VERICO Designer Mortgages

Canada’s five-year bond yields reached their highest level in almost a year, in part due to improved employment numbers in the U.S., BusinessWeek reported. 

“Banks are hedging seasonal mortgage flows, which is weighing on the five-year sector,” Mohammed Ahmed, a rates strategist at CIBC told BusinessWeek. “Banks are receiving a fixed-rate asset and to hedge that, they typically pay the fixed rate in swaps, or sell cash bonds.”

Canada’s benchmark five-year bond yielded 3.04 per cent yesterday, the magazine reported, up 15 basis points from April 1 and the first time the yield has broker the three per cent mark since October 2008. The Bank of Canada will auction $3 billion worth of 1.5 per cent bonds tomorrow.

Most lenders raised five-year, fixed mortgage rates last week in anticipation of higher inflation. These rates will serve as the qualifier for borrowers when the new mortgage rules come into place on April 19. 

http://www.mortgagebrokernews.ca/news/bond-yields-rise-as-fixed-mortgage-rates-move-up/43642

Great info on HST from the Realtors Association of Hamilton-Burlington.

HST Update

OTTAWA — With Bay Street convinced the Bank of Canada will maintain its pledge to wait until July to begin raising interest rates, the debate now turns to how aggressively the central bank should behave thereafter.

In the view of a paper prepared for the C.D. Howe Institute, the central bank should act with zeal. If it wants to get ahead of the inflation curve, the bank should raise its benchmark rate by 50 basis points at every scheduled rate announcement until the middle of next year, the paper said.

Michael Parkin, an economics professor at the University of Western Ontario and member of the think-tank’s monetary policy council, said “steep” increases would be required to make up for keeping the benchmark rate so low for so long.

The paper comes a week before the Bank of Canada’s next interest-rate statement, scheduled for March 2 and the same day Mark Carney, the bank governor, held an annual meeting with leading private-sector economists in Ottawa.

The bank cut its benchmark rate last year to a record low 0.25%, and made a pledge — conditional on inflation — to keep it there until the end of June in an effort to pump up the economy amid the financial crisis. Analysts say the move has worked. Figures on gross domestic product, to be reported next week, should indicate the economy grew roughly 4% in the fourth quarter, above the central bank’s own expectations. And inflation is closer to the bank’s 2% target earlier than envisaged, although analysts suggest price increases could lose some steam in the weeks ahead.

The main thrust of Mr. Parkin’s argument is the central bank needs to raise rates as aggressively in anticipation of the recovery as cut in response to the financial crisis. This would be in line with the Taylor rule, which dictates by how much a central bank should move its benchmark rate in response to inflation.

Based on the central bank’s own economic projections, Mr. Parkin calculated the future path of interest rates. “When the [benchmark] rate starts to rise, it must be on a steep upward path,” he wrote. Under the Taylor rule the benchmark rate should in fact, be higher than present levels. As a result, a target rate “somewhat higher” than what otherwise would be required might be necessary for the latter half of this year and all of next, he said, “to avoid inflation running above target.”

Economists indicate the central bank, if possible, will keep its pledge because reversing course now could damage its credibility.

Other analysts also signalled that they shared some of Mr. Parkin’s view.

“In order to move from an exceptionally low to low-rate environment, you need to move fast,” said Sébastien Lavoie, economist at Laurentian Bank Securities, which last fall indicated in a report Mr. Carney would need to entertain rate increases of up to a percentage point.

Michael Gregory, senior economist at BMO Capital Markets, said that by mid-2011 the benchmark rate would “have to be in proximity of being neutral.”

However, he added the central bank would have to take into account the strength of the loonie in determining the appropriate level of interest rates. The currency is likely to climb as the Bank of Canada moves ahead of the U.S. Federal Reserve, and perhaps more aggressively, Mr. Gregory said.

Financial Post
(Feb 24, 2010)

Financial Post

January 21, 2010

When Hamilton, Ont., residents and partners Kathy Funke and Dan Perryman wanted to purchase an investment residential property in 2000, they did what most Canadians do when it’s time to borrow. They headed to the bank branches in their area.

