Mortgage Brokers Continue Fight for Competition

Sabeena Bubber • March 22, 2017

As you may well be aware, the government has recently made changes to the way mortgages are qualified through the Canadian Mortgage and Housing Corporation (CMHC). In short, these changes have made it more expensive for some of the broker channel lenders to fund mortgages, the increased cost of doing business is then passed on to consumers through higher interest rates. This government intervention has led to an unfair playing field, which means when you consider all your mortgage options, you now have less options than you did before. As an industry, we don't believe this is right, and we've taken our concerns to Ottawa.

Here is an article titled Mortgage Industry Voices Concerns to Ottawa that was published on Canadian Mortgage Trends, a publication of Mortgage Professionals Canada. It provides a highlight of what mortgage brokers are doing to continue the fight for better mortgage products for Canadians.

Mortgage Industry Voices Concerns to Ottawa

A delegation of mortgage industry leaders went to Ottawa this month. Its mission: to educate lawmakers about the implications of the latest mortgage regulations.

The event, organized by Mortgage Professionals Canada, was its first-ever Parliament Hill Advocacy Days. In just over two days, the group participated in more than 30 meetings involving more than 100 members of parliament, senators and senior policy staff.

The association’s core message centred on the economic ramifications of the new policies that came into effect last fall and January.

Face-to-Face Progress

“Many of the MPs could describe stories from their own riding of homebuyers who were affected by these changes,” said Paul Taylor, President of Mortgage Professionals Canada. “Others were less familiar with our issues but were appreciative of us bringing them to their attention. In all cases, we were delivering messaging to support the channel, to support choice and accessibility for the Canadian consumers we all serve day to day…”

Among those who participated in the effort were familiar industry names like Boris Bozic (Merix Financial), Eddy Cocciollo (Mortgage Centre), Jared Dreyer (VERICO Dreyer Group Mortgage Brokers), Claude Girard (Laurentian Bank), Dan Putnam (CLMS), Amanda Roy-Macfarlane (AMBA), Hali Strandlund (Fisgard Asset Management), Michael Wolfe (AMBA) and Dustan Woodhouse (DLC), among others.

The group conveyed to parliamentarians the recommendations that Mortgage Professionals Canada has publicly put forward, including asking the government for a moratorium on further rule changes for the next 12-18 months, as well as revisiting its anti-competitive position on refinancing.

Boris Bozic, CEO of Merix, said one of the key concerns was the new stress test rules and the need for any changes to be applied to all mortgage types (not just insured mortgages), and all financial institutions. “If the government is truly concerned about debt levels being incurred by Canadian homeowners, the stress test should be applied equally,” he said. “This would ensure that Canadian homeowners continue to have choice, and allow Canadian borrowers to benefit from competition.”

Overall, the group was pleased with how their position was received by members of parliament and other government officials.

“Our concerns were heard and appreciated by all the MPs we met with, irrespective of party affiliation,” Bozic said. “They all committed to raising the issue with their colleagues and sharing our recommendations for slight modifications to the new rules imposed on our industry and middle-class Canadians. Time will tell if the Department of Finance will be receptive to the modifications we suggested.”

Dunning Takes on the DoF

Mortgage Professionals Canada’s chief economist Will Dunning also made a submission to the Standing Committee on Finance in which he presented his analysis of the flaws with the government’s changes and the risks they pose.

“The policies announced on October 3 will reduce housing activity and weaken the broader economy,” Dunning said. “Even in the very best of economic times, a policy that will weaken the economy should be undertaken only after thorough discussion.”

He noted that the Trump presidency raises economic risks for Canada, which he argues justifies rescinding the government’s changes to mortgage insurance. Here’s Dunning’s analysis.

The Next Steps

In an update posted on its website, Mortgage Professionals Canada outlined the expected timeline for the Standing Committee on Finance to finalize its report and recommendations for the Minister based on the testimonies it heard concerning the mortgage changes.

