Uptick In Home Purchases, Say Brokers

February 16, 2011 § Leave a comment

Taken from Mortgage Broker News


Climbing resale housing activity is the result of consumers trying getting a jump on mortgage rule changes being implemented by the federal government in March.

This is backed up by the latest numbers the Canadian Real Estate Association (CREA) that indicated national resale housing activity rose 4.5 per cent in January 2011 compared to the previous month, reaching the highest level since April 2010.

“We have noticed an increase in preapprovals and clients who are actively looking for a home to purchase,” said mortgage broker Paula Roberts of The Roberts Group. “Some of our realtors are working hard to put deals together. This combined with recent interest rates hikes is pushing anyone who is on the fence about purchasing in the spring.”

Roberts says that although her office is noticing an increase in business, clients aren’t panicking. ”We find that most clients who are purchasing are fitting within the new rules. Like the changes last year, they are an adjustment but before long will be second nature and accepted.”

“We anticipated the recent announcement of tighter mortgage regulations, which will come into effect this March, would pull forward sales activity into the first quarter of 2011, particularly in some of Canada’s more expensive housing markets,” said Gregory Klump, CREA’s chief economist.

“It will take some time before the longer term impact of the latest mortgage regulations on the housing market can be known,” said Georges Pahud, CREA’s President. “For that reason, further action shouldn’t be taken until the impact can be measured. In the meantime, if last year can be used as any guide, sales activity may heat up further as we get closer to the date on which tighter mortgage regulations come into effect, especially in some of Canada’s pricier markets”

John Panagakos a mortgage broker with The Mortgage Centre Canada in Toronto has also seen business pick up recently. “I have seen my mortgage business double in January with quite a flurry of calls from clients and realtors,” he said. “I have seen a considerable amount of multiple offers since the [mortgage rules] announcement.

Actual (not seasonally adjusted) national sales activity via the Multiple Listing Service (MLS) Systems of Canadian real estate Boards came in 6.6 per cent below levels in January 2010. This was the smallest year-over-year decline since May 2010.

Will the numbers continue to go up? Some aren’t so sure.

“The growth spurt will likely be short-lived, and come at the expense of future sales. As was the case the last time the federal government made mortgage insurance rules more restrictive, the strength in sales will likely be followed by a short period of weak housing data,” said TD economist Diana Petramala in a statement.


“It’s For Your Own Good”

February 8, 2011 § Leave a comment

I got a call from a new client today in a rather distressed state.

She went to her bank for a pre-approval a few months ago. They gave her a variable rate mortgage at 2.6%. When she put an offer on a house last week the bank’s mortgage representative came back saying “You are now approved at 4% for a 5-year mortgage.”

“Why would the rate change?” She asked.

“I am protecting you. You’re a first time buyer and the variable rate is not good for you. Fixed rates are more stable and I think you should take a fixed rate term.”

Protection? Since when has the bank been in charge of your choices? What happened to giving the pros and cons and weighing the options? As a broker, I do just that and allow the client to choose what they think is best. After all, they have to live with the decision and make the mortgage payments. Not me – nor the mortgage rep. at the bank.

We’ve had two government interventions in the last year where mortgages are concerned. What’s next? Will the banks decide where we should live?

My client is a professional woman with 20% down payment, excellent income and great credit. I think she can make her own decisions.

Don’t let this happen to you. Consult with your broker – they work for you, not the lender.

John Panagakos

Hot Off The CMHC Press

January 31, 2011 § 1 Comment

As a follow up to the last post regarding CMHC’s amortization and HELOC guideline changes, here are some FAQs taken off the CMHC website. The original can be viewed here: http://www.cmhc-schl.gc.ca/en/corp/faq/faq_008.cfm

On January 17, 2010, the Government of Canada announced adjustments to the parameters governing the application of the government’s mortgage loan insurance guarantee.

What are the new mortgage loan insurance requirements?

CMHC will implement the following new measures to all applications for mortgage loan insurance:

Effective March 18, 2011:

  • Reduce the maximum amortization period from 35 to 30 years for new insured mortgages with loan-to-value ratios of more than 80 per cent.
  • Lower the maximum amount Canadians can borrow when refinancing  a 1 – 4 unit owner-occupied property from 90 to 85 per cent of the value of their homes.