They shopped around a bit, made lots of phone calls, compared mortgage conditions and rates and then signed.

“That was our first experience. We didn’t really know where to start. And I didn’t know anything about mortgage brokers at that time. The bank seemed like the obvious place to start,” said Ms. Funke, 45.

But in retrospect, they found the whole experience exhausting.

“During our first experience we tried to shop around. The banks discouraged that. They gave us some story that because we had a mortgage being approved and when another bank does the same thing it shows that another mortgage is being approved,” said Ms. Funke.

Three years later when they were shopping for another house, they had a different strategy.

“We didn’t even go to the bank then…We were just so frustrated from the last experience that we didn’t want to run around to the banks. We figured we couldn’t do any worse so we just put ourselves in the broker’s hands and let her do the shopping around for us. We use insurance brokers for insurance, why wouldn’t we use a mortgage broker?” said Ms. Funke.

Dan and Kathy are part of a growing number of Canadians foregoing the traditional walk into the bank branch and instead sitting down with the local mortgage broker.

In their case they used Grimsby, Ont.-based Verico One Mortgage Corporation.

This growth is a core finding of Maritz Research Canada, which studied the broker industry on behalf of the Canadian Association of Accredited Mortgage Professionals (CAAMP)

“In the past, the first or only place a person would go when looking for a mortgage was to their local bank, however more and more Canadians are now seeking out the services of Mortgage Brokers to help them navigate the biggest purchase of their lives,” concludes study author Rob Daniel, managing director, Maritz Research Canada.

The Maritz Research concluded that the mortgage brokerage channel handled 23% of all mortgage activity in 2008. The broker channel is particularly strong in Western Canada (34% of all activity in Alberta, 27% in British Columbia). In addition, women are more likely than men to deal with mortgage brokers. (26% vs. 20%).

Young Canadians are much more likely to consult with and deal with brokers than their older counterparts; Brokers represent 28% of mortgage activity among 18-34 year olds, 24% among 35-54 year olds, and just 17% among those 55 and older.

A mortgage broker works as a conduit between the buyer and the lender. In many cases, the mortgage broker is informally representing lending institutions. The banks have used brokers to outsource the job of finding and qualifying borrowers.

Dan and Kathy felt they got a better interest rate than the banks offered and there were no brokerage fees. And they wanted a mortgage that offered an annual paydown of 20% with no penalty on the balance outstanding.

Maritz Research Canada concluded that the average Canadian who renewed or renegotiated through a broker saw their interest rate reduced by an average of 125 points, compared with 114 among those who dealt directly with a bank or credit union.

For Toronto resident Leanne Bernardo, the mortgage broker not only represented a one-stop shop, it provided a number of “add ons.” These included a line of credit, a life insurnace option, annual and monthly lump sum payment options without penalty and weekly interest rate alerts. The variable interest rate selected was comparable to what the banks offered.

“We just wanted to have a number of different options presented to us and we felt that going through a broker would give us an unbiased opinion of different options. Otherwise we would have gone to three or four different banks to get our options. It was great for us in terms of time efficiency,” says Ms. Bernardo.

And then there is the personal service. James Bell, of Toronto-based Ultimate Mortgage Corporation, has been arranging mortgages since 1989. He’s been dealing with some of his customers for 15 years.

“People get very frustrated when they are dealing with banks because there’s such a turnover of staff, it’s very difficult to build a relationship with a mortgage officer. Even if they are successful in establishing a relationship now it’s not likely that person will be in the same branch in the same position five years down the road,” says Mr. Bell.

The broker is ideal for those who would have difficulty or would not normally qualify for a conventional bank mortgage.

When Karl Klos was co-purchasing a house with a friend in 2006, his friend was working but he wasn’t. They were having trouble getting approved. They were offered $250,000 in private financing at just under 6%. When that didn’t work out they ended up being referred to Toronto-based The Mortgage Centre (www.clickjohn.com) which found them a mortgage at 4.35%

And then there are those who are seeking second mortgages to save their homes.

