Mortgage War in Canada: What Homeowners Need to Know

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Canadian homeowners may soon face a “mortgage war” as banks compete for business. With interest rates falling and big changes ahead, this battle could benefit consumers. Here’s everything you need to know.

Why Competition Among Banks Is Heating Up

The Canadian banking sector is experiencing unprecedented dynamics. RBC Capital Markets has highlighted several factors driving this competition, including:

  • TD Bank’s Growth Challenges: Restrictions on its U.S. operations have pushed it to focus on the Canadian market.
  • Upcoming Open Banking Systems: They will let Canadians share financial data more easily. This will increase competition among banks for long-term customers.

Banks face declining loan growth in several categories. Mortgages are now critical for profit.

How Mortgage Renewals Could Shape the Market

A Surge in Renewals

About 55% of Canadian mortgages expire within two years. 85% will expire within three years. Borrowers renewing loans may face higher payments despite recent rate cuts. This is prompting many to shop for better deals.

Discounted Rates Are Already in Play

Banks are reportedly offering big discounts, even in renewal letters, to retain customers. As consumers become more financially savvy, they are expected to scrutinize their options and demand competitive rates.

Open Banking and Its Impact on Mortgage Strategies

With open banking anticipated to arrive within three to five years, Canadian banks are strategizing to lock in customers before the market becomes more accessible. Analysts suggest that lower long-term mortgage rates could boost banks’ customer loyalty in a more competitive future.

Winners and Losers in a Mortgage War

Banks are Best Positioned to Compete

RBC and similar banks can withstand tough competition. They have large mortgage portfolios and strong deposits. They may even gain market share as other banks struggle.

Banks Facing Higher Risks

Analysts have flagged BMO, Scotiabank, and CIBC due to their potential vulnerabilities. These banks risk losing customers while grappling with narrower profit margins on mortgages.

TD’s Potential for Aggression

TD Bank is well-capitalized despite recent challenges. It may be incentivized to engage in fierce competition. Analysts believe TD may focus on attracting high-value customers who are likely to use multiple financial services.

What Homeowners Should Do Now

1. Compare Renewal Offers

Don’t settle for the first offer you receive. With competition intensifying, banks are more willing to negotiate.

2. Seek Expert Advice

Consult mortgage brokers. They can secure the best deals for you in a competitive market.

3. Keep an Eye on Long-Term Trends

Consider the effects of open banking on your future mortgage options. Opting for a long-term fixed-rate mortgage could provide stability in an evolving market.

The Bottom Line

The “mortgage war” in Canada could benefit homeowners. It may lower rates and increase options. With banks competing for market share, it’s a good time for borrowers. They should explore their options, negotiate hard, and get good terms.

Stay informed. Compare offers. Use expert advice to thrive in today’s competitive Canadian banking era.

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Good news on mortgage insurance changes

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Recently I wrote a blog post regarding an announced change to CMHC’s mortgage qualification guidelines that were potentially damaging to the real estate market and to buyers looking to get into the real estate market.  It would have also resulted in higher rates for many homeowners looking to renew or refinance their mortgages.

In that email, I had mentioned that the effect of these policy changes would depend on what the other mortgage insurers would do.  At that time, I was not particularly optimistic that they would maintain the current policies, as the government has an influence on their policy decisions.  However, they have since confirmed that they will maintain the policies as they are.

As a result of these announcements, the negative effects of CMHC’s decisions have been largely mitigated, at least for the time being.  It is not inconceivable that the other insurers (Genworth and Canada Guaranty) could change their policies in the future.

The effect of these events will be that CMHC will largely become a minor player in the mortgage insurance space, and I expect that the market will continue to be largely unaffected by those changes from CMHC.  I do not know or foresee any other changes in how it will affect business at this time.

If you have any questions, please feel free to follow up with me.

New CMHC mortgage rule changes impact non-wealthy borrowers

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CMHC has announced new mortgage rule changes that will come into effect on July 1.  Here are the changes:

  1. They are discontinuing the “Flex-down” mortgage product. This program is not being used very often, but it now disqualifies you from using borrowed money (aka line of credit) to use as a down-payment to purchase a home.
  2. The minimum beacon score required to qualify for a mortgage with less than 20% down will increase from 600 to 680.
  3. The debt servicing ratios for borrowers to qualify for a mortgage will be changed.  The gross debt service ratio (GDS) will decrease from 39% to 35%, and the total debt service ratio (TDS) will decrease from 44% to 42%.
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CBC: Chartered bank charges $30,000 mortgage penalty to woman forced to sell home due to pandemic

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I was reading through the news yesterday when I came across this article about mortgage penalties that chartered banks are charging their mortgage clients to break their mortgage. This case was a TD mortgage. However, they also mentioned another example in the article that was a CIBC mortgage.

I have written about this and told my clients about it many times before. Have a look at my Mortgage broker vs bank article for more information about this and other issues that can cost you more money by working with a bank instead of a mortgage broker.

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How does the COVID-19 epidemic affect your mortgage

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With the COVID-19 pandemic reaching its second week of interrupting our regular daily lives, there have been increasing questions in the wake of business closures and layoffs about how mortgage companies will face the significant disruption to the lives home owners.

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COVID-19 update

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The news of the COVID-19 pandemic weighs heavily on all of us, from the public in general, to my mortgage clients, my brokers and to ourselves and our families.

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What line of credit mortgage means and how it can be beneficial for you

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You can experience unexpected expenses in your life. You may need money for maintenance or to complete a home project. In such cases, you need to access the assistance of a trusted financial partner who can offer the right suggestion to get you out of the financial need. Canada Innovative Financial is one such mortgage service that offers you timely assistance to manage your financial difficulties with ease. Mortgage brokers can offer you a line of credit mortgage that is better than a regular unsecured loan. You can access money on demand for a set period. Line of credit mortgages offer you flexibility.  You can borrow the money, pay it back, and repeat the process as necessary. When you access the assistance from the best mortgage experts in Canada, you can experience the following benefits with a line of credit:

Access To Instant Cash

You are gain access to credit immediately as required. You never have to wait a long time for processing. Without a delay in getting the funding, you can manage your financial needs without undue stress.

Lower Interest Rate

When you access the line of credit loan from the financial experts like Canada Innovative Financial, the interest rates are low. You pay less interest in this type of loan compared to others. Another important feature is that you pay interest only for the amount you use and not the entire amount available to you. The less expensive loans help you deal with your financial difficulties without the fear of huge interest charges.

Tax-Deductible Interest

The line of credit loan can be tax-deductible if you are borrowing for the purposes of a qualifying investment. So, when you pay the interest, you can add your income tax savings. You need to talk to your tax advisor for more details.

Use Funds for Any Purpose

When you take a line of credit mortgage, it is not limited to buying or completing projects for your home. You can use it for any purpose that requires immediate financial attention. If you have a secure job and can meet your financial obligations, and enough equity in your home, you have a good chance of approval.

To access the advantages offered, you need the assistance of the best mortgage broker like Canada Innovative Financial. The financial experts update you with the market changes and ensure you get the best deals without any hassles. Click on bc-mortgage-broker.ca to get assistance from experts to manage your financial problem with ease.

GOOD NEWS REGARDING OSFI RULE CHANGES

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This is just a quick note to let viewers know that IF you are one of the people with 20% or more down-payment and are in a position that the new OSFI rule changes affect your pre-qualification, that I can extend the