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.

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.

6 Reasons to Follow Your Mortgage Broker on Social Media

Social media marketing has been the hot spot for many businesses and professionals who use it as an effective way to connect with their customer base. While it can sometimes be beneficial to follow a more traditional business in the hopes of finding out about offers, deals, and hours, you may not see following your Mortgage Professional in the same light.

Here are six reasons to follow your mortgage professional on social media, which can be just as beneficial for you as it is for them.

 Get Your Questions Answered. Lots of people turn to the Internet and social media to crowd source answers, such as “what are the current interest rates” or “how much house can I qualify for”.  While you can certainly get a lot of responses from your friends and contacts, having a Mortgage Professional in your feed can get you some very specific and goal-oriented answers.

You’ll Get More Details. You will get independent mortgage advice from a mortgage industry expert about purchasing, refinancing or renewing.   You will get:

•  Personalized service
•  Independent, unbiased advice about what's in your best interest.
•  A great rate that comes with terms and conditions that match your long-term needs.
•  Ongoing advice, when you need it

You’ll Do Less Searching. The mortgage process can be complex and daunting.  Why navigate through the often murky waters of bank terms, hoops and red tape when you can have a mortgage professional work not only with you, but for you?

Whether it’s your first home, a refinance to consolidate debt, an investment property, a mortgage renewal or a second mortgage, a mortgage professional can help you find the best financing solution for your needs. A mortgage professional will research and filter through dozens of loans and products and then review the best options with you. A mortgage professional will help you make key decisions and then support you through the application and closing process.

You’ll Learn Things. You can learn something.  By following a mortgage professional , you’ll be getting all kinds of information about the market, interest rates, new mortgage products, etc. that you might not have learned otherwise. This can help you accomplish your goals faster and with better results.

They’ll Come to You. While email lists aren’t necessarily part of social media, chances are that if you follow your Mortgage Professional  on any type of site, they’re going to ask you to sign up for their email list. If you do so, you’ll now be getting information delivered right to your inbox. So all you have to do is sit back and read, rather than spending your time searching for the same thing.

Start Following. If you’re worried that your Mortgage Professional will use social media as a big push to get you to use their services, you shouldn’t be. Most of them are using social media as a way to get word and information out and to connect with their existing client base as well as potential new clients by getting their name out in front of as many people as possible. So you have nothing to lose and everything to gain by clicking “like”, “follow”, or “sign up”.

Start following your  Mortgage Professional  on social media today and find out just how much you stand to gain.
 

NDP in Alberta?? Say, what now?

By Gord Appel, Vice-President TMG Alberta Region

Wow, this time last year someone might have thought to have you locked up if you said there would be a NDP majority in Alberta.  Yet, here we are mid-May, after the May 5th election dust has settled, and we find ourselves welcoming in new Premier, Rachel Notley, of you guessed it - the NDP.

While the election results may have been shocking enough to gain attention on a national and even international scale; a closer look at the political landscape in Alberta would show another story.  Rumblings that the 44-year privilege, the PCs believed would stay forever was about to crumble, were being echoed throughout the province.

After six years of governing a financially booming province, the then current PC government not only handed down an un-balanced budget but also gave Albertans a budget that proposed legislation with significant increases to Mortgage/Land Title fees, further cuts to essential services and front-line staff in both the medical and education sectors.  We were told to brace for tough austerity.

We then witnessed (now former) PC interim leader Jim Prentice call a premature election to secure his leadership spot - this election was to cost the Alberta taxpayers an estimated  $30 Million Dollars.  Uhm, what?  We Albertans took to the polls and with an unprecedented move removed the longest (provincial/federal) run in government in Canadian history.

The election results said that while change is frightening we were no longer willing to go with the "devil we knew".  We took the NDP from a mere four  seats in the legislature to a majority government with a resounding 53 seats.  While some are pleased, some dejected, and perhaps more still indifferent, we are all going to have to live with the outcome.  This "new" cabinet and lack of experience has many Albertans fearful.  While the cabinet is a group of "newbies", Rachel Notley herself is not.  She brings a strong sense of leadership and her team brings with them a message of hope, renewal and positive change.

