes, which measures both price increases and units sold. On the flip side, the coldest markets were in Quebec City, Saguenay, Que., and Halifax, all registering double-digit declines.

How Do Real Estate Agents Determine Your Home's Value

Thinking about selling your home? Understanding what your home is worth can help you decide how much to price your home and how much it is truly worth. Get real insights from experienced Seattle, WA real estate agents. 

Local Community

Efficient emergency services and thriving local businesses ordinarily translate into healthy property and home values.

Your Neighborhood

Take a look around your neighborhood. Is it safe? Is it visually appealing? Or does your neighborhood have a high crime and poverty rate? Real estate agents, as well as potential buyers, look into these qualitative and quantifiable properties while assessing your home's resale value.

Quality of the School District

High quality schools raise your home's value. Poor school districts and low graduation rates have the potential to negatively impact your home's value.

Community Amenities

Local amenities such as parks and libraries have the potential to enhance local property values. If community amenities are un-kept, dirty and dangerous, this can negatively impact your home's value.

Urban Planning & Property Zoning

Property values can be influenced both positively and negatively by zoning decisions and community development plans. How readily available are local shopping, entertainment and eateries? Is there public transportation available or easy access to a freeway? What is nearby the home for sale? These important issues are things real estate agents need to consider before pricing a home.

State of the Economy

Home sales and the state of the economy go hand in hand. When the economy is flourishing, asking prices for home sales go up. When the economy is depressed, it will be more difficult to sell your home, therefore influencing to a lower asking price.

Perception of Your Neighborhood

Whether your neighborhood's perceptions are negative or positive, realistic or unrealistic, they do influence property values. These perceptions have the potential to drive your home price into the ground or up into the stratosphere.

Natural Disasters

Natural disasters such as hurricanes, wildfires and earth quakes have the potential to lower property values temporarily after such an event. If natural disasters are a reoccurring problem, it can depress your home value permanently.

New House Prices Fall, But Real Estate Sector Still Strong

After rising steadily since 2008, Statistics Canada’s new housing price index has flattened out in September, following on a 0.1 per cent increase in August, but a new report says that's no cause for concern as Canadian real estate development will remain strong.

New housing prices fell in Edmonton, Windsor, Ottawa and Montreal, but those decreases were offset by a 0.5 per cent jump in Calgary, which is seeing higher labour and materials prices as it recovers from floods this summer.

The flat housing prices are no cause for concern, according to the Emerging Trends in Real Estate report from Price Water house Coopers and the Urban Land Institute.

Canada’s relative economic health, especially compared to our neighbours to the south, has kept residential real estate strong, says the report, released Wednesday.

Trend to urbanization
Tighter mortgage rules and increasingly cautious banks have helped flatten condo prices, especially in North America’s hottest condo market — Toronto, the report said. But, cranes are expected to remain visible along major city skylines as projects already in the pipeline are fully built and but the trend toward urbanization keeps demand buoyant.

The trend among young Canadians to live, play and work all in the same neighbourhood is driving a boom in both condos and urban office development, says the report.

The outlook for development of all types of property – from residential to commercial – is good in Canada, according to PwC partner Lori-Ann Beausoleil.

Transit is of increasing importance to all forms of real estate development, she said.

Look for transit
“With challenging infrastructure in all major Canadian centres coupled with the urbanization trend, there will be a continued demand for retail, office and residential space in our urban centres where there is easy access to mass transit,” she said.

Redevelopment of urban areas and creation of mixed use real estate are key trends for the coming year, she said, especially in centres such as Vancouver, Calgary, Toronto and Montreal.

But the report says real estate that is far from transit, or a long way from residential areas may become underused and is less likely to be redeveloped because of a significant shift in where people want to live.

Increased automobile commute times and snarled traffic are turning people off suburban living and many Canadians are choosing condo living over the house with a yard which comes with a frustrating commute.

These include the 20-somethings, who are establishing lifelong habits of urban living, and baby boomers, who want to give up snow-shovelling and be closer to the symphony, the report said.

Changes to office market
Older commercial or suburban properties that are not close to transit may wait in limbo for redevelopment.

The office development business is changing with more demand for open layouts, shrinking space use per capita, technology impacts and demands for energy efficiency, Beausoleil advises.

She said the Canadian real estate sector is likely to remain strong for the coming year, and the U.S. market is likely to recover.

