According to a report released today by CREA (Canadian Real Estate Association), seasonally adjusted home sales across Canada for February 2010 were 42,700, which was 1.5% lower than January 2010. CREA President Dale Ripplinger said the Ontario and BC markets were likely to remain high until the summary with buyers looking to get in before HST and interest rate hikes.

Other notable stats from the release included:

CREA Chief Economist Gregory Klump, commented that “There are still a number of major markets where sales negotiations favour the seller due to a shortage of inventory, but supply has begun rising. Further expected supply increases will continue to take the steam out of housing markets as the year progresses.”

This is great news for shareholders, but probably not so great for mortgage shoppers, as highlights our story earlier this week about how Canadian’s lender loyalty could be costing them thousands of dollars over the years. TD was so happy with the results, that they’re giving their employees an extra day off next week!

Here is a breakdown of the bank profits:

Bank earnings – Q1 2010
Bank	Q1 profit	Change from year ago
	$988 million	+17%
	$652 million	+343%
	$657 million	+192%
	$215 million	+211%
	$1.5 billion	+35%
	$1.29 billion	+98%

TORONTO, March 9, 2010 … RateSupermarket.ca, Canadian consumers’ one-stop-site to quickly and easily compare over 500 mortgage rates from the country’s top providers, is embarking on a campaign to educate Canadians that shopping around for the best mortgage rates at renewal time could save them thousands.

“Mortgage rates are at near all time lows and many Canadians are missing an opportunity to get better rates by staying loyal to their existing mortgage providers,” said Kelvin Mangaroo, Founder, RateSupermarket.ca. “We want to let Canadians know that they have many options when renewing their mortgage and are in a position of power. By comparing lenders and brokers on our site you could easily save thousands.”

A recent poll of 413 Canadians conducted on the RateSupermarket.ca site showed that 50% of consumers renewed their mortgages without shopping around for better rates. This means that half of the surveyed Canadians are likely paying above what they should for their mortgages. A standard Canadian bank posted 5 year fixed rate is currently 5.39%, but the lowest 5 year fixed rate on RateSupermarket.ca is 3.69%. That difference could cost Canadians an extra $3,407.52 a year in mortgage payments (assuming an average home loan of $300,000 paid over 25 years.)

“Even if you’re a savvy negotiator and can get your banks posted rate down 1.00% to 4.39%, you’re still looking at paying an extra $1,368.84 a year by sticking with your existing lender,” added Mangaroo.

Case Study:

Allen
Oakville, Ontario

Back in July, Allen and his wife purchased a house in Oakville when the credit markets were very tight. They secured a mortgage at Prime + 0.70%, which was the best rate they could find at the time. Afterwards, Allen kept a close watch on the 5 year variable mortgage rates on RateSupermarket.ca as he wanted to refinance when rates dropped.

“In January of 2010, mortgages started to enter that prime minus environment that I was waiting for,” said Allen. “As a recent first time homebuyer I did not really know my options so I continued to visit RateSupermarket.ca to watch the rates and educate myself on my options.”

Allen used the website as a resource to answer his questions and further educate himself on mortgage rates. A consultation call with a broker through RateSupermarket.ca empowered Allen with some great negotiating tools and resources. “I explained my refinancing situation to Jim and he was able to give me a lot of interesting facts on what to expect in terms of costs and breakage (penalty) fees in raw numbers. He also asked some good questions about my living situation to determine if it was worth my while to refinance at this point.” added Allen.

In the end, armed with insight from RateSupermarket.ca, Allen re-financed his mortgage and will save thousands over the next few years.

“We want Canadians to know that they always have options when it comes to their mortgage,” added Mangaroo. “Even using a mortgage broker might not be enough to ensure you’re getting the best deal. Different brokers have different relationships with various lenders, and some brokers, due to the large volumes they process, are able to access special rates and products that others can’t get. So it makes sense to not only compare banks against brokers, but the top brokers against other brokers, as we do on RateSupermarket.ca.”