Effective April 18, 2011:

  • Mortgage loan insurance will no longer be available for non-amortizing secured home equity lines of credit, or HELOC.

I already have an insured mortgage. How will these changes affect me?

CMHC mortgage insurance is good for the life of the mortgage.Borrowers renewing an insured mortgage will not be affected by these changes. For example, if a borrower had a 40 year amortization and there are 37 years remaining on the mortgage, the mortgage can be renewed with a 37 year amortization, as long as no new funds are being added to the mortgage.

What is required to qualify for an exception to the new parameters?

If the approved lender has documentation of a binding purchase and sale, financing or refinancing agreement and that agreement was dated before March 18, 2011, CMHC will not apply the new parameters, even if the application for insurance is received by CMHC on or after March 18, 2011.

Will a purchase and sale agreement dated prior to March 18, 2011 be considered binding if there are outstanding conditions that have not been fulfilled prior to March 18?

Yes, if the date on the purchase and sale agreement is earlier than March 18, the new parameters will not apply, even if the conditions of the agreement have not been waived.

Will the new refinancing rules allow a borrower with a mortgage above 85 per cent loan-to-value (LTV) to refinance by extending the amortization period?

No. Effective March 18, 2011, borrowers will not be permitted to refinance a mortgage above an  85% loan-to-value, unless the borrower has a binding refinance agreement dated prior to March 18, 2011.

I have a written mortgage pre-approval from a lender, dated before March 18, 2011 with a 35 year amortization. Will I still be eligible for a 35 year amortization if I don’t sign an agreement of purchase and sale until March 18 or later?

No, a mortgage pre-approval is not considered to be a “binding agreement”. You may have a 35 year amortization only if your agreement of purchase and sale is dated before March 18, 2011.

Will the new parameters apply to assignment (“switch” or transfer) of a previously-insured loan from one approved lender to another?

No. As long as the loan amount and amortization period are not increased, the new parameters will not apply to a switch/transfer/assignment of mortgage to a different approved lender.

If I sell my current home and buy another, will the new parameters apply if I transfer the outstanding balance of my CMHC-insured mortgage to the new home?

As long as the outstanding balance of the insured loan, the loan-to-value ratio and the remainder of the amortization period are not increased, the new parameters will not apply when the CMHC mortgage insurance is transferred from one home to another.

What if I need to increase the amount of my insured loan when I sell my current home and buy another?

In this situation the new parameters will apply for any insured loan.

Is it only new Home Equity Lines of Credit (HELOCs) that are affected by the new parameters or existing HELOCs as well?

As of April 18, 2011, CMHC  will no longer offer mortgage loan insurance on non-amortizing lines of credit to approved lenders, such as HELOCs. However, if a HELOC is already CMHC insured then it remains insured for the  life of the mortgage.HELOCs will no longer be insurable as of April 18, 2011. Is there any situation which would quality for an exception (e.g. binding agreement) to allow for these loans to be insured?

No. As of April 18, 2011, non-amortizing lines of credit will not be eligible for mortgage loan insurance. Lenders can continue to offer non-amortizing HELOCs with a loan-to-value ratio up to 80 per cent on an uninsured basis.

Finance Minister Changes Mortgage Lending Guideline

January 27, 2011 § Leave a comment

Effective March 18th, 2011

John Panagakos discussed the Changing Mortgage Guidelines on CTV News Monday, January 17th 2011 with Dana Levenson. To view the interview, join John’s Facebook group by clicking here.

Main Points:

– Reduce the maximum amortization period to 30 years from 35 years for new government backed insured mortgages with loan-to-value ratios of more than 80%.

– Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes.

– Home Equity Lines Of Credit will no longer be CMHC Insured

So what does all this mean for the mortgage consumer?

The average consumer probably won’t notice much impact from these changes. The goal wasn’t to discourage people from buying, but to make sure people that shouldn’t be borrowing aren’t over-extending themselves.

Why did the government make these changes?

The government is trying to encourage responsible borrowing and reduce the total interest payments Canadians pay on their mortgage. The changes are put in place to avoid a US-Style housing market crash, and to promote a stable housing market.

How will it effect the real estate market?

It is likely to spur a flurry of buyers who have been pre-approved based on the 35-year amortization. Expect some bidding wars!

