Toronto Mortgage Source

Totonto and Area MLS Housing Report for October 2010

    Greater Toronto Area Realtors registered with the Multiple Listing Service (MLS) reported 6,681 unit sales in October 2010. This represents a 21 percent decrease in contrast to sales figures in Toronto in October 2009. This said, the average cost for October transactions increased five percent when compared to the same time last year. A central motive for the increase in average selling price in the Greater Toronto Area is the affordability of home ownership, given stronger incomes and low Toronto Mortgage Rates.

    The Toronto Real Estate Board commented that composition of GTA homes sales differ according to location, with condominium apartments accounting for 42 percent of total sales in Toronto and 60 percent in the Toronto Real Estate Board’s central areas.  This said, in suburbs of Toronto, low rise homes accounted for almost 90 percent of transactions. The entire Toronto area continues to enjoy low mortgage rates which should continue to support sustainable increase in housing prices over the short to medium term.

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CMHC Spring 2010 Toronto Housing and Mortgage Report

The Spring 2010 CMHC Mortgage and Housing Report for the Greater Toronto Area states that MLS housing sales will reach a record high over the course of the year. Much of this growth will be supported by low mortgage rates in Toronto. This said, the market will decline towards the latter part of the year. New home sales will show a significant increase. An improving corporate environment will help push the unemployment rate down thus supporting the demand for home ownership. The resale market in the GTA will show record level activity. This growth however, is set to decline in the later part of the year, partly due to a possible increase in Toronto mortgage rates. According to the report, housing prices may consequently decline however such declines will be minimal and short lived. Prices can be expected to remain fairly flat over the next few years to allow income levels to catch up. Purchases for new semi detached homes may moderate and the construction industries in Toronto will rely more on high rise development.

High rise condo starts in Toronto will rise by close to 30 percent over the next year with a strong likelihood for more gains. Like the high rise expansion over 2010, starts for detached homes will have a 60 % increase in 2010 matched, however for detached homes in Toronto and the area, there is a more significant possibility for growth moderation in 2011. This said, and thanks in part to relatively low mortgage rates, single detached homes will remain limited and this fact will continue to push the prices for these homes up. Row homes which are conducive to infill development and more affordable than singles will take on the greatest share of low rise housing.

With respect to employment, rates should increase by 1.5 percent in 2010 and wages are expected to grow by 2.5 percent. The nature and timing for the latest downturn in Toronto has allowed for a quick recovery for the job market. As the economy has begun to recover, businesses are in a much stronger position to re hire. Along these lines, good employment opportunities in the Greater Toronto Area will attract a higher level of immigration.  This boost in population, when combined with low mortgage rates, will provide support for both home ownership and rental demand. At the time of writing, the prime mortgage rate is 0.25 percent. With the overnight bank rate expected to increase, mortgage rates have begun to rise. Rates could increase quickly if the economy recovers at a faster pace. This said, rate increases could be lessened if the recovery is modest.

DANGEROUS Credit Lines and Mortgage Products Offered by Banks

Over the past several years, some of the Big Banks have decided to design mortgage products that lock customers into their Bank- even when the mortgage comes up for renewal. The really unfortunate part about these Banks and products is that in most cases, the Bank will not disclose the negative information to its clients. Most in the broker industry consider these practices incredibly decietful.

With titles such as 'Step' or 'Homeline', these mortgages will offer a line of credit that is attached to the mortgage. The main issue is that when the Bank registers one of these products against your house, they register it under what is called a 'Collateral Charge Term' (not the usual 'Standard Charge Term') at 125% of the value of your home. This has the affects of:

• Disallowing any other financing to be placed against your home.
• Locking you in at mortgage term renewal. This gives Banks massive liberties to charge unfavourable rates when your term is up.  
• Charge major penalties to ever exit these products and lowers others abilities to compete for your future business.
• The ability to change their bank prime rate without your consent. For example, the Bank can decide, as they did in 2008, to move up credit lines across the board by 1% in 1 day. 

No wonder Banks call these products 'customer retention devices'. Good mortgage brokers will always fully disclose such information whereas most of the time, Banks have not been reporting this kind of information to thousands of customers. It is potentially costing customers $10,0000's each. Indeed, customers should be retained by providing excellent service, value and a good customer experience. There are many excellent mortgae products in the market that can meet your needs and goals, and give you the low rates and long term flexability that is far more desirable.

Questions? Comments? Feel free to contact me any time or leave a post below.

Best Regards,

Brent www.brentrichardson.ca - brent@brentrichardson.ca