“The forecasts show that Canadian real estate players are able to both invest and attract investors. With the U.S. economy on the upswing, we are likely to see even more activity between the two countries, Beausoleil said.

“Over the last several years, Canada has been the interesting real estate story while the U.S. markets were in distress, but now, we expect that the continuing U.S. recovery will be the real story. Still, Canada’s strong market and the spending power of our consumers will continue to position us well in the international community as we head into 2014.”

Canadian Housing Bubble? 9 Signs We’re In For A Major Correction

Maybe Canada doesn’t have a housing bubble.

Maybe this time, it really is different. Maybe life expectancies have grown, and with them, people’s willingness to take on more debt. That would mean house prices could stay up higher than history would suggest.

Maybe interest rates aren’t going back up. If there is no inflationary pressure, either in Canada or in the U.S., there isn’t much reason for central banks to push interest rates back up.

Maybe we’re in for an endless housing boom. Maybe. But if history is still any guide to go by, then folks, it looks like we have one whopper of a housing bubble on our hands. Because just about every single indicator that warns economists of trouble in the housing market is now flashing red.

Investment bank Goldman Sachs and British business paper the Financial Times are the latest to throw in with the “Canada has a housing bubble” crowd. Goldman put out a report last month saying that some parts of Canada are suffering from overbuilding, and given the excess construction, a “price decline can be quite significant.”

Meanwhile, FT declared Monday that Canada’s “property sector is perched precariously at its peak.”

Here are nine of the most compelling reasons given by economists for why Canada has a housing bubble. Decide for yourself whether this is much ado about nothing, or a major warning sign for an economy in trouble.

1. House Prices Are Growing At An Unreasonable Pace
House prices in Canada have grown 20 per cent since the end of the 2008-2009 recession — and that’s when you adjust for inflation.

The compare: During this time, the U.S.’s flailing housing market saw a net decrease in prices of about 10 per cent, adjusted for inflation. Maybe a better comparison would be Australia, which, like Canada, is a commodities-heavy economy that does well when resource prices are high. Australia’s house price growth during this time has been half that of Canada’s.

2. We’ve Never Been So Indebted
Canadian household debt has hit a record high of 163 per cent of income, meaning Canadians owe $1.63 for every dollar of income. Tha’s pretty close to where the U.S. and U.K. were when their housing bubbles burst.

And Canadians seem to be going debt-crazy even outside of mortgages. According to a recent RBC survey, non-mortgage consumer debt soared 21 per cent in the past year.

3. Canada’s Gap Between House Prices And Rent Is The 2nd Largest In The World
The Economist magazine reminds readers several times a year that Canada’s housing market is among the “bubbliest.” According to its data, Canada’s housing market is overvalued by 73 per cent, compared to rental rates, when looking at long-term norms. That’s the largest gap among countries where this data is available.

4. Canada’s Gap Between House Prices and Income is the Third Worst In The Developed World
That’s according to the OECD, which released a report this summer saying Canada is “vulnerable to a risk of a price correction.” The OECD estimates that house prices are about 30 per cent higher than they should be, given what Canadians earn.

Canada is part of a small group of countries “where houses appear overvalued but prices are still rising,” the OECD said.

5. Canadian Housing Markets Are Exhibiting ‘Irrational Exuberance’
“Irrational exuberance” is the term Fed chairman Alan Greenspan coined in the mid-90s for a market that is bubbling up. (Four years later, the dot-com bubble burst and Greenspan’s warning proved prescient.)

Canada’s housing markets are also showing signs of irrational exuberance. Despite warnings from even the most optimistic market analysts that house price growth is bound to slow due to tighter mortgage rules, huge house price increases still abound in many markets.

One of the most irrational markets is Toronto, where a large drop in sales in 2012 resulted in … very little change in house prices. When the market picked up again this year (sales were up a stunning 19.5 per cent year-on-year last month), the result was … little change in house prices. This is a sign of a market that has become detached from economic fundamentals.

6. Low Mortgage Rates Are All That Are Holding Up This Market
The housing market optimists, like CIBC economist Benjamin Tal, point out that, for all the increases in house prices, affordability is still actually pretty good (or at least not much worse than normal).

They’re right, but this depends entirely on interest rates staying at current historically low levels. If interest rates go up, so do monthly payments, and affordability is out the window.