Industry Study Says Mortgage Fears Exaggerated

January 21, 2011 § Leave a comment

A new study released by CAAMP (Canadian Association for Accredited Mortgage Professionals) concludes that very few Canadians face unaffordable increases in mortgage costs and Canadian lending criteria are already tight.

The report entitled, “Revisiting the Canadian Mortgage Market – The Risk is Minimal” states that “lenders and borrowers have been highly prudent in the mortgage market … and a vast majority of borrowers have left themselves considerable room to absorb increases in interest rates.”

The study said 79 per cent of mortgages are fixed rate and mostly for terms of five years or longer, leaving 21 per cent of borrowers with variable rates and more exposure to changes in interest rates. The study was based on about 59,000 mortgage loans (excluding renewals or refinances of existing mortgages) totaling just under $16 billion, which were funded during 2010, which represents about one-quarter of the total mortgage activity.

The study reported that the average gross debt service (GDS) ratio was 19.6 per cent, well below typical lender standards of 32 or 35 per cent used to qualify borrowers. The average total debt service (TDS) was 28.9 per cent, still well below the 45 per cent lender standard.

For fixed rate mortgages the GDS was 22. 5 per cent and the TDS was 32.5 per cent.

According to the report a 2.5 per cent rise in interest rates for variable mortgages would see the average GDS would increase to 24.6 per cent and the average TDS would increase to 33.7 per cent. CAAMP’s research indicates that of the mortgages funded in 2010, only 800 to 950 would exceed the 45 per cent TDS ratio.

For fixed rate mortgages, a one per cent increase in interest rates would increase the average GDS to 22.5 per cent and the average TDS to 32.5 per cent and less than one per cent (1,000 to 1,350) would have TDS ratios of more than 45 per cent.

The Association also found that among the high ratio loans approved in 2010 – with the reduced amortization period (30 years versus the prior 35 year limit), a small minority (about 2 per cent) would have TDS ratios above 45 per cent and those loans would probably not qualify. Some of those consumers would still be able to buy, by buying lower priced homes.

The report cited job loss or reduced income as the main reason for mortgage defaults, saying that “Unaffordable premium increases are a negligible risk factor at present and in the near-to-medium term future.”

A third cause is unaffordable increases in mortgage payments, something that caused difficulty in the U.S. as low introductory rates were replaced by market rates and payments that rose substantially. Stated the report “But this third category of risk is the source of recent concerns about future threats. This study concludes that very few Canadians face unaffordable increases in mortgage costs.”

The Industry Veteran.

January 5, 2011 § Leave a comment

John Panagakos, Principal Broker at The Mortgage Centre (People’s Choice Mortgage Corp.), is an industry veteran with over 20 years experience in mortgage financing.

A noted authority on mortgage and real estate market trends in Toronto, John is recognized for his ability to make sense of the complex web of information surrounding mortgage rate fluctuations and home financing products.

About John:

John is one of the most reputable and widely known names in the mortgage industry. He was one of the first in-branch brokers in Canada with RBC. He set the precedent for mortgage specialists and has always fought for the client. In his tenure, John has funded over a Billion dollars in mortgages.

In 1997 and 1998 John was awarded CMHC’s Top Producer Award. Shortly after this career-high achievement, he moved towards the independent broker channel in 1999.

He garnered a great deal of media attention in 2001 with his purchase of his first investment property at 1 King Street West. The opportunity had sentimental value as his father worked in the former Dominion Bank headquarters for 35 years, and in John’s youth he was the Bank’s messenger boy during the summer.

When asked about his investment, John was quoted in the National Post as saying “This is the Wall Street of Canada. Try to buy something like this in New York. This location, with this price, and with this return on your investment. You can’t do it.”

Ten years later, John’s brokerage, The Mortgage Centre (People’s Choice Mortgage Corp.) is thriving with a high-profile client base. His office is an unofficial banking staple at the corner of Pape and Danforth, with RBC and Scotiabank across the street. He has proudly served the Danforth Community, making home ownership possible for restaurant workers, high networth individuals,  self employed, and anyone else that walks through his office door.


