17 replies to this topic

[mcmusty]

xTbz9QuW218

What do you think will happen at the $600B cap?

[pherthyl]

What do you think will happen at the $600B cap?

The $85 billion cap for this year was not changed, and the cap was known in the industry before it was publicized last week.
The $600 billion total insurance in force cap was NOT put in place in the 1990s.
Current levels of $562 billion and a yearly cap of $85 billion does not mean that we would exceed the cap. There are always mortgages that are paid off and are removed from the insurance in force.
The CMHC has effectively curtailed all bulk insurance (insurance for low ratio mortgages) and so the $600billion cap is not really a problem. They can meet the demands of high ratio borrowers without really increasing their insurance in force (the new insurance is offset by mortgages being paid off).

Here is a more informed analysis of the situation: http://www.canadianm...bs-ceiling.html
It's quite unlikely this will lead to anything close to a 0.25-0.75% increase in rates. There might be a small increase, but nothing major.

[wisevictoria]

I don't understand the title of the video. Lender of Last Resort? Is this the appropriate forum for such self-promotion?

[North Shore]

I have a hard time thinking that a .25% to .75% rate increase would really affect things..
using a base rate of 3.5%, on a principal of $400k, and a 25 year amortization, you end up paying $997.82 semi-monthly. Boosting the rate to 4.5%, that payment goes up to $1105.92. Will that break the bank for most people? I would hope not?

And, don't people take rate increases into mind when they calculate things out? Granted, I purchased my house nearly 10 years ago now, so prices were still reasonable, but I made my calculations on what I could afford based on a 20 year amortization, and doubled the interest rate. Perhaps I'm too conservative?

[mcmusty]

I have a hard time thinking that a .25% to .75% rate increase would really affect things..
using a base rate of 3.5%, on a principal of $400k, and a 25 year amortization, you end up paying $997.82 semi-monthly. Boosting the rate to 4.5%, that payment goes up to $1105.92. Will that break the bank for most people? I would hope not?

And, don't people take rate increases into mind when they calculate things out? Granted, I purchased my house nearly 10 years ago now, so prices were still reasonable, but I made my calculations on what I could afford based on a 20 year amortization, and doubled the interest rate. Perhaps I'm too conservative?

A .25 - .75% increase in interest rates likely wouldn't impact the ability for Canadians to gain financing for their homes. This is just a small contributor to the increasing list of items that will cause interest rates to rise in the next few years, as the Canadian government tapers the Real Estate market off life-support. We can't keep this up forever.

Take the example of purchasing a $300,000 home today @ 3.00%. Suppose we saw a huge surge in interest rates, and they were sitting at 10% in 2023. By that time, your house value would drop significantly, and you would of paid off a large portion of your mortgage. Let's say you only need to re-finance $100,00 at 10.00%.

Despite the hypothetical 7% increase in interest rates, you would be paying about $1,000 less on your monthly payment.

So infact, homes could become more affordable when home prices fall due to the high cost of capital.

[mcmusty]

I don't understand the title of the video. Lender of Last Resort? Is this the appropriate forum for such self-promotion?

Hi wisevictoria,

Lender of Last Resort is essentially the Canadian tax-payer. We are on the hook if there is a huge volume of mortgages that default. The CMHC is a pro big bank program that allows banks to 'securitize' large amount of Canadian mortgages and sell them off to investors.

Since these MBS / ABS financial assets are a significant portion of a banks revenue, the Canadian Gov't is acting as a Lender of Last resort. A private insurer wouldn't be able to insure $600B in mortgages effectively. Look at what happened to AIG in the United States.

I apologize if you saw the video as shameless self promotion. I am a local Realtor, but I hope the v-logs I create offer some valuable content to those interested in Real Estate & the general economy.

[wisevictoria]

I apologize if you saw the video as shameless self promotion. I am a local Realtor, but I hope the v-logs I create offer some valuable content to those interested in Real Estate & the general economy.

