Bank of Canada lowers overnight rate target by 1/4 percentage point to 2 1/4 per cent

The Bank of Canada lowered its key lending rate 0.25% today. This was an expected cut by most people, although lower than expected.

From the Bank of Canada Statement issued today the cuts were a result of:

"Three major interrelated developments are having a profound impact on the Canadian economy. First, the intensification of the global financial crisis has led to severe strains in financial markets. The associated need for the global banking sector to continue to reduce leverage will restrain growth for some time. Second, the global economy appears to be heading into a mild recession, led by a U.S. economy already in recession. Third, there have been sharp declines in many commodity prices. The outlook for growth and inflation in Canada is now more uncertain than usual."

We are now waiting to see how much of the rate decrease will be passed on to consumers by the major banks.

The Bank of Canada's next scheduled date for announcing the overnight rate target is 9 December 2008.

Read the Bank of Canada Statement Here

Canadian Mortgage Industry Changes

Last week October 15th came and went and with it some very good changes to our mortgage industry. Specifically the end of 100% financing, and 40 year amortizations. The minimum beacon to qualify is now 620, and the TDS ratio is now at 45.

I have always felt it is better to put some money down when buying a home and now the minimum required is 5% down.

Traditionally mortgages were amortized for a maximum of 25 years. Over the past couple of years the options were increased to 30, 35 and even 40 years. This made it easier to qualify, however left little room for homeowners to make the adjustment to increased payments if the rates were to go up. The maximum amortization period for mortgages has been reduced from 40 years to 35 years.

The minimum credit score requirement is now 620. If you are close to that score either above or below and considering purchasing a new home soon there are a few things you can do to help keep your score above or bring your score above 620:
1) Do not have too many inquiries on your credit
2) Make all your payments on time
3) Keep your balances within their limits
4) If you do happen to have a collection, pay it off at once and fax your final release letter to Equifax and TransUnion.

If you do not know your score you can order it from Equifax online at Get Your Equifax Credit Report Now!

Under the new rules, the TDS is set at a maximum of 45 percent. TDS is the Total Debt Service Ratio which is your principle and interest payment plus property taxes and heat plus you debt payments divided by your income.


For more information on any of the recent changes please contact Gregory Barrow by phone at 416 807 7123 or by email at gbarrow@dominionlending.ca

The local market still looks sound

Many people are wondering whether the housing crisis in the U.S will be the same here in Canada, and specifically Ontario. There are many reasons why it will not, and that is good news. There was a great article in Friday's Globe in Mail that puts into perspective and spoke about the key indicators to consider.

The local market still looks sound
[Source - DEREK RAYMAKER, From Friday's Globe and Mail October 17, 2008]

There's an old saying that goes: when the water-hole dries up, that's when all the animals start to look at each other funny.

The last two weeks have seen a spectacular crash of global equity markets and a virtual paralysis in capital flow. The headlines are frightening, but digging behind them even slightly is enough to make your blood run cold.

This is especially true if you are close to retirement and have just watched your investments go for a swan dive off the tallest peak of Bay Street, ripping one-third or more of their value on the way down. But the scariest part of a good old-fashioned economic meltdown is waiting for the other shoe to drop. That's when the terror sets in — not having a clue what comes next.

As last week's stock market collapse showed, psychology can drive events to a crisis point as much as real economic happenings such as job losses, trade slowdowns, property foreclosures and bank failures. So how do home buyers and sellers keep their heads on straight in these troubled times?

Read entire article here

Title Insurance: Fraud can turn dream home purchases into disaster

Whether purchasing your first home or refinancing your existing home you should always, always have Title Insurance. Title insurance offers peace of mind and protects your investment. Although it is not required, most lawyers, real estate and mortgage professionals will highly recomend purchasing it. The decision on whether or not you should purchase title insurance should be discussed with your lawyer.

For detailed information on the benefits of Title Insurance, you can download FSCO Title Insurance Brochure here.

Here is a recent article on Title Insurance from The Canadian Press
[By Eric Shackleton, THE CANADIAN PRESS - 2008-10-16]

Fraud can turn dream home purchases into disaster

TORONTO - The purchase of a dream home is probably the greatest investment in many people's lives, but beware - even with such a major purchase, fraud could be lurking just around the corner, say experts in the real estate industry.

This joy killer comes in many forms - lawyer negligence, title defects, title liens such as unpaid utility bills, property encroachments, title fraud such as forged documents and land survey errors.

"Nobody is protected from fraud," says Ray Leclair, vice-president of TitlePLUS, a division of LawPRO, the liability insurer for lawyers.

"Unfortunately, fraud is on the increase," not just in urban areas but even in small communities, he said in a recent interview.

"It's like a lottery. There's very little chance of it happening to you. But if it does happen, it has a huge impact."

To help protect themselves, prospective homeowners should make sure they have title insurance and also get their own credit report.

People can gain a lot of "peace of mind" for as little as a premium of $200 for title insurance, said Leclair.

Read entire article here

Title Insurance Companies:
First Canadian Title
TitlePlus
Stewart Title Guaranty Company

Mortgage borrowers pushed to lock in

[Source - Garry Marr, Financial Post Published: Wednesday, October 15, 2008]

Canadian banks are trying to convince consumers to lock in their mortgage rates because more than 20% of the home loans they have negotiated have become unprofitable, according to industry sources.

[Source-Andrew Barr, National Post]

The push has come after the banks cut the discount they offered to consumers with variable-rate products tied to the prime lending rate. Two weeks ago a consumer could get a variable rate product at 0.60 percentage points below prime; today it is one percentage point above prime.

"Banks are scaring people and those people are calling us asking whether they should lock in," said Vince Gaetano, a vice-president with Monster Mortgage, a mortgage brokerage firm.

His advice is pretty emphatic. Anybody with a mortgage negotiated in the past two years would be out of their mind to lock in to, say, a five-year term, he said. They would be going from a rate as low as 3.35% to 5.79%. Lines of credit previously negotiated at a rate below prime are also still valid.

Read More: http://www.financialpost.com/story.html?id=880446

BMO, RBC, CIBC, Scotia all Reduce Prime Rates

All the remaining major banks including: Royal Bank, CIBC, Scotiabank and Bank of Montreal announced on Friday a decrease of one quarter of one per cent in its Canadian dollar prime lending rate. The new rate is 4.25 per cent, effective Tuesday, October 14, 2008.

"We are pleased to offer this reduction in interest rates to ourcustomers, which we believe will reinforce confidence in the Canadian economy," said Chris Hodgson, Executive Vice-President and Head of Domestic Personal Banking (Scotiabank). "At a challenging time in world financial markets, this reduction in interest rates reflects actions initiated by the Bank of Canada and the federal government."

TD Canada Trust lowers prime lending rate

[Source - CNW Group]

TORONTO, Oct. 10 /CNW/ - TD Canada Trust today announced that it haslowered its prime lending rate by 15 basis points to 4.35 per cent, effective,Tuesday, October 14, 2008. This morning the government announced that it will buy $25-billion ininsured mortgage pools to address Canadian banks' increased cost of borrowing. "We believe that this initiative will be put into effect in a way thatwill reduce our overall cost of funds and, as a result we are dropping ourrate today. As we've been saying, a number of factors go into decisions aboutrate changes. Financial markets are very turbulent, and funding costs arestill high. However, we anticipate that our cost of funds will decrease withthe implementation of this program, and therefore wanted to take action thatwill benefit our customers directly," said Tim Hockey, President and CEO, TDCanada Trust.