  1. Hawkins, Miranda (March 24th, 2001). “Bullish On Condos” New Homes, National Post.
  2. Goddard, John (October 2nd, 2004). “The view is priceless from site of old bank”  Toronto Star
  3. Metro News (October 7th, 2004). “View At 1 King W. Priceless” Metro
  4. Carrick, Rob (September 24th, 2006). “Interest-only mortgages best left to high rollers, not real home buyers.” The Globe and Mail
  5. Leatherdale, Linda (November 25th, 2007). “Guess Who Pays?” Your Money, Toronto Sun
  6. McLeod, Lori and Carmichael, Kevin (July 10th, 2008). “Ottawa tightens mortgage rules to avoid bubble” Report On Business, The Globe and Mail
  7. McLeod, Lori (July 11th, 2008). “Federal crackdown could spark housing sales” Report On Business, The Globe and Mail
  8. McLeod, Lori (July 31st, 2008) “A zero down mortgage by another name?” Report on Business, the Globe and Mail
  9. Pasternak, James (February 17th, 2010) “Borrow your cash, take your chances” Financial Post
  10. Pasternak, James (February 17th, 2010) “Leveraged investing: real returns and real risks” Financial Post
  11. Belford, Terrance (March 30th, 2010) “Brokers gaining consumer trust” Canwest News Service, Vancouver Sun
  12. Belford, Terrance (March 31st, 2010) “Reverse mortgage a “wonderful windfall” Ottawa Citizen
  13. Belford, Terrance (March 31st, 2010) “Freedom through reverse mortgages” Financial Post
  14. Ladurantaye, Steve (July 19th, 2010) “REAL ESTATE NOTE” The Globe and Mail
  15. Morris, Helen (October 8th, 2010) “Risky type? Try a variable mortgage” National Post, Post Homes



Canadian Mortgage Broker News – Housing more affordable into 2011: RBC

November 30, 2010 § Leave a comment

Canadian Mortgage Broker News – Housing more affordable into 2011: RBC.

It’s becoming more affordable to own a home, according to the Royal Bank of Canada, but the high cost of ownership will continue to keep the market steady and contain price increases.
In its quarterly housing affordability report, RBC said home ownership cost decreased over the summer for the first time in more than a year. This is attributed to low mortgage rates.
But homes were still more expensive than long-term averages in many markets, suggesting “greater than usual tensions exist for Canadian homebuyers.”
“These tensions are unlikely to derail demand for housing in the near term but will act as a restraint on growth in market activity going forward,” said RBC senior economist Robert Hogue.
This is the first time affordability has improved since mid-2009.
The following are provincial highlights from the report:
  • British Columbia: In the third quarter of 2010, affordability in B.C. dropped between 1.8 and five per cent, representing the largest decline since the first quarter of 2009. But the measures remain above long-term averages and poor affordability will weigh down on provincial housing demand in the time ahead.
  • Alberta: Homeownership in Alberta is among the most affordable in Canada both in absolute terms and relative to its historical averages.
  • Saskatchewan: Current market conditions are stretching homebuyers’ budgets. However, those budgets are likely to be boosted from a strong expected rebound in the provincial economy and thus family income this year and next.
  • Manitoba: Lower mortgage rates in the third quarter were particularly helpful in bringing down homeownership costs in the province although some price declines also contributed. Manitoba is one of only two provinces, alongside Alberta, where the measures for all housing types are currently below long-term averages, which will be a supportive factor for demand going forward.
  • Ontario: Existing home sales ended their earlier slide by sustaining three straight gains from August to October. With the market now back in balance, the recent softness in home prices will likely prove to be healthy for 2011.
  • Quebec: Following four consecutive increases, province affordability fell 1.4 to 1.8 per cent. Still, the measures remain close to the pre-downturn peaks and above their long-term average, which will restrain upcoming demand growth.
  • Atlantic: Affordability levels returned to roughly where they were in mid- to late 2009. Overall, housing continues to be quite attractive in Atlantic Canada.
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    John Panagakos, Broker
    Agent Lic #M08001216
    Brokerage Lic #10456
    Principal Broker of People's Choice Mortgage Corp
    An independently owned and operated franchise of The Mortgage Centre Network. All views expressed here are solely those of the author and do not represent The Mortgage Centre Network.

    658 Danforth Avenue, Suite 401
    Toronto, ON M4J 5B9
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