Hey, make all the videos you want. Great way to promote yourself. Just don't think that this should become an advertising forum.

Put em on your website or facebook page.

[LJ]

A .25 - .75% increase in interest rates likely wouldn't impact the ability for Canadians to gain financing for their homes. This is just a small contributor to the increasing list of items that will cause interest rates to rise in the next few years, as the Canadian government tapers the Real Estate market off life-support. We can't keep this up forever.

Take the example of purchasing a $300,000 home today @ 3.00%. Suppose we saw a huge surge in interest rates, and they were sitting at 10% in 2023. By that time, your house value would drop significantly, and you would of paid off a large portion of your mortgage. Let's say you only need to re-finance $100,00 at 10.00%.

Despite the hypothetical 7% increase in interest rates, you would be paying about $1,000 less on your monthly payment.

So infact, homes could become more affordable when home prices fall due to the high cost of capital.

OK I cut you a lot of slack the first time you posted mis-info here, but you seriously need to do some research, unless I'm not understanding what you are saying.

If you buy a house and have a $300,000 mortgage on it @ 3% you will be paying about $1420 per month on a 25 year amortization. At the end of a 10 year term, you will still owe over $205000 on that mortgage. It doesn't matter what the value of the house is, you still owe the original amount. On $205,000 @ 10% over the remaining 15 years of amortization that payment now becomes over $2170 per month which is over $700 more per month.

Also it is not a 7% increase in rate, think in 100's.

[Szeven]

I thought Realtors were supposed to assist people in buying and selling homes, not scare them into NOT buying a home. I am so confused what the point of these videos are. Scare me into selling and listing with you?

[Szeven]

I also was under the impression people have to qualify at posted rates, giving a built in cushion of at least 1% on rate movement,

[MarkoJ]

I thought Realtors were supposed to assist people in buying and selling homes, not scare them into NOT buying a home. I am so confused what the point of these videos are. Scare me into selling and listing with you?

In order for REALTORS® to move towards being recognized as true professionals I think it will be important to educate accordingly even if it means losing a buyer, or seller, here and there; however, at the end of the day I think credibility is more important than an occasional lose. It isn't always a great time to buy, neither is it always a great time to sell, contrary to what some in the industry may say. Renting also makes sense in many scenarios. In fact, currently I rent my principal residence (that I could easily afford to buy).

I don't know about Dustin but when I go on HHV or VV to blog/comment I am not trying to talk anyone into buying or selling with me. I give my honest 2 cents and sometimes it results in some business for me.

[Szeven]

In order for REALTORS® to move towards being recognized as true professionals I think it will be important to educate accordingly even if it means losing a buyer, or seller, here and there; however, at the end of the day I think credibility is more important than an occasional lose.

I know I shouldn't continue to harp on this issue, but I do think in order for REALTORS®™© to be recognized as true professionals they need to educate themselves! A couple of anecdotes:

A friend who has been a CGA for 6 years at a place downtown still very rarely meets with clients. The head CA owner does, and he does the grunt work.

A friend at a reputable Financial Advisory firm for 6 years more recently just started meeting with clients after learning for 5 years doing client contact, paperwork, back office, course and continuing education etc.

At my teenage job as a meatcutter, I wasn't allowed to trim the Beef Tenderloins for 2 years! They didn't want me screwing it up because the customers had expectations that they weren't confident I could meet.

Now contrast that with this thread. It goes back to my other post in another thread. Real professionals need to be groomed by established mentors before they go public. You don't take the CSC and start selling investments, and I don't see how taking a Realty course for a year and $1000 means you should start selling homes.

[pherthyl]

I know I shouldn't continue to harp on this issue, but I do think in order for REALTORS®™© to be recognized as true professionals they need to educate themselves! A couple of anecdotes:

A friend who has been a CGA for 6 years at a place downtown still very rarely meets with clients. The head CA owner does, and he does the grunt work.

