Tuesday, June 23, 2015

What to make of the economy, interest rates, house prices and debt

Here are the facts at this moment in time: The growth of the Canadian economy continues to struggle in the wake of lower oil prices and a dropping loonie. 

Interest rates are at historic lows. The Bank of Canada’s prime interest rate is now at .75%. The prime lending rate for consumers is 2.85%. Five-year fixed mortgage rates are between 2.64% and 2.79%. Five-year variable rates range from 2.15% to 2.3%.

House prices have spiked in a few hot spots across the country — most notably Toronto and Vancouver where prices have risen 10% and 11% respectively  — which is skewing the national average.

Household debt is sitting at 163.3% as a percentage of disposable income according to Statistic Canada's recent report -- only marginally lower than the record 163.9% ratio the agency reported in the fourth quarter of 2014.

Should Canadians be concerned about their jobs? Will interest rates start to rise soon? Will there be a housing meltdown? Is household debt out-of-control?

Let’s see. The Bank of Canada’s (BoC) Governor Stephen Poloz, in his latest statement, was clear about one thing — he was confident that the regulatory changes to mortgage lending was working and those taking on mortgages were able to pay them. So, as far as interest rates, it’s pretty safe to say, barring any major economic upheaval, that low interest rates are here to stay until the economy starts to grow.

The Chair of the US Federal Reserve Janet Yellen announced recently that interest rate hikes are coming. Yellen said if the American recovery continues, rates with rise this year. As the US economy starts to pick up steam, then Canada’s economy will likely follow. 

At this time consumers are taking advantage of low rates to pay down mortgage debt. A recent survey by Manulife Bank of Canada found that 40% of homeowners are starting to pay off their mortgages ahead of schedule. Manulife found that 18% made extra lump-sum payments in the past year, while 17%  increased their regular payments which reduces amortization. Another five per cent did both.

The annual survey of home buying habits by the Canadian Association of Accredited Mortgage Professionals (CAAMP) finds the same thing. CAAMP found that  first-time buyers are, on average, putting 21% down and expect to tighten up amortization periods from 25 years to 20 by increasing their payments.

If Poloz was truly concerned about debt then raising interest rates would quickly nip that worry. But raising interest rates would not help what Poloz sees as a bigger concern —  weak exports and business spending. Basically, Canada’s economy is stagnant. What the BoC does monitor closely is the rate of inflation, which it aims to keep between 1% and 3%. If it starts to edge closer to the 3% rate, then we can expect some changes. The current inflation rate is hovering around the 2% mark. 

House price increases may still be a concern; however, there is evidence that prices are stabilizing. According to the Canadian Real Estate Association (CREA) only half of Canadian provinces can expect house prices to increase.

Canada Mortgage and Hosing Corporation (CMC) recently reported that while there are some concerns about overheated regional markets, the overall national risk remains low.

While newspaper headlines tend to be somewhat controversial, the reality is that many Canadians are getting better educated financially,  are putting themselves in stronger financial positions and are more resilient to whatever is happening in the country.

Monday, June 08, 2015

TMG The Mortgage Group Celebrates 25 years in the Mortgage Industry

It was the year the Edmonton Oilers came back and Mario Lemieux couldn't. The economy turned its worst performance since the Second World War.

It was the time of Brian Mulroney and George Bush (Sr). Caller ID systems were introduced and the Internet revolution began.

It was a time of hot pants, mini-skirts, pre-ripped jeans, grunge art, Ninja turtles, head bands and sneakers. "Die Hard" was a box office hit and TV show "Cheers" won all of the Emmys.

It was the early 90s and TMG The Mortgage Group was formed. From day one, Grant and Debbie Thomas had a goal of operating a strong brokerage, educating the consumer that mortgage brokers were  best suited to help them get the best products, and to not become a big, faceless company. They wanted to create a company with old-fashioned family values, yet remain relevant and strongly competitive.

They have succeeded. On May 28, 2015, TMG celebrated its 25 years in the mortgage industry with a gala event.  After 25 years TMG, a national full service mortgage brokerage has developed an excellent reputation in the industry and is highly-respected among agents, brokers and industry partners, including lenders. TMG is known as a company with integrity.

Early on, it was decided to grow the company organically. Today, TMG has nearly 800 brokers and agents nationwide. The company continues to grow and attracts like-minded, professional individuals by treating them with respect, providing good value, and continually responding to their needs.

“Our core values help promote an open, progressive, entrepreneurial environment. We think in terms of partnerships with our brokers and staff,” said Mark Kerzner, president of TMG.

Through the years of continued and impressive growth, TMG has been able to maintain and even strengthen its corporate family culture.

The company’s contribution has not gone unrecognized in the industry. In 2011, TMG was honoured with the Canadian Mortgage Award’s top award for Network Broker of the Year.

In 2012 the company was named one of the Best Companies to Work for in B.C. TMG was awarded CAAMP’s Partners  in Excellence Award as well as Grant and Debbie receiving MBABC’s Pioneer Award for Lifetime Achievement.

In 2013 the company won Employer of Choice at the Canadian Mortgage Awards and later that year Grant and Debbie were inducted into CAAMP’s Canadian Mortgage Hall of Fame.

In 2014, four TMG brokers were recognized for their contribution to the industry by winning CAAMP Excellence Awards.

However, as wonderful as the accolades are, and as proud as they are of their achievements, Grant, Debbie and Mark are not ones to sit back and rest. There is much more to do. After 25 years, it’s important that TMG  continue to find innovative ways to help its brokers succeed.