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2006: The year of Mortgage Evolution
2006 introduced a wave of new mortgage options for homebuyers; 2007
mortgage market will remain robust
TORONTO, Dec. 21 /- It was a year of the never-before-seen mortgage
- fuelled by rising competition among mortgage lenders, 2006 saw a wave of new
mortgage products in Canada including 40-year mortgages, interest-only
mortgages, and 100 per cent loan-to-value mortgage financing. And, according
to Invis, all of this activity will contribute to a vigorous mortgage market
in 2007.
"There's a smorgasbord of new options for homebuyers that if used wisely,
can translate into increased buying power in the face of rising real estate
prices," says Andrew Moor, president and CEO of Invis, Canada's largest
mortgage brokerage firm.
Homebuyers enjoyed a relatively stable mortgage rate environment in 2006
- the prime rate began the year at 5.00%, and was increased by the Bank of
Canada by 0.25% in January, March, April and May, to 6.00% with the cost of a
variable rate mortgage rising in step. And even those increases were offset by
heightened competition among mortgage lenders, whose rivalry led to increased
discounts off prime rate - up to 0.95 per cent in some cases. Posted rates for
the popular five-year fixed mortgage were 6.30% at the beginning of the year,
and ended the year at around 6.45%. Meanwhile, discounted rates on new
five-year fixed mortgages available through a mortgage broker were generally
around 4.99% at the start of 2006, peaking at around 5.54% in August, and
standing at 5.09% at year's end, depending in part on a borrower's credit
rating. Currently, this 5.09% rate for the discounted five-year fixed mortgage
is similar to a the rate for a competitive variable mortgage at prime minus
0.9%, or 5.10%.
In 2006, competition among mortgage insurers also intensified. With more
insurers entering the market, risk assessments loosened making it easier for
borrowers to qualify for financing.
"The mortgage landscape gets more complicated every day and consumers can
really benefit from the guidance of a mortgage expert who can sort through the
mounting options," says Audrey Wamboldt, Regional Business Leader with Invis
in Halifax. "Increasingly, a mortgage broker is the only way to access some of
these products, and as such, they've also become the most knowledgeable."
Invis expects additional lenders to enter the alternative mortgage market
in 2007. The alternative market serves homebuyers who have slightly lower
credit scores and are not usually approved for financing through traditional
banking channels.
"As we head into the New Year, there's room for rates on new fixed-rate
mortgages to drop, based on trends in the bond markets. Those trends could
easily change, so consumers thinking of borrowing should be in touch with a
mortgage broker," adds Moor. "We believe the Canadian mortgage market will
continue to be robust in 2007 and will not suffer in the same way as the U.S.
market. Strong price appreciation in certain markets - particularly in Alberta
- has led to increased home equity. Homeowners may want to consider
refinancing their mortgage as a means of reducing or eliminating
higher-interest consumer debt such as credit cards or car loans." |
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