A friend at a reputable Financial Advisory firm for 6 years more recently just started meeting with clients after learning for 5 years doing client contact, paperwork, back office, course and continuing education etc.

At my teenage job as a meatcutter, I wasn't allowed to trim the Beef Tenderloins for 2 years! They didn't want me screwing it up because the customers had expectations that they weren't confident I could meet.

Now contrast that with this thread. It goes back to my other post in another thread. Real professionals need to be groomed by established mentors before they go public. You don't take the CSC and start selling investments, and I don't see how taking a Realty course for a year and $1000 means you should start selling homes.

I think instead of trying to bring realtors up to that level they should just drop it and leave it as the sales job it is. You don't see used car salesmen calling themselves AUTOMOSERS® or anything silly like that.

The professional that protects you in a real estate purchase is a lawyer. Everyone else is in sales.

That doesn't mean individual realtors can't act in highly professional ways. I agree with Marko that the first step is not towing the party line that it is always a good time to buy and the market is always "picking up" or "balanced".

[Bob Fugger]

I am a local Realtor, but I hope the v-logs I create offer some valuable content to those interested in Real Estate & the general economy.

Keep hoping.

[MarkoJ]

I know I shouldn't continue to harp on this issue, but I do think in order for REALTORS®™© to be recognized as true professionals they need to educate themselves! A couple of anecdotes:

A friend who has been a CGA for 6 years at a place downtown still very rarely meets with clients. The head CA owner does, and he does the grunt work.

A friend at a reputable Financial Advisory firm for 6 years more recently just started meeting with clients after learning for 5 years doing client contact, paperwork, back office, course and continuing education etc.

At my teenage job as a meatcutter, I wasn't allowed to trim the Beef Tenderloins for 2 years! They didn't want me screwing it up because the customers had expectations that they weren't confident I could meet.

Now contrast that with this thread. It goes back to my other post in another thread. Real professionals need to be groomed by established mentors before they go public. You don't take the CSC and start selling investments, and I don't see how taking a Realty course for a year and $1000 means you should start selling homes.

A year? I had an engineering friend pick it off in 3 or 4 weeks and passed the exam with no problems.

If reasonably intelligent person can do it in 5-6 weeks if they aren't working.

I agree with you in that the barrier to entry is poor; however, I cannot control that but I can try to educate myself after the fact to better serve my clients.

[MarkoJ]

The professional that protects you in a real estate purchase is a lawyer. Everyone else is in sales.

I disagree with this as 95% or more of the time the real estate lawyer is not reviewing the conditional offer; he or she usually gets the file once it goes unconditional and prepares that paperwork for conveyancing. For example, if the inspector and REALTOR® forgot to inform you that the property should be scanned for an oil tank you are out of luck (other than litigation if a tank was found).

A good REALTOR® can add value if they are aware of current issues and acting for the best interests of his or her clients.

However, my feeling is that the compensation for the added value is a little on the high side.

[pherthyl]

I disagree with this as 95% or more of the time the real estate lawyer is not reviewing the conditional offer; he or she usually gets the file once it goes unconditional and prepares that paperwork for conveyancing. For example, if the inspector and REALTOR® forgot to inform you that the property should be scanned for an oil tank you are out of luck (other than litigation if a tank was found).

A good REALTOR® can add value if they are aware of current issues and acting for the best interests of his or her clients.

However, my feeling is that the compensation for the added value is a little on the high side.

Well I had my lawyer review the offer before submitting.
Yes a realtor can add value in that they can educate you quickly. Although out of all the ones I've met at open houses, a striking number seemed to have not the first clue about their own business. The key as with anything else is finding a good one. I wonder what kinds of metrics (aside from number of sales) would be good to evaluate the quality of a realtor?

[MarkoJ]

I wonder what kinds of metrics (aside from number of sales) would be good to evaluate the quality of a realtor?

Good question.....sales numbers don't always equate to quality. I guess sit down and interview 3 or 4 and ask them a bunch of difficult questions?