The report isn’t expected to be tabled and made public until at least July or August. In the meantime, the association says the industry “needs to remain active in educating MPs, officials, and the Minister of Finance on how these changes will increase interest burdens, obstruct competition and harm local economies across Canada.”

The mortgage industry has another shot at having its voice heard this Wednesday when DLC President Gary Mauris and our own Editor Robert McLister meet with Deputy Bank of Canada Governor Larry Schembri. The Bank of Canada routinely consults with the Department of Finance on housing issues and Schembri aims to better understand our industry’s perspectives on its policy changes. We’ll keep you posted on that meeting.

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Finance Your Home Renovations

By Sabeena Bubber • February 19, 2025

If you’re looking to do some home renovations but don’t have all the cash up front to pay for materials and contractors, here are a few ways to use mortgage financing to bring everything together. Existing Home Owners - Mortgage Refinance Probably the most straightforward solution, if you’re an existing homeowner, would be to access home equity through a mortgage refinance. Depending on the terms of your existing mortgage, a mid-term mortgage refinance might make good financial sense; there’s even a chance of lowering your overall cost of borrowing while adding the cost of the renovations to your mortgage. As your financial situation is unique, it never hurts to have the conversation, run the numbers, and look at your options. Let’s talk! If you're not in a huge rush, it might be worth waiting until your existing term is up for renewal. This is a great time to refinance as you won’t incur a penalty to break your existing mortgage. Now, regardless of when you refinance, mid-term or at renewal, you’re able to access up to 80% of the appraised value of your home, assuming you qualify for the increased mortgage amount. Home Equity Line of Credit Instead of talking with a bank about an unsecured line of credit, if you have significant home equity, a home equity line of credit (HELOC) could be a better option for you. An unsecured line of credit usually comes with a pretty high rate. In contrast, a HELOC uses your home as collateral, allowing the lender to give you considerably more favourable terms. There are several different ways to use a HELOC, so if you’d like to talk more about what this could look like for you, connect anytime! Buying a Property - Purchase Plus Improvements If you’re looking to purchase a property that could use some work, some lenders will allow you to add extra money to your mortgage to cover the cost of renovations. This is called a purchase plus improvements. The key thing to keep in mind is that the renovations must increase the value of the property. There is a process to follow and a lot of details to go over, but we can do this together. So if you’d like to discuss using your mortgage to cover the cost of renovating your home, please connect anytime!

Fixed-Rate or Variable-Rate Mortgage?

By Sabeena Bubber • February 12, 2025

If you're looking to buy a new property, refinance, or renew an existing mortgage, chances are, you're considering either a fixed or variable rate mortgage. Figuring out which one is the best is entirely up to you! So here's some information to help you along the way. Firstly, let's talk about the fixed-rate mortgage as this is most common and most heavily endorsed by the banks. With a fixed-rate mortgage, your interest rate is "fixed" for a certain term, anywhere from 6 months to 10 years, with the typical term being five years. If market rates fluctuate anytime after you sign on the dotted line, your mortgage rate won't change. You're a rock; your rate is set in stone. Typically a fixed-rate mortgage has a higher rate than a variable. Alternatively, a variable rate is not set in stone; instead, it fluctuates with the market. The variable rate is a component (either plus or minus) to the prime rate. So if the prime rate (set by the government and banks) is 2.45% and the current variable rate is Prime minus .45%, your effective rate would be 2%. If three months after you sign your mortgage documents, the prime rate goes up by .25%, your rate would then move to 2.25%. Typically, variable rates come with a five-year term, although some lenders allow you to go with a shorter term. At first glance, the fixed-rate mortgage seems to be the safe bet, while the variable-rate mortgage appears to be the wild card. However, this might not be the case. Here's the problem, what this doesn't account for is the fact that a fixed-rate mortgage and a variable-rate mortgage have two very different ways of calculating the penalty should you need to break your mortgage. If you decide to break your variable rate mortgage, regardless of how much you have left on your term, you will end up owing three months interest, which works out to roughly two to two and a half payments. Easy to calculate and not that bad. With a fixed-rate mortgage, you will pay the greater of either three months interest or what is called an interest rate differential (IRD) penalty. As every lender calculates their IRD penalty differently, and that calculation is based on market fluctuations, the contract rate at the time you signed your mortgage, the discount they provided you at that time, and the remaining time left on your term, there is no way to guess what that penalty will be. However, with that said, if you end up paying an IRD, it won't be pleasant. If you've ever heard horror stories of banks charging outrageous penalties to break a mortgage, this is an interest rate differential. It's not uncommon to see penalties of 10x the amount for a fixed-rate mortgage compared to a variable-rate mortgage or up to 4.5% of the outstanding mortgage balance. So here's a simple comparison. A fixed-rate mortgage has a higher initial payment than a variable-rate mortgage but remains stable throughout your term. The penalty for breaking a fixed-rate mortgage is unpredictable and can be upwards of 4.5% of the outstanding mortgage balance. A variable-rate mortgage has a lower initial payment than a fixed-rate mortgage but fluctuates with prime throughout your term. The penalty for breaking a variable-rate mortgage is predictable at 3 months interest which equals roughly two and a half payments. The goal of any mortgage should be to pay the least amount of money back to the lender. This is called lowering your overall cost of borrowing. While a fixed-rate mortgage provides you with a more stable payment, the variable rate does a better job of accommodating when "life happens." If you’ve got questions, connect anytime. It would be a pleasure to work through the options together.