“The idea is to solve their problems and not to put them into more problems. And I would say we’re very successful at that. There are always situations that go wrong. But by far the highest percentage of them work,” says Jeff Atlin, a mortgage broker and president of the Independent Mortgage Brokers Association of Ontario.

But one thing consumers might end up doing is shopping for a mortgage broker. Unlike a bank, depending on the complexity of the deal and level of risk, mortgage brokers will charge fees. In one case, a low risk $240,000 mortgage on a $320,000 home in Toronto brought $3,200 in fees.

“It really is on a per deal basis. I wouldn’t say it’s what the broker feels they can get away with. I would hope that people would have higher standards than that. There are some deals that are quite time-consuming and perhaps a higher fee would be reflective of the time that’s necessary to put it together so the borrower ends up with a mortgage that they are really satisfied with,” says James Bell.

According to one banking insider, the banks are chilly about mortgage brokers because they make it a more competitive market in which interest rate competition takes away the ability of the local branch to hold firm on posted rates.

As for Dan Perryman and Kathy Funke, they’re making it a habit. They currently have two rental properties and live in a third house. But it doesn’t look like they are going to stop there. They have another home purchase going through in April. And they only plan one stop and that is to Verico One Mortgage Corporation.

“We wouldn’t even consider anybody else. If it isn’t broke you don’t fix it,” says Kathy Funke.

Heeding Rupert Murdoch’s words, global financial powerhouse is taking on the big domestic players in a specific niche

Canada, meet Macquarie Group.

In a little more than two years, with three major acquisitions, the giant Australian bank has become one of the biggest foreign challengers in Canadian high finance, with about 1,000 employees across a broad range of businesses.

And the name is about to become a lot more familiar.

With the most recent purchase, the acquisition of Blackmont Capital’s chain of financial advisers, Macquarie is the first big non-Canadian player in years to try to face off against the RBC Dominion Securities and BMO Nesbitt Burns of the world in the business of stock brokerage and mutual fund sales to everyday Canadians.

As of next month, when Blackmont is rebranded as Macquarie Private Wealth, the name will be on the wall across Canada in cities such as Victoria, Edmonton, Ottawa and Guelph, Ontario.

It’s all part of a strategy by Paul Donnelly, who came to Canada from Sydney in 2007 to head Macquarie’s business here and exploit what the company believes is a gap in the Canadian market, now dominated by big banks and small boutiques. Those banks are huge but mostly focused on Canada, giving Macquarie what it believes is an edge because of its global presence. At the same time, the Australian firm plans to offer more services than the boutique investment dealers.

Mr. Donnelly wants Macquarie to feel like a Canadian firm, rather than like a small branch of a global bank, which is the model for many of the immense so-called bulge bracket foreign firms that try to do business in Canada with just a few locals and others who fly in from head office when needed.

“We’re proud to be different and we’re deliberately different,” Mr. Donnelly said. “We’re global perhaps in a way that the large Canadian banks aren’t. We’re truly committed to Canada perhaps in a way the bulge brackets aren’t, and we’re really full service in the way perhaps the boutiques aren’t.”

Starting in 2007 with the first big deal, the purchase of Orion Financial Inc., the Australian firm has built a business in Canada that specializes in financing industries such as construction, real estate and infrastructure, and that aims to offer all the products of a big Canadian bank along with international experience and access.

Mr. Donnelly’s philosophy is based in part on a quotation from tycoon Rupert Murdoch, who Mr. Donnelly laughingly calls “that famous ex-Australian.” Mr. Murdoch once said “You have to look for a gap where competitors in a market have lost contact with the customers” - words that stuck with Mr. Donnelly.

“If we are really strong in something, but all the Canadian banks are equally strong, maybe you can break through but you’re going to butt your head against the wall a lot before you succeed. So we just focus on a clear and discernible difference: Where can you sit down and have a conversation with someone that’s going to be different than any other conversation they’re having.”

Prior to the acquisitions, Macquarie’s presence in this country was a mixed bag of businesses few Canadians would have run across: A group of mining bankers here, an infrastructure investment fund there, a mortgage business on the side. All in all, there were about 300 people, but few outside of niche finance businesses would have run across them.

