Canadians go for brokers

Great post here; a topic dear to my heart

Once ‘lenders of last resort,’ they’re now strongly in demand

The percentage of Canadians using mortgage brokers to buy their homes has increased significantly — especially in B.C. and Alberta — according to a new report.

The Deloitte report, Winning Strategies in the Brokered Mortgage Marketplace, said that in the 1990s mortgage brokers numbered in the hundreds and were “lenders of last resort” for borrowers unable to obtain a mortgage directly from a bank or credit union.

“Over the last decade, an increasing number of viable options for borrowers have surfaced,” said the report, released Wednesday.

“In addition to branch-based lenders, borrowers can now consult with the banks’ own mobile mortgage specialists as well as independent brokers — while also conducting their own research online.

“In this changing and information-abundant environment, the mortgage-brokerage channel has emerged as a legitimate competitor.”

The report said share of origination transactions increased from 26 per cent in 2003 to 38 per cent in 2009 as mortgage brokers made particular inroads with first-time homebuyers and young Canadians.

“Overall, this channel has evolved from a fragmented ‘lender of last resort’ network to a legitimate option for prime customers.”

Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, said the organization will be releasing its annual report in early November.

“Mortgage-broker share overall is about 25 per cent of the market,” said Murphy. “It’s higher for first-time buyers. First-time buyers are more likely to use a mortgage broker than those that renew their mortgage.

“The percentage of mortgage brokers is higher in Alberta and British Columbia overall.”

Murphy said the percentage of mortgage brokers has grown significantly although in recent years it has levelled off.

“We had big growth in the 1990s and in the first part of this decade,” said Murphy.

“Brokers were very much seen in many ways 20 years ago as the lenders of last resort. So you couldn’t get a mortgage through a credit union or ATB or the bank and you went to a broker. [Brokers] usually charged the higher rate. Usually charged you a fee in order to get a mortgage.

“That’s changed dramatically in the last 10 to 15 years. Brokers are seen in a much more positive light. They shop the market. They have access to different lenders including banks and credit unions and they really work on behalf of the customer,” Murphy said.

Real estate association members ratify deal giving consumers wider choice

ST. JOHN’S, N.L. — Delegates from Canada’s 101 local real estate boards Sunday ratified a deal worked out by the federal Competition Bureau and the real-estate industry.

It would allow consumers to choose what services they want from their agent when selling their homes, and to pay for only those services.

The deal was reached after months of negotiations between the competition watchdog and the Canadian Real Estate Association that represents some 100,000 realtors.

The bureau chief was quick to praise the ratification.

“I am pleased that CREA members have voted in favour of this agreement,” said commissioner Melanie Aitken. “For Canadian homeowners, it ensures that they will have the freedom to choose which services they want from a real-estate agent and to pay for only those services.”

Association president Georges Pahud also welcomed the vote.

“We are pleased that after careful consideration and reflection, real-estate boards and associations from across Canada have endorsed the agreement,” Pahud said.

Under the deal, the Canadian Real Estate Association has agreed that its rules as well as those of its members should not deny or discriminate against realtors wishing to offer mere posting services.

The Competition Bureau has been pressuring the association to change rules it calls “anti-competitive” on behalf of realtors and consumers who want more flexible services.

“This 10-year agreement brings a close to a long process of negotiation with the Competition Bureau and will allow CREA and realtors to do what they do best — help people with the biggest financial decision of their lives, buying and selling a home in these challenging economic times,” said Pahud.

But experts say the doors to lower-cost services won’t be thrust open overnight because the industry is dominated by traditional agents who are reluctant to change their business models.

Realtors currently operate on the principle that selling agents will split the standard five per cent commission with the buyer’s agent.

Canadian Real Estate Association members voted on amendments to the organization’s rules in March that were expected to appease the Competition Bureau, but the watchdog took issue with a clause in the amendments that said the changes are subject to the rules of local boards.

The watchdog said it would settle for nothing less than a legally binding agreement so that the association couldn’t change its rules back on a whim.

With Sunday’s ratification, the deal will be legally binding as of today and will remain in effect for 10 years, with hefty penalties for any violation.

Bank of Canada maintains overnight rate

Bank of Canada maintains overnight rate target at 1 per cent

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is entering a new phase. In advanced economies, temporary factors supporting growth in 2010 – such as the inventory cycle and pent-up demand – have largely run their course and fiscal stimulus will shift to fiscal consolidation over the projection horizon. While the Bank expects that private demand in advanced economies will become sufficiently entrenched to sustain the recovery, the combination of difficult labour market dynamics and ongoing deleveraging in many advanced economies is expected to moderate the pace of growth relative to prior expectations. These factors will contribute to a weaker-than-projected recovery in the United States in particular. Growth in emerging-market economies is expected to ease to a more sustainable pace as fiscal and monetary policies are tightened. Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery.

The economic outlook for Canada has changed. The Bank expects the economic recovery to be more gradual than it had projected in its July Monetary Policy Report, with growth of 3.0 per cent in 2010, 2.3 per cent in 2011, and 2.6 per cent in 2012. This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending. With housing activity declining markedly as anticipated and household debt considerations becoming more important, the Bank expects household expenditures to decelerate to a pace closer to the rate of income growth over the projection horizon. Overall, the composition of demand in Canada is expected to shift away from government and household expenditures towards business investment and net exports. The strength of net exports will be sensitive to currency movements, the expected recovery in productivity growth, and the prospects for external demand.

Inflation in Canada has been slightly below the Bank’s July projection. The recent moderation in core inflation is consistent with the persistence of significant excess supply and a deceleration in the growth of unit labour costs. The Bank judges that the output gap is slightly larger and that the economy will return to full capacity by the end of 2012 rather than the beginning of that year, as had been anticipated in July. The inflation outlook has been revised down and both total CPI and core inflation are now expected to converge to 2 per cent by the end of 2012, as excess supply in the economy is gradually absorbed and inflation expectations remain well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada.

At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies, and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered.

The next scheduled date for announcing the overnight rate target is 7 December 2010.