Mortgage Advice to Help You Through a Separation

By Sabeena Bubber • February 5, 2025

With the latest stats claiming that about half of marriages end in divorce and with around three-quarters of Canadians being homeowners, it’s important to know how to handle your mortgage if you decide to separate. Here’s a quick list of things to consider. Keep making your payments. A mortgage is a legally binding contract between you and the lender. It doesn’t take marriage into account. If your name appears on the mortgage, you're responsible for making sure the regular payments are made. A marital breakdown does not give you an excuse not to make your mortgage payments. If, during your marriage, you've relied on your spouse to make the mortgage payments and you aren’t certain payments are being made after separating, it's in your best interest to contact the lender directly to verify your mortgage is being paid. If payments aren't being made, it could affect your credit score or worse; the lender could start foreclosure proceedings. There is always a financial cost to break your mortgage. When working through how to split your finances, you decided to either refinance your mortgage, remove someone from the title, or sell the property, keep in mind that you will incur legal costs. If you’re in the middle of a term, the penalty for breaking your mortgage might be significant, especially if you have a fixed-rate mortgage. It’s certainly worth contacting your mortgage lender directly to verify the cost of breaking your mortgage. Having that information accessible when writing out your separation agreement will provide increased clarity. Listing your marital status as separated or divorced. When completing a mortgage application for securing new mortgage financing, when you list your marital status as separated or divorced, you can expect that a lender will want to see your legal separation agreement or your divorce papers. The lender wants to make sure you aren’t responsible for support payments. So if you haven’t finalized the paperwork, expect delays in securing mortgage financing. It could be harder to qualify for a new mortgage. With the separation of assets also comes the separation of incomes. If you qualified for your existing mortgage on a double income, you might find it hard to maintain the same quality of lifestyle post-separation. This is where careful planning comes in. Working closely with your independent mortgage professional will ensure you understand exactly where you stand. You’ll want to put together a plan for how to handle the mortgage on the matrimonial home. Purchasing the matrimonial home from your ex. There are special considerations given to people going through a separation to buy out the matrimonial home. Instead of looking at the transaction like a refinance where you can only borrow up to 80% of the property’s value, lenders will consider one spouse buying out the other up to a 95% loan to value ratio. This comes in handy when dividing assets and liabilities. Navigating the ins and outs of mortgage financing isn’t something you have to do alone. If you're going through a separation and you’d like to discuss all your mortgage options, please connect anytime. It would be a pleasure to walk you through the process.