How precarious is the situation? Economist Will Dunning, who works in part for the Canadian Association of Accredited Mortgage Professionals, estimates that even a one percentage point hike in mortgage rates would be enough to sink the market.

A one-per-cent increase in Toronto would result in a decline in home sales of 15.3 per cent in Toronto, Dunning estimated recently, while prices would drop by about six per cent.

7. We’ve Never Been So Dependent On Construction Jobs
Canada’s booming housing market in the years after the 2008 economic collapse helped to hold up the economy (much of that thanks to rock-bottom interest rates), but it has also fundamentally changed the economy in ways that could prove to be bad news.

With manufacturing slowly dying as a source of jobs, construction jobs have taken over the slack. Fully 13.5 per cent of Canadian jobs are now linked somehow to construction — the highest level on records going back some four decades. Compare that to the U.S., where only 5.8 per cent of jobs are related to construction.

BMO economist Doug Porter believes this could be a sign of an “unbalanced” economy, and the risk here is that, when the construction market returns to normal (as eventually it must), there will be serious job losses.

8. In Housing, What Goes Up Does Come Down
The conventional wisdom is that house prices are something that just keep going up and up. But historical data shows this actually isn’t true. We have records of home sales in North America going back centuries, and throughout the years, average house prices have always trended back towards a level that’s about 3.5 times median income.

So if the median household income in Toronto is about $70,000, which it is, then an average house should cost $245,000, which it certainly doesn’t. The average price of a home sold in Toronto today is $539,035, a seven-per-cent increase from last year.

It’s hard to imagine Toronto house prices falling all the way back to long-term trends even with a housing bubble collapse, so it may be that, at least on this metric, things really are different this time. Perhaps people’s longer lifespans and greater willingness to take on debt have changed the market permanently. Perhaps.

9. Some of the World’s Most Trusted Economic Sources Are Worried
“Because they said so” is not a good reason to believe anything, but it is telling to see who’s worried about a housing bubble in Canada. Here’s a quick rundown of the people and institutions that are saying a day of reckoning is approaching for Canada’s housing markets.

Goldman Sachs has warned of a “large correction” in Canada’s housing market, due to what it sees as overbuilding of housing units.

Renowned U.S economist Robert Shiller fears Canada is experiencing the U.S.’s housing bubble burst but in “slow motion.”

Nobel prize-winning economist Paul Krugman thinks Canadians have taken on way too much debt, and a “deleveraging shock” is likely in the cards.

The Economist magazine calls Canada’s housing markets among the “bubbliest” in the world, noting that house prices are way above normal levels compared to rent and income.

The Organization for Economic Cooperation and Development (OECD) says Canada has the third-most overvalued housing market in the world, and is part of a group of countries “most vulnerable to the risk of a price correction.”

U.S. Government Shutdown Driving Canadian Mortgage Rates Lower, For Now

The U.S. government shutdown has had an interesting side effect for Canada: It has held out the promise of lower mortgage rates, and therefore a stronger housing market.

Not that the housing market needs much help these days. Housing starts jumped 5.3 per cent in September, according to data released Tuesday by Canada Mortgage and Housing Corp., beating analysts’ estimates. All parts of the country saw rising starts except Ontario, where they fell 15.6 per cent.

September house sales in the two most closely-watched markets, Toronto and Vancouver, are up 30 per cent and 63.8 per cent respectively, according to those cities’ real estate boards (though there is reason to doubt those numbers).

But the housing market could see even more heating, thanks to the U.S. shutdown. That’s because, with the economic uncertainty, investors are flocking to bonds, driving down bond yields. Fixed-rate mortgage rates are tied to bond yields, somortgage rates are going to come down as a result, according to RateSupermarket’s mortgage outlook panel.

Of course the flipside of lower mortgage rates is higher house prices, and Canadian municipal leaders are getting worried about the erosion of affordability, the National Post reports.

In a letter to Prime Minister Stephen Harper, Claude Dauphn, president of the Federation of Canadian Municipalities, urged the federal government to help address the shrinking supply of affordable housing.

“Housing costs and, as the Bank of Canada notes, household debt, are undermining Canadians personal financial security, while putting our national economy at risk,” Dauphin wrote.

But all bets are off if the gridlock in the U.S. Congress extends past the debt ceiling deadline on Oct. 17.

If the U.S. were to suddenly default on its debt, it would “devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression,” Bloomberg reports, citing dozens of experts.