Starting in late 2007, that changed. The Orion purchase gave the firm a big team focused on energy and mining.

Then Macquarie began to broaden further, spending money on high-profile hires. Former senior bureaucrat Stanley Hartt, once a top man at Citigroup Inc. in Toronto before the bank shut down its operations here, is now chairman of Macquarie in Canada.

Top-ranked analysts followed in key areas such as utilities, real estate and banking.

With the purchase last year of Calgary-based Tristone Capital, Macquarie added expertise in energy. It also became a player in what’s known as acquisition and divestiture - the business of helping oil and gas companies buy and sell real estate.

It hasn’t all been smooth. Some key personnel left Tristone, and one of the biggest mining bankers who came from Orion recently departed for a competitor.

But the result of all the expense has been some big clients. Now, the firm is advising the government of New Brunswick on the sale of its power producer to Hydro Quebec and helping Suncor Energy Inc. sell natural gas assets.

The final piece was Blackmont, which gives the firm a force of about 130 brokers who can sell shares of companies that Macquarie finances to individual investors. The goal now is to double that number in three to four years.

Doing the acquisitions of Tristone and Blackmont in quick succession wasn’t part of the original plan, but fast growth has been a hallmark of Macquarie globally.

“When you want to act and when the opportunities are available rarely line up,” Mr. Donnelly said. “You can’t do a linear strategy. You have to take advantage of the opportunities”

He doesn’t expect there’s anything more that Macquarie needs to buy in Canada.

But then, Mr. Donnelly points out that getting bigger fast is in Macquarie’s DNA - globally the firm has expanded at a furious pace - giving the sense that if something offbeat were to come up, something unexpected that could help the company, Macquarie might be there with a check book and a plan to grow.

“We didn’t know we were going to do Tristone, and we didn’t know we were going to do Blackmont, but that’s the nature of our organization.”

Bank of Canada cut its overnight lending rate by 0.25% to a historic low of 0.25%.

The Bank of Canada also stated that it will keep the key overnight rate at 0.25 percent until mid-2010.

Various Canadian Banks quickly cut their Prime Rates following this announcement by 0.25% to 2.25%.

The Bank of Canada’s next rate announcement is due June 4.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Bank of Canada cut its overnight lending rate by 0.50% to 1.00%, the lowest since the central bank was formed in 1934. The decrease was inline with most economists expectations.

The previous lowest rate level set by the Bank of Canada was last seen at 1.12% in 1958.

In the past few days leading up to this morning’s announcement by the Bank of Canada, a few lenders began cutting some of their fixed term mortgage rates. Various Canadian Banks quickly cut their Prime Rates following this announcement by 0.50% to 3.00%.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Many economists expect that the Bank of Canada will cut interest rates to a record low next week on January 20th to stimulate the economy. Its expected that the Bank of Canada will cut its rate by 0.50% to a record low of 1.00%. The Canadian Banks are expected to follow with a cut to their prime rates, which are currently sitting at 3.50%.

European Central Bank to cut its trendsetting interest rate to two per cent on Thursday.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Deadline March 2, 2009: Post Courtesy of Carolyn Moshtagh

As part of your financial security plan, a registered retirement savings plan (RRSP) loan can help you maximize your annual contribution or catch-up on unused RRSP contribution room. The loan:

• Reduces this year’s tax bill through an income deduction equal to the amount of your allowable RRSP contribution

• Gives you more money earlier to help grow your investment

• Potentially creates a larger nest egg down the road

An RRSP loan means more money works now towards your future retirement. With a convenient Solutions Banking™ loan, the process is easy.

Contact me today for details.

Carolyn Moshtagh
Financial Security Advisor
905-332-3400, ext. 245 office
416-500-9195 cell
Fax: 905-332-3999
carolyn.moshtagh@f55f.com

Freedom 55 Financial and design are trademarks of London Life Insurance Company.

TM Solutions Banking products and services are distributed by Freedom 55 Financial, a division of London Life Insurance Company and is a registered trademark of Power Financial Corporation. National Bank of Canada is a licensed user of these trademarks. Solutions Banking products and services are provided by National Bank of Canada.