Qualified To Make Sure You Qualify

General Michelle Foster 20 Jul

If you need open-heart surgery, you want to be sure the doctor in the operating room knows what they’re doing. You want to know they’ve got the professional education, skills and experience to carry out the life-saving procedure. You would expect nothing less from the person handling the biggest financial decision of your life – your mortgage broker.

Though a mortgage broker doesn’t need quite the same qualifications as a heart surgeon, there are still rigorous standards each mortgage professional must meet to do their job. While regulations can vary in each province, mortgage professionals need to be registered with a government body and be licensed to carry out broker activities.

First, each broker must complete a provincially approved course for mortgage brokering. These courses are offered through various colleges and institutions. In Ontario, for instance, after completing the course, aspiring brokers need to be hired by a Financial Services Commission of Ontario licensed brokerage, in which the brokerage applies to the commission for that particular broker’s licence. In B.C. for example, mortgage brokers need to pass a course to be registered with the Financial Institutions Commission, or FICOM, and then update their licence every two years.
Agencies like FICOM have the power to investigate public complaints, hand out fines, and suspend or revoke licences of brokers. “The Registrar of Mortgage Brokers protects the public and enhances mortgage broker industry integrity by enforcing mortgage broker suitability requirements and reducing and preventing market misconduct under the Mortgage Brokers Act and Regulations,” notes the FICOM website.

While Greg Domville, DLC’s vice president of training and business development, noted the course for mortgage brokers is a good foundation, he suggested it’s the background and criminal checks that are most important.
“They make sure you’re a real good person,” he told Our House Magazine. If you’re going to be dealing with someone’s finances, those checks and balances are in place.” Domville added that consumers can take comfort that their mortgage broker has gone through a rigorous screening process before they have any contact with them. Adding the standards in place are good at weeding out people in the industry. He pointed out, at DLC, a mentoring program is in place where franchise owners can monitor and train new brokers to ensure they’re doing all the right things along the way. As Domville noted, there’s a good chance even if you’re dealing with a new broker, they’ll have a lot of experience.

There are a number of online resources available to the public through the varying licensing agencies. Don’t be afraid to ask your mortgage broker about their background, they’ll be more than proud to share with you their qualifications!

Original Post by Jeremy Deutsch, Communications Advisor

 

Bank Of Canada Holds Rates Steady and Continues QE Program

Latest News Michelle Foster 17 Jul

Bank of Canada Holds Target Rate Steady Until Inflation Sustainably Hits 2%

The Bank of Canada under the new governor, Tiff Macklem, wants to be “unusually clear” that interest rates will remain low for a very long time. To do that, they are using “forward guidance”–indicating that they will not raise rates until capacity is absorbed and inflation hits its 2% target on a sustainable basis, which they estimate will take at least two years. As well, they indicate that the risks to their “central” outlook are to the downside, which would extend the period over which interest rates will remain extremely low. The Bank also made it clear that they are not considering negative interest rates. The benchmark interest rate remains at 0.25%, which is deemed to be its the lower bound.

The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds. The provincial and corporate bond purchase programs will continue as announced. The Bank stands ready to adjust its programs if market conditions warrant.

With the benchmark rate at its effective lower bound, the Bank’s quantitative easing is the way it is lowering mid- to longer-term interest rates, reducing the borrowing costs for Canadian households and businesses. The Bank assumes that the virus will be with us for the entire forecast range, which is two years.

The Bank released its new economic forecast in today’s July Monetary Policy Report (MPR). The MPR presents a central scenario for global and Canadian growth rather than the usual economic projections. The central scenario is based on assumptions outlined in the MPR, including that there is no widespread second wave of the virus in Canada or globally.

The Canadian economy is starting to recover as it re-opens from the shutdowns needed to limit the virus spread. With economic activity in the second quarter estimated to have been 15 percent below its level at the end of 2019, this is the most profound decline in economic activity since the Great Depression, but considerably less severe than the worst scenarios presented in the April MPR. Decisive and necessary fiscal and monetary policy actions have supported incomes and kept credit flowing, cushioning the fall and laying the foundation for recovery.

Mincing no words, the MPR acknowledged that the COVID-19 pandemic has caused a “worldwide health-care emergency as well as an economic calamity.” The course of the pandemic is inherently unknowable, and its evolution over time and across regions remains highly uncertain.