So the good news for mortgages could be short-lived indeed.

TROUBLE IN TORONTO CONDOS?
The Toronto Star reports that some buyers of pre-construction condos are struggling to get financing to close their deals.

“Some have had to walk away from deposits worth tens of thousands of dollars. Others have been forced to borrow from family — or against their principal residence — to come up with final payments on condos that lenders are no longer keen to finance,” the newspaper reports.

It’s not just a question of lenders being more cautious in today’s housing market; tighter mortgage rules brought in by the federal government last year mean many who bought condos two or three years ago now have to make larger down payments than they bargained for, the Star reports.

“This is the hardest environment I’ve seen for borrowing money in the last 10 years,” Toronto condo developer Brad Lamb told the newspaper.

Apply With More Than One Mortgage Lender?

Unlike applying for a credit card or auto loan, there is little benefit in applying to more than one lender for a mortgage loan. You might believe you are increasing your chances of getting the best available deal or giving yourself “insurance” that you will receive an approval. But, there are reasons that it is usually not in your best interest to do this.
  • In addition to filling out lots of paperwork, it will cost you money to apply (credit report, property appraisal, and, possibly, an application fee).
  • A full credit report, usually a “tri-merge” (reports from all three major credit reporting agencies) is required. This will cost you money (around $15) and also bring down your credit score, as each inquiry takes some points off.
  • You will end up paying for more than one property appraisal (from $200 to $450).
  • You may be required to pay one or more application fees (around $200 each).
  • If you want to lock (guarantee) a rate at application and a fee is involved, more than one application will involve multiple fees, only one of which will benefit you.
If you locate an experienced, honest mortgage professional and provide him/her with the correct information, he/she will advise you of the best available terms for which you qualify. Therefore it is usually unnecessary and always costly to make more than one application with multiple mortgage lenders.

Information You Need to Apply for a Mortgage
Since the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) purchase the majority of home loans in the U.S., their standards are followed by most mortgage loan buyers. 
This means most lenders will require the same information from you. The differences relate to either the type of property being financed or the specific type of loan being used. The most common information all lenders require:
  • Credit report : The mortgage source will get your report, but you should get one of your own BEFORE you apply so you know your current status in advance.
  • Income verification : Keep your pay stubs for at least two months prior to making application. Also have copies of your last two years’ personal income tax returns in the event you need them, including W-2’s. If you earn overtime or other additional compensation, be prepared to prove that it is regular and consistent over time. To verify this, you will need more pay stubs, as many as you can collect. The same rules apply if you earn a significant portion of your income from commissions and fees. You must justify the level of income you wish to get credit for.
  • Liquidity (Cash) : Regardless of the type of mortgage you receive or the property you’re financing, there will be costs to close your new loan. In all cases, you will need third party verification of the cash you claim to have. Have your bank or credit union statements for the past twelve months handy. Also gather up all information on investments, mutual funds, and other “cash equivalents”. If some of your cash is coming in the form of a gift, have the giver sign a “gift letter”. You can find appropriate wording from the Internet or you can probably get a demo letter from your mortgage source. Be aware that most lenders will allow a gift letter ONLY from an immediate family member (mother, father, sister, brother, son, or daughter).
  • If you’re buying a property, you will need a Purchase & Sale Agreement : Once you make an offer that is accepted, your real estate broker will prepare a formal agreement to purchase the property. Most lenders will require this agreement before they will accept a formal application, since there is no deal without it.
  • If you’re refinancing a property, have your current tax bill, hazard insurance information or policy, a copy of your deed and/or legal description of your home: This will greatly facilitate the processing of your application and result in a faster approval.
  • If you’re purchasing or refinancing a condominium : Have your condominium documents (e.g., bylaws, budget, master insurance policy declaration page, homeowner’s dues information, etc.) ready.
There may be some other information you need to provide for different lenders but your mortgage source will make you aware of anything further they want.


Clients Less Willing To Renew Early… For Now

Following historically low lending rates, clients are less likely to opt to renew early, leaving few opportunities for independent brokers to try to entice clients to switch lenders… for now, at least.

“Clients (were) getting 2.79- 2.89 five year mortgages and there is no incentive for clients to jump ship earlier and opt to renew early,” Lee Welbanks of Verico Welbanks Mortgage Group told MortgageBrokerNews.ca. “The banks certainly have the advantage because they can renew four months out and they aren’t charging clients a penalty to renew.”

