Survey Shows Consumers Satisfied with their Mortgage

A recent survey conducted by the Mortgage Brokers Association of BC (MBABC) confirms the increasing acceptance of mortgage brokers as a source for financing. Here are some of the findings of the study:

1. 91% of consumers were satisfied with the services provided by mortgage brokers
2. Keys reasons for using a mortgage broker include: General satisfaction, good competitive rates, simple/no hassle, helpful and accommodating. Mortgage customers placed value in the research provided by the broker.
3. 86% of consumers felt that mortgage broker services were valuable in arranging a mortgage
4. 69% of BC mortgage consumers would consider using a mortgage broker. Of those who have already used mortgage brokers, 96% said that they intend to return using a mortgage broker.
5. Mortgage brokers customers would typically be younger compared to customers who would go direct to their bank.

The study was designed to understand awareness, usage and opinions of mortgage brokers in British Columbia. A total of 350 random surveys were completed between Oct 18 to Nov 1, 2007.

Forecasts from the Major Banks Still Point to Lower Rates

The Bank of Canada has already cut their overnight rate by 1.5% over the past 6 months. Are the interest rate cuts over? Economists at the major banks don’t seem to think so. Many still think that the Bank may still drop interest rates by another 1/4%. This time around, however, the expectation is that the rate drop will not happen immediately.

Here’s what the economists are saying:

1. TD Canada Trust – “we expect the Bank to follow the lead of the Fed and remain on hold for the next two meetings before resuming their easing stance in the fourth quarter with two more quarter point cuts and the floor on interest rates at 2.25%” (see TD Economics Weekly Bottom Line dated May 23, 2008)
2. RBC – The Bank of Canada to drop the overnight rate by 1/4 in their July meeting (see RBC’s Financial Markets Monthly for May 2008)
3. CIBC Wood Gundy – “one further quarter-point easing by the Bank of Canada” (see CIBC World Markets Market Call for April 24, 2008)
4. BMO – Rates to 2.75% by 3rd Quarter of 2008 (see BMO’s Canadian Economic Outlook, May 23, 2008)

First National’s Excalibur programme – The Latest Casualty in the Sub-Prime Crisis

On May 15, First National announced that they will no longer be offering their Excalibur programme. Excalibur was an excellent programme targetted to individuals with challenges proving their income. Applicants under this programme would include self-employed individuals and individuals earning partial commissions or earning tips. Many lenders offer self-employed programmes insured by CMHC, Genworth or AIG. Unfortunately, many borrowers cannot fit under these guidelines. For example, if an applicant earned less than 100% commissions, they would not qualify for an insured mortgage. Secondly, individuals who had a significant income from tips could not self-declare this income.

During the past year, the players in the alternative lending market have dwindled. The remaining ones include Wells Fargo, GE Money, Citifinancial, Abode Mortgage and possibly a few others. These leave me to wonder how long the remaining players will stay in this market. With less competition, I expect that these lenders will want to charge a higher rate and possibly be more difficult to deal with.

The lesson to be learned is that these alternative lending programmes can be taken off the market anytime. If you feel you are ready to purchase, you should get yourself evaluated now before the market landscape changes (as it always does).