Soapboxes, Popcorn and Credit Cards. Oh My!
By my count, on a random Thursday night, as I have a glass of wine and some microwave popcorn for supper, there have been about 9 sweeping regulatory changes in the Canadian mortgage market since 2007.
Lets go back to 2007.
At that time, I was in love forever, I wore a size 26 pair of jeans and my Canadian Blue Chips were pulling in a lazy 15% return, all while I was trying to figure out what was going on in Lost. (What exactly was the black smoke monster? Did they ever really ever circle back to that?) Speaking of smoke, all of this went up in it.
That same year, I left my cush bank gig for the rock n roll lifestyle of a mortgage broker because I was promised endless sandwiches and the ability to cuss whenever I wanted. And here I am. Exactly 10 years later. Truly, the sandwiches and profanity are the only constants in this market. Everything else is flipped and reversed.
There are probably a couple of changes in how your mortgage is qualified that we should address. So, let me just lay this out for you:
Firstly....you kind of need a paper trail and reasonable track record of the income that you earn over a legit period of time that would lead someone to the logical conclusion that you can afford a payment on a big thing like a whole entire house.
I knowbanks are assholes. But lets just devils advocate this one.
If you have a salary or guaranteed base hours and that can be confirmed by your employer, we can use that to determine how much of a mortgage payment you can afford by the banks guidelines. If you have any fluctuating income, are self-employed or working on a contract basis, youre going to need to show a two-year track record of how thats been playing out. Or, youre going to need to pony up a more sizable down payment to mitigate the possibility of a dip in your earnings.
Does that really seem so unreasonable? Youre buying a WHOLE ENTIRE HOUSE!
Second...ifyou have credit card debt, or lines of credit which are readvancible*, we are going to assign, on your mortgage application, a completely fictitious, super-high payment that you dont contractually, morally or reasonably ever have to pay and will effect the price of the home the banks determine that you can afford by their guidelines. (And when I say super-high, I mean James Franco super-high.) Oh and by the way, youre completely screwing your credit!
*Readvancible means that its not a loan that you would make set payments on over a predetermined amount of time until its paid. Rather, its a credit limit, like a credit card or line of credit.
And I have a serious beef on this point.
When it comes to your credit card debt and how its required to be appropriated on your mortgage application, the banks blame the feds who regulate the banks. The feds wag their fingers at the consumers who misuse the credit limits. The credit limits are glad-handed by the banks to anyone with a pulse. The banks blame the feds and the feds blame us and the banks blame
You get where this is going, right? To Bullshitsville! Thats where.
Take control. If you are holding credit card debt or balances on lines of credit, you are putting undue pressure on your capacity to carry a mortgage. You may have some interest-only, easy-street, payment arrangement written in blood on your 20% annual interest contract. However, the banks are assigning a very large, made up payment for the purpose of qualifying a mortgage. (The same bank that said Hey! Here! Have this interest-only, easy-street credit card! Youve made it, Cuz! Drinks for everyone!) And then you cant qualify for your mortgage.
This is a thing. Its happening.
And not to kick you while youre down but if you are holding more than 50% balance on your credit card, in relation to the overall credit limit, your credit score is abysmal. This is true. Call your handy dandy mortgage broker. We see credit reports by the dozen, on the daily. And we can help. We have access to the whole puppetshow. We know where all the strings are. And when I say we, I actually mean more specifically me. I can help. Its pretty much my lifes work.
On a side note, its been 10 years for me as a mortgage broker this month. This is a tough industry. So, I think that makes me officially biker-gang badass. And Im celebrating with wine and microwave popcorn.
Like a black smoke baller.
Bank of Canada increases overnight rate target to 1 per cent
The Bank of Canada is raising its target for the overnight rate to 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Recent economic data have been stronger than expected, supporting the Banks view that growth in Canada is becoming more broadly-based and self-sustaining. Consumer spending remains robust, underpinned by continued solid employment and income growth. There has also been more widespread strength in business investment and in exports. Meanwhile, the housing sector appears to be cooling in some markets in response to recent changes in tax and housing finance policies. The Bank continues to expect a moderation in the pace of economic growth in the second half of 2017, for the reasons described in the July Monetary Policy Report (MPR), but the level of GDP is now higher than the Bank had expected.
The global economic expansion is becoming more synchronous, as anticipated in July, with stronger-than-expected indicators of growth, including higher industrial commodity prices. However, significant geopolitical risks and uncertainties around international trade and fiscal policies remain, leading to a weaker US dollar against many major currencies. In this context, the Canadian dollar has appreciated, also reflecting the relative strength of Canadas economy.
While inflation remains below the 2 per cent target, it has evolved largely as expected in July. There has been a slight increase in both total CPI and the Banks core measures of inflation, consistent with the dissipating negative impact of temporary price shocks and the absorption of economic slack. Nonetheless, there remains some excess capacity in Canadas labour market, and wage and price pressures are still more subdued than historical relationships would suggest, as observed in some other advanced economies.
Canadian home sales fall further in July
According to statistics released today by The Canadian Real Estate Association (CREA), national home sales declined further in July 2017. Highlights:
National home sales fell 2.1% from June to July.
Actual (not seasonally adjusted) activity in July stood 11.9% below last Julys level.
The number of newly listed homes edged back by 1.8% from June to July.
The MLS Home Price Index (HPI) was up 12.9% year-over-year (y-o-y) in July 2017.
The national average sale price edged down by 0.3% y-o-y in July.
Julys interest rate hike may have motivated some homebuyers with pre-approved mortgages to make an offer, said CREA President Andrew Peck. Even so, sales activity continued to soften in the Greater Golden Horseshoe region. Meanwhile, sales and prices in Montreal continue to strengthen. All real estate is local, and REALTORS remain your best source for information about sales and listings where you live or might like to.
July marked the smallest monthly decline in Greater Golden Horseshoe home sales since Ontarios Fair Housing Plan was announced in April, said Gregory Klump, CREAs Chief Economist. This suggests sales may be starting to bottom out amid stabilizing housing market sentiment. Time will tell whether thats indeed the case once the transitory boost by buyers with pre-approved mortgages fades.
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