In Canada, the number of new COVID-19 cases has fallen sharply from its April high, and the economic recovery has begun in all provinces and territories and across many sectors. Consequently, economic activity is picking up notably as measures to contain the virus are relaxed. The Bank of Canada expects a sharp rebound in economic activity in the reopening phase of the recovery, followed by a more prolonged recuperation phase, which will be uneven across regions and sectors (Figure 1 below). As a result, Canada’s economic output will likely take some time to return to its pre-COVID-19 level. Many workers and businesses can expect to face an extended period of difficulty.

There are early signs that the reopening of businesses and pent-up demand are leading to an initial bounce-back in employment and output. In the central scenario, roughly 40 percent of the collapse in the first half of the year is made up in the third quarter. Subsequently, the Bank expects the economy’s recuperation to slow as the pandemic continues to affect confidence and consumer behaviour and as the economy works through structural challenges. As a result, in the central scenario, real GDP declines by 7.8 percent in 2020 and resumes with growth of 5.1 percent in 2021 and 3.7 percent in 2022. The Bank expects economic slack to persist as the recovery in demand lags that of supply, creating significant disinflationary pressures.

Bottom Line

Governor Macklem said in the press conference that what he wants Canadians to take away from today’s Bank of Canada’s actions is “Canadian interest rates are very low and will remain very low for a very long period”. The reopening of the Canadian economy is well underway. Economic activity hit bottom in April and began expanding in May and accelerated in June. About 1.25 million of the 3.0 million jobs that were lost in March-April, were added in May and June.

Some activities, including motor vehicle sales, have already seen a strong pickup since April. Likewise, housing activity fell sharply during the lockdown but is beginning to recover quickly. In contrast, some of the hardest-hit businesses, such as restaurants, travel and personal care services, have only just started to see improvements in recent weeks and are expected to continue to face significant challenges.

The chart below, from July’s MPR, shows that household spending patterns have shifted since the onset of the pandemic. Some of these shifts might last. In the central scenario, the effects of the downturn and lower immigration hold down housing activity over the next few years. After a near-term boost from pent-up demand, residential investment slowly increases as income and confidence recover.

Dr. Sherry Cooper

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

5+ Year Terms – What To Know

Mortgage Tips Michelle Foster 3 Jul

5-year mortgage terms are by far the most popular option for Canadian homeowners. However, 10-year terms do exist. If you are thinking about signing on for a long-term mortgage, here’s some things to consider.

PROS:

  • Stability. Your mortgage payments will be fixed and not go up for a decade, while theoretically your income and property value should increase over time. Knowing your payment is fixed makes budgeting your finances a lot easier, and if you lock in at a low rate, you get to enjoy that rate for the next 10 years. If you are on a fixed income and know you will be receiving that income for a long time, a 10-year term can provide you with a manageable payment and the peace of mind that you can afford your payments for the foreseeable future.

CONS:

  • Inflexible. The average time a Canadian homeowner spends in their mortgage in 38 months. That means that typically every 3 years or so people are moving, switching their mortgage, getting a divorce, or refinancing. If you are on a fixed mortgage rate, you will be charged an interest differential and pay big bucks to break your mortgage. However, after staying in your mortgage for 5 years, your penalty would convert to a 3-month-interest penalty. But if you think you’ll be breaking your mortgage in the next few years, a 10-year term does not make sense.
  • Expensive. Did you know that 10-year rates are generally higher than 5 year rates? While you may be gambling that rates will be increasing in the next few years and you want to lock that low rate in now, none of us owns that crystal ball to know what rates will do 1 year from now, let alone 10.
  • Lengthy. Do you remember where you were 10 years ago? Chances are your life looks a lot different today than it did back then. If you sign on for a 10-year mortgage today, chances are your financial needs and homeownership needs will change within 10 years, and you’ll end up breaking that mortgage early. 10 years is a long time, and a lot can change.

For some, it can absolutely make sense that they want the stability of a long-term mortgage. But for the majority of Canadians, change is inevitable and your mortgage is likely to change with you. Always talk to your mortgage broker or financial planner about your long-term homeownership goals, and always feel free to reach out to me at any time for more information about mortgage terms.