[youtube]http://www.youtube.com/watch?v=vk1usmO_iFc[/youtube]
Thank you for joining me this week. Because of major dips in sales in October, CAAMP as well as Toronto builders increasing pressure on Jim Flagherty to change mortgage rules. Jim probably will not. He has given all indications that he won’t going forward. I do agree with him. Although they have had quite the impact, the recent statistics from the CAAMP survey say that a lot of people are going with lower then 25 year amortization on average. Also, I think we are living in an age of advertising where the importance of budget setting and financial education is so much more important then ever. This is where I can add value added service to my clients. I work with them to purchase a home within their budget and make sure there is enough for emergency funds, future spending and investing. I want to see my clients making that cross from paying more interest to paying more down on principal earlier. Benjamin Tal from CIBC also agrees that markets were slowing already when the initiatives were introduced. What happens when interest rates rise? And they will at somepoint! They still do only need the 5% DP, so until that changes, I am okay with the changes.
This past week we saw the loss of Mark Carney to the Bank of England, I see this as a major loss. He used to work in England when he was an investment Banker at Goldman Sachs. He is the first non British to hold the title since the Bank was established in 1964. His mandate here was to watch over the health of the Canadian Financial system and he has done just that. His other major role was mapping out Canada’s monetary policy and dealing with inflation. Lately I remember him for his chiding of Canadian companies sitting on hordes of money to try to motivate them to expand and spend more money. In some sense this is a good thing for our former head of the Bank of Canada to be closer to the European fiscal crisis. It does benefit us greatly if Europe is financially stable.
Kevin O’Leary’s plain white label 5 year 20/20 prepayment, 25 year amortization, no broker label is not a good product and I am not worried.
A few CMHC stats from last week:
- In total, CMHC booked a whopping 37% less insurance last quarter. That’s 54,435 fewer housing units that were insured in just a 3-month period, quite a drop.
- CMHC High Ratio Refinances have plunged 22% Y/Y.
- Borrowers are paying down their principal at a rate of $60-65 billion a year—which makes room for new insurance.
- CMHC’s average high-ratio mortgage balance is $176,838.
- The nation’s top insurer made $1.16 billion of profit in its first three quarters. It’s made $17 billion over the last decade.
- Year-to-date, its losses on claims are 5% below plan. Its arrears rate is 0.34% and trending lower.
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