Our political landscape may be changing, but what makes us uniquely Albertan has not.  Our "Alberta Advantage" is not borne from the luck of geography alone, our greatest resource has and always will be the great people of this province.  Yes, we are blessed to have one of the richest oil patches in our backyard and lucky for us that doesn't change either.  Oil is going to continue to be an important resource for the foreseeable future -- we have lots of it – and the infrastructure and foresight to get at it and distribute it.  We are an entrepreneurial-spirited bunch. We work hard work and we play hard and that is not going to change either; regardless of the flag colour the governing party flies.

And while we may be nervous of what a change in government may bring, we are willing to take the chance on some fresh faces, new ideas and the inspiration it can bring.

Notley's first act was to extend an olive branch to the energy sector.  She promises to work closely with energy-industry leaders to re-write Alberta's system of royalties and environmental rules over the next four years.  She has promised to cancel Prentice's increases to Mortgages and Land Titles (certainly good for all us in the Mortgage Industry).  She has promised significant investments in health care and education.  She pledges to freeze post-secondary tuition fees, expand public home care and include school lunch programs for kids in low-income households.

 Now it's just a question of how she's going to pull it all off?

The Growth of the Canadian Economy

When Bank of Canada (BoC) Governor Stephen Poloz lowered the prime interest rate to .75% earlier this year in response to what he called the “effects of the oil shock” it came as a surprise to economic pundits and economists alike. Many thought the central bank would hold off on moving the rate until late 2015 or early 2016, with the next adjustment expected to be a hike.

"We have an oil-price shock, which will reduce the income flowing into Canada and lead probably to some increase in unemployment overall," Poloz said.

Until the “oil shock”, Canada seemed to be headed for some post-recession growth. Still, Poloz said he was encouraged by signs of economic life, particularly in Canada's non-energy sector, thanks to a low loonie and strong U.S. growth.

Yet, we still hear about housing bubbles and overvalued real estate. It’s true that house prices in many markets are on the upswing especially in the country’s two hottest markets -- Vancouver and Toronto.

However, the Spring market has turned out to be surprisingly strong and ReMax revised its house price projections upward last week citing high consumer confidence and low inventory. There are even bidding wars in some markets surrounding the “Big Two” – like Hamilton and Barrie in Ontario and in Victoria B.C.  And while in Calgary, the housing slump is evident (oil shock fallout), the Edmonton market is showing resilience.

There was talk that Poloz might lower the prime interest rate again, which did not happen. Poloz said the January interest rate cut was enough to support the nation’s economy as it recovers from the slump in oil prices. Total inflation is at 1%, reflecting the drop in consumer energy prices. Core inflation has remained close to 2%.

So what does that all mean for the Canadian housing market? At this time, little of what has occurred has had an adverse affect on the housing market in most areas of the country. Is there a housing bubble? Well, we have been hearing about a potential housing crash since 2010 – if it was going to happen, it likely would have happened by now.

During these past four years, the government has imposed tighter restrictions to mortgage qualifications and mortgage products, which have altered the lending landscape, and which appear to have prevented a housing collapse. As always, there will be doomsayers.

A better thought is to look at all the positives in the economy starting with the latest Bloomberg Nanos Canadian Confidence Index. According to the results of its recent telephone poll, Canadians are optimistic about real estate, with consumer confidence the highest it’s been in three months. Homeowners are more confident than renters.

When we review the recent federal budget, there are more positive signs for housing and the economy. For one, it was a balanced budget and the government is projecting a surplus of $1.4 billion dollars. Seniors get a new tax credit for home improvements to improve accessibility. Small business gets a tax rate drop to 9% from 11% over the next four years. Manufacturers get a tax break. And the budget held off on any new measures to cool housing.

“There has been an appropriate and desirable moderation in housing activity in most regional markets across Canada. Toronto and Vancouver, in contrast, have continued to experience periods of strong sales and price growth, with housing market strength in these cities supported by such factors as population growth and land scarcity,” according to the budget.

This, despite the fact that household debt levels have reached record levels, again.

Also, when we look at the news coming out of some key sectors, this is what we find:

•  Real gross domestic product (GDP) by industry increased in every province and territory except New Brunswick, Newfoundland and Labrador and Yukon in 2014. Nationally, real GDP by industry rose 2.4% in 2014. (Stats Canada)

• Employment increased by 29,000 in March. The unemployment rate was unchanged at 6.8%.

