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Greta article by Robert Mclister about early mortgage renewal.
A rate in the hand is worth two in the bush.Many mortgage lenders want you to believe that rate certainty is worth paying a premium for. It is the justification, they say, for staying with them and renewing your mortgage early.Early renewal features typically let you lock in a new rate two to four months ahead of when your mortgage is due to mature. Some lenders, like Bank of Nova Scotia, even let you renew up to six months in advance.he question is, do early renewals save or cost home owners money?“Unless the consumer believes that interest rates are going to move up significantly prior to their ability to lock in, I fail to see a reason to do an early renewal with their existing lender,” says mortgage broker Calum Ross.By locking in earlier, you minimize risk of adverse rate movements. But in return, you pay a premium to the best available rates, and you’ll lose all benefit if rates drop before your term is up.Not surprisingly, Canada’s big lenders are advocates of renewing your mortgage in advance. “We think it’s a good idea to have some room to manoeuvre [when locking in a renewal rate],” says David Stafford, Scotiabank’s managing director of real estate secured lending. Having more time to make a decision is especially important if you plan to renew with your current lender, as more than 90 per cent of customers do at Scotiabank.Of course, the benefit of renewing early depends largely on the rate you’re offered. Right now, for example, you can find fully featured five-year fixed rates at 3.29 per cent or less. If your lender is letting you lock in 90 days early for 3.39 per cent – a mere 10 basis point premium – that’s worth considering (assuming a five-year fixed is the right term for you). This seems especially relevant today, given that fixed rates may climb if the U.S. Federal Reserve slows its bond buying (i.e. “tapers” its economic stimulus program).On the other hand, if your lender were pitching a “one-time-only” opportunity to renew early at 3.59 per cent or more, that warrants more skepticism. A 0.30-percentage-point rate difference would tack on $3,500 of extra interest on a $250,000 five-year term. (Note: This 3.59-per-cent rate is an actual early renewal “special” currently being offered by at least one major bank.)I use 0.30 of a percentage point in my example on purpose: That’s roughly how high today’s best fixed rates can increase until they’re equal to a good early renewal rate.But it’s not that often that rates jump 0.30 of a percentage point in 90 days. Since the 1950s, fixed rates have risen 0.30 of a percentage point over a three-month span only 21 per cent of the time. Mind you, we experienced one such case last May to July when rates soared three-quarters of a percentage point.Either way, if lenders can get you to commit early, they will. By law, banks have to send you a renewal notice at least 21 days before the end of your existing term. But they’ll often contact you well in advance of that, which reduces the odds of you shopping around.Positioning early renewals as a “convenience” or risk mitigator is a strategy that frequently pays off for lenders. According to the Canadian Association of Accredited Mortgage Professionals, almost four out of 10 people who renew with the same lender do so at the original rate proposed by that lender. In other words, they don’t negotiate.To minimize rate risk, fixed-rate borrowers should seek at least a 90- to 120-day rate hold, either at their existing lender or elsewhere. If your current lender offers to hold a decent rate for you (without making you commit right then), that’s a “no brainer,” Mr. Ross says. Having a rate hold in your back pocket limits rate risk if you choose to wait until 30 days from maturity to renew. The market’s best rates are often 30-day “quick closes.”“It is clear to me that consumers don’t do a good job at managing this part of their personal finances,” Mr. Ross adds, and that’s certainly true. If you want a great deal on yournext mortgage renewal, one that could potentially save you thousands, rememberthat your lender's first offer is seldom the best offer.Robert McLister is the editor of CanadianMortgageTrends.com and a mortgage planner at VERICO intelliMortgage, a mortgage brokerage. You can also follow him on Twitter at @CdnMortgageNews
CREA releases latest sales figures: home sales decline while prices rise
According to statistics released this week by The Canadian Real Estate Association (CREA), national home sales declined for a third consecutive month in July 2016.
National home sales fell 1.3% from June to July.
Actual (not seasonally adjusted) activity came in 2.9% below July 2015.
The number of newly listed homes rose 1.2% from June to July.
The MLSHome Price Index (HPI) rose 14.3% year-over-year in July.
The national average sale price climbed 9.9% in July from one year ago; net of the Greater Toronto Area (GTA) and Greater Vancouver, it advanced 7% year-over-year.
While national home sales fell 1.3% month-over-month in July, the average price jumped 14.3% year-over-year last month. Newly listed homes, meanwhile, increased 1.2% month-over-month.
Sales activity was down from the previous month in slightly more than half of all markets in July, led by Greater Vancouver and the Fraser Valley. Transactions in these two markets peaked in February of this year, and have since then dropped by 21.5 and 28.8 percent respectively. Accordingly, much of the national sales decline in recent months reflects slowing activity in B.C.s Lower Mainland.
National sales and price trends continue to be heavily influenced by a handful of places in Ontario and British Columbia and mask significant variations in local housing market trends and conditions across Canada, said CREA President Cliff Iverson.
Home sales continued to trend lower while price gains further accelerated in the Lower Mainland of British Columbia, said Gregory Klump, CREAs Chief Economist. This suggests that sales are being reined in by a lack of inventory and a further deterioration in affordability. The new 15 per cent property transfer tax on Metro Vancouver home purchases by foreign buyers took effect on August 2nd, so it will take some time before the effect of the new tax on sales and prices can be observed. That said, the new tax will do little in the short term to increase the supply of homes.
With sales down and new listings up, the national sales-to-new listings ratio eased to 61.6 percent in July 2016 its second monthly decline following its peak of 65.3 percent in May. A sales-to-new listings ratio between 40 and 60 percent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers and sellers markets respectively.
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canadas tightest, most active and expensive housing markets. The actual (not seasonally adjusted) national average price for homes sold in July 2016 was $480,743, up 9.9 percent y-o-y.
If these two housing markets are excluded from calculations, the average price is a more modest $365,033 and the gain is trimmed to 7.0 percent y-o-y.
Canadian Housing Starts Trend Increases in July
The trend measure of housing starts in Canada was 201,936 units in July compared to 197,847 in June, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of the state of Canadas housing market.
In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.
The standalone monthly SAAR for all areas in Canada was 198,395 units in July, down from 218,326 units in June. The SAAR of urban starts decreased by 9.9 per cent in July to 182,620 units.
In July, the seasonally adjusted annual rate of urban starts decreased in Quebec, British Columbia, Ontario, and Atlantic Canada, but increased in the Prairies.
Preliminary Housing Starts data is also available in English and French at the following link:Preliminary Housing Starts Tables