Nevertheless, clients who signed up for five-year fixed rates five years ago – and whose mortgages are now maturing — will likely look to renew, as rates are lower today than they were when they signed up for the current term.

“The variables rates are in vogue right now and we have high rate fixed rates coming out of maturity and so they’re happy to get in on an early renewal,” Welbanks said.

In many of these cases, clients are usually satisfied to stay with the original lender; leaving few opportunities to entice clients to leave. Though that shouldn’t sway brokers from trying.

“We’re trying to find the deals where the clients need more funds. I have some who like my services but, at the end of the day, clients often opt for the path of least resistance – so they choose to renew with the banks or their current lender even if they have to pay a little more,” Welbanks said. “I think the idea is that we need better incentives in order to switch clients; that may be a cash incentive for the hassle they go through, that may be other products you offer.

“It could be a myriad of things but at the end of the day, we can never stop trying, as long as we are not doing something that acts against the client’s better interests.”

And even if that fails, there is always the knowledge that the future will bring with it a leveler playing field.

“The playing field will be more level in 4.5 years because we won’t see as many early renewals. It’s a brand new deal and they have to play with whatever rates are available,” Welbanks concluded.

How To Beat Banks At Renewal Time

The challenges of the traditionally slow winter season is now being compounded by banks contacting past clients 120 days ahead of renewal – and just out of reach of the brokers’ 90 day rate hold.

“I’m relatively new so I still don’t get those return clients with renewals (and) this time of year in Ottawa it’s slow because people don’t want to move in in December and January,” Nick Bachusky told MortgageBrokerNews.ca. “The banks are getting to the clients first – 120 days out, the managers get an automatic message saying whose renewals are up and then the specialists contact the clients with the best rates. It’s tough for brokers to compete because we can only offer at 90 days out.”

The banks tend to have the rate advantage and it can be difficult to sway a previous bank client to move the mortgage to the brokerage side.

“The banks go on floors: they don’t make revenue on it, they make more on volume (and) if it’s a war on rates, the banks will usually win it,” Bachusky said. “They can go to upper management and get rate matches and clients are more willing to stick with the bank because no new paperwork has to be done and no new rules need to be discussed.”

However, one way to get a leg-up on the competition is to focus on other areas of wealth management and providing customers a more holistic financial services approach.

“For renewals, what we’re finding, is that with our client base we offer more than just mortgage services,” Patrick Briscoe of Mortgage Alliance told MortgageBrokerNews.ca. “We have a little bit more client dedication in the fact that they come to us first to get an opinion on what they should do.”

Briscoe believes it can be difficult to compete on rate but it’s this other services that help keep the client, in many cases.

“We have seen competition from the banks for sure as they compete for rates, but at the same time by offering other services we have been able to maintain the client,” Briscoe said. “We do investment services, life insurance and income tax preparation.”

Perhaps this approach is the best way to stay competitive during this important time of the year.

“It’s nice to have a niche in what we’re doing but we think it’s necessary for brokers to have the same sort of model if they want to remain competitive,” Briscoe said.

Committing To A Mortgage With Your Honey? Consider These House Hunting Essentials

House-hunting couples have many important decisions to make together – from deciding on a new-build condo or century-old bungalow to agreeing on the ideal neighborhood and the type of mortgage that will work best for them.

According to research from TD Canada Trust, 73% of Canadians bought or expect to buy their first home with their significant other. Since a home is the biggest purchase most couples will make, Farhaneh Haque, director of mortgage advice at TD Canada Trust, provides her top three tips to ensure couples are on the same page before hitting any open houses.

Air out financial closets – Couples should be open and honest about their current financial situation and financial history. If anything could affect the ability to secure a loan together, afford monthly mortgage payments or interest rate increases, be upfront about it.

Start on the same foot – From a home office to a kitchen made for entertaining, couples should set a budget and discuss the key characteristics they want in a home, and what they are and are not willing to compromise on.

Saying ‘I do’ to a mortgage – Couples need to give as much thought to their mortgage as they do to their dream home. This includes discussing the size of the down payment, amortization period, type of mortgage and payment schedule.

“The last thing couples want is an unwelcome surprise when they’re about to sign on the dotted line,” Haque said. “By speaking with a mortgage specialist well before you’ve entered the pressure-cooker of the house hunt, couples can make informed decisions that can save money and stress in the long run.”