• Oil prices are showing signs of improvement and so is the loonie. (Stats Canada)

•  Average wages have grown by 2% over the past twelve months, which means that incomes are rising a little faster than the average price growth, as measured by the Consumer Price Index (CPIP), which stood at 1% in February. While not spectacular, this signals a small expansion in the purchasing power of the average Canadian worker. (TMG’s David Larock: http://www.movesmartly.com/2015/04/how-will-the-latest-employment-data-affect-canadian-mortgage-rates-april-13-2015.html )

• Canadian housing starts rose much more sharply than expected in March as groundbreaking on new condominiums and apartments in urban areas surged 48.2%. (CMHC)

•  A robust U.S. economy will ensure that slow growth will not be Canada’s new normal (Fraser Institute)

All of this good news in the Canadian economy trumps the small news and makes Canada a growing, stable economy that can weather short term fluctuations for a strong and prosperous future.

A Lesson in Customer Service

By Mark Kerzner, President TMG The Mortgage Group

How many times have you heard one of the following?

1.  “It’s our policy.”
2.  “I have to check the policy manual”
3.  “Because I have to”
4.  “I am just going on my break”
5.  “Let me provide you with a website address where you can fill in your comments”

… and the list goes on and on and on. While these are just a sampling of my personal business pet peeves, my blood boils as I simply recall them and write them down.

Let me share a couple of challenges I had with the customer service practices of a car rental agency as a lesson on how not to treat customers.

Last winter I rented a car at the Calgary airport.  After completing the compulsory paperwork the rental agent handed me my keys.  To my surprise there were three identical keys on the key chain.  Over the past few years I have become a personal fan of the keyless car starter if for no other reason than to reduce the bulk of what I have to carry around. I was travelling on my own, so I said I would just take one of the keys, asked that they keep the other two. They refused. The reason: because I have to take them all.

I didn’t let it go quite that easily and tried to reason. I said, “If I happen to lose the keys, I would lose all of them if I had three with me on the single key chain. At least if you have the spare you could help me out.”  It didn’t work.  At that point I simply didn’t have the energy to continue and went on my way.



A few months later I had the exact same experience. Knowing where this was likely going to end I decided to circumvent the conversation by asking how I could get feedback to a decision maker so that they would have the opportunity – yes, I do believe it was an opportunity -- to hear feedback directly from a customer. The rental clerk said she could provide me with the contact information for the owner of the franchise and I could give my feedback directly to them. I was happy with this outcome until I got the “business card” of the franchise owner. (See below)



Despite my frustration at receiving a form email alias rather than contact for an accountable human being, I decided to follow through with the feedback form and went to the main home page of the company to provide it.  By the time I was ready to submit I had some additional feedback as well. The car that I was given was dirty inside and out. I wrote up a nice, long note, and went to submit it when the system bounced me out. Nothing I wrote was saved and I would have had to rewrite it all again.  Which I did not do.

By the way, I was not able to submit feedback to the survey URL provided from the rental agent. There was no room for feedback and I would have had to provide the digital Rental Record number to complete the survey.  In the end the car rental company never had the opportunity to hear my feedback and lost my future business.

I guess what I was hoping for was an opportunity to help empower the client service people so that they could remove the above excuses from their vocabularies. 

As mortgage brokers, we know our business is evolving and has become more competitive.  Our clients are asking us for more than they did just a few years ago. Many of our clients are better educated about finances and mortgages when they speak with us. They have already done research online or with their personal bankers.  This is actually a good thing for both the client and us. 

As problem solvers we ensure clients have the best product for their unique circumstances.  But it’s also about being there with answers and not just standard phrases such as “those are the lenders’ rules”. We owe it to our clients to explain why policies are what they are. This means we must be more diligent about knowing our lenders, their products, and the policies. We need to connect with underwriters and BDMs to makes sure of the varying conditions and be informed with recent changes.

It also means keeping in regular contact with clients to keep them informed of what’s happening in the industry and how those changes impacts them. And, if there is a complaint, then we need to listen to what they’re saying and find ways to continually improve our level of customer service.