Wednesday, May 20, 2015

Over 40% of first-time home buyers in Canada can’t afford a house without their parents’ help, report suggests



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The Canadian Press | April 23, 2015
A Bank of Montreal report suggests first-time home buyers are increasingly turning to the “Bank of Mom and Dad.”
BMO’s 2015 Home Buying Report found that 42 per cent of first-time buyers told an online survey that they expected their parents or relatives to help pay for their first home.
That’s up 12 per cent from last year’s report.
The bank also said 40 per cent of the first-time buyers said they couldn’t afford a home without financial help from family.
The study found the first-timers were anticipating a downpayment of about $59,413 on average and had a budget of $312,700 for the purchase — slightly less than last year’s average price of $316,100.
The bank also found that 42 per cent of current home-owners surveyed said they were looking for family help with the purchase. Their average budget was $473,000 and their average downpayment was $123,214.
The BMO report is based on online interviews with a random sample of 2,007 people aged 18 years or more between Feb. 24 and March 5.
The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.
Prices in Canada have been rising since 2009, resisting regulators’ efforts to cool the market by restricting credit. In Toronto and Vancouver, values have surged as much as 56 per cent in six years. Now as the European Central Bank’s bond buying helps drive down rates to near-record lows in Canada, the housing market is poised to ascend even higher.
Re/Max, the country’s largest residential real estate agency, raised its forecast for home price growth to 3 per cent from 2.5 per cent last week because transactions and values were so high in the first three months of this year. In March, housing sales rallied 4.1 per cent, the most in 10 months.
Toronto home sales increased 11 per cent to more than 8,000 transactions in March over the prior year, according to the Canadian Real Estate Association. Prices in the country’s most populous city jumped 10 per cent to about $601,500.
In Vancouver, Canada’s most expensive home market, sales soared 53 per cent and the average cost to buy a home rose 11 per cent to $870,000.

Friday, May 15, 2015

Mortgage lenders are getting creative to keep rates low, but here’s why homebuyers should beware



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Alexandra Posadzki, The Canadian Press | May 11, 2015
Online comparison shopping is changing everything from how we buy a new television set to how we select a mortgage, and it’s causing some mortgage lenders to get creative in order to compete.
“Lenders are stripping away features of mortgages to get their rates lower,” says Steve Pipkey, co-founder of Spin Mortgage.
Consumers have always been keen on scoring a low mortgage rate, but the ease with which they can comparison shop via their computers, smartphones and tablets has created an even greater fixation on the headline number, above all else.
“The majority of our phone calls are about rates these days, whereas before it might have been more about, ’How can I get my money out fast?’ or ’What’s the quickest way to refinance my home?”’ says Bob Aggarwal, president of Canadalend.com.
Brokers say the push for low rates is not a bad thing, but it has led to some confusion. While mortgage contracts used to be fairly standardized, many of them now contain various conditions and clauses, and in some cases it’s hard for consumers to decipher the difference between various products.
“If you’re online trying to figure out what the rates are and why, good luck to you,” says Pipkey. “Some banks and brokers are better at disclosing the fine print than others.”
In some instances, in exchange for a lower rate, lenders are adding steeper penalties for paying off a mortgage early. By chasing those five extra basis points, buyers put themselves at risk of having to pay thousands more in penalties later on down the road, says Pipkey.
Prepayment privileges also allow borrowers to pay more than their regular mortgage payments without penalty in order to get out of debt faster. But some lenders may reduce how much money borrowers can repay in exchange for a rate reduction.
Pipkey says it’s not surprising that lenders are lowering their rates given how competitive the mortgage market has become.
“Mortgage originations are down and lenders are fighting for market share in the face of compressing margins,” he said.
Bill Whyte, senior vice-president and chief of member services at Meridian Credit Union, says it’s hard to attract clients unless you offer a competitive rate that will grab the attention of borrowers.
The credit union recently offered, for a limited time, an 18-month mortgage for an eye-grabbing 1.49 per cent.

“To our knowledge, when we offered it, 1.49 was the lowest in Canadian history,” said Whyte.
“It drove a ton of traffic to our contact centre, our website and our branches.”

However, many borrowers who phoned to discuss the offer ended up going for a five-year mortgage at a slightly higher rate instead, he said.
“In a lot of cases the five-year rate fit them better, and some of that initial interest in 18-month was diverted to five-year,” he said, adding that many Canadian borrowers are looking to lock in at today’s rock-bottom interest rates before they climb higher.
http://business.financialpost.com/personal-finance/mortgages-real-estate/mortgage-lenders-are-getting-creative-to-keep-rates-low-but-heres-why-homebuyers-should-beware