Case Study

Christie
Calgary, Alberta

Christie had been with Royal Bank for over 13 years, her first mortgage was with them and she had many accounts both business and personal.
“I have an excellent credit score. I have a high income and I’ve never missed a payment on anything,” said Christie. “I usually make frequent additional payments to loans, yet when my account manager left and I was designated a new account manager they would not even match mortgage offers from banks I’d never done business with on my mortgage renewal 3 years ago. I was shocked and angry.”

Christie went to RateSupermarket.ca looking for a better deal and compared many rates and options with an approved mortgage broker. The broker found her a better deal with a lower rate and the switch was completed within one week.

“Due to the economic conditions and favourable interest rates I’ve chosen to pay a penalty on my previous mortgage and have switched lenders,” added Christie. “Bottom line – there are better offers and options out there. I should be able to save thousands of dollars and pay off my mortgage a few years sooner. All you have to do is ask. I’d never have thought it would be that simple but it was. Gone are the days of putting on your best suit, hat in hand to the bank manager begging for a loan!”

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is an independent, impartial resource that is not affiliated with any mortgage lender or broker. It is the only resource in Canada that allows visitors to compare the whole mortgage market in the country. RateSupermarket.ca also compares insurance products, credit cards and GIC rates.

It appears that the new qualifying rate, which goes into effect on April 19, 2010, that all customers with less than a 20% deposit and are trying to secure a variable rate mortgage or any fixed product under 5 years will need to qualify for the higher of:

No official announcement has been made but it appears the qualifying rate will be posted on the Bank of Canada website each Monday at midnight EST.

Many lenders use qualifying rates already for mortgage shoppers looking to get variable or short term fixed rates anyways, but this move will standardize this process across the industry rather than leave it up to each lender themselves.

The odd thing about this qualifying rate is the contract rate. If you wanted a 5 year fixed mortgage, for example, you’d need to qualify based at the 5 year contract rate. The best current mortgage rate 5 year rate is 3.59%, versus the posted 5 year rate of 5.39%. However, if you wanted a 4 year fixed with a best current rate of 3.59%, you’d need to qualify at the 5.39% rate. The monthly payment difference based on a $250K mortgage with a 25 year amortization period is $249.93 or almost $3,000/year. So which would you choose?

We’ll update the post when we see an official announcement.

BMO (Bank of Montreal) has introduced a new 3.75% 5 year fixed mortgage with a maximum amortization period of 25 years. The current maximum amortization period is up to 35 years. Here are the details on this mortgage special:

BMO is still showing their posted 5 year rate at 5.39% on their website, while the 5 year fixed rate in their “special rates” section is stil 4.09%.

This is a major move by one of the big banks and comes as BMO reported a $657M first quarter profit this week and is focusing on growing its mortgage market share after a couple years of losing ground after deciding to stop selling their products through mortgage brokers in early 2007. BMO’s market share fell to 9.2% in the last quarter, down 0.7% from the same time last year.

BMO also released details of a new poll that showed:

The Bank of Canada did as expected this morning and kept interest rates steady. They will maintain their key interest rate, the target for the overnight rate at 0.25%, and reiterated their commitment to hold rates at current levels until the end of Q2 2010.

They cited that the global economic recovery is being fuelled by domestic growth in emerging markets, while the western world’s recovery is due to the monetary and fiscal stimulus by governments.

Closer to home in Canada, economic activity has been higher than expected back in January as the economy grew by an annualized rate of 5% in Q4 2009. The high Canadian dollar and low US demand are acting as the main drags on the economy while inflation seems to be under control.

So no major surprises ahead of the budget announcement on Thursday, and we expect the same from the Finance Minister.

So if we’re keeping score it would be:

Customer service: 8/10 (would have been better to speak to someone “live” on Friday, but a quick call back)

Resolving the issue: 2/10

So we wait for the email update….

The search for the new credit card rules continues. I had put a call in the Finance Ministry today and they couldn’t put me in touch with anyone, so I was told to leave a message and someone will “call me back”. The wait begins today at 9:08am on February 26, 2010. Nonetheless, I found the rules that were published in the Canada Gazette on September 9, 2009.

Here is a summary of the credit card rule changes that came into effect on Jan 1, 2010 and below are the ones that will come in later in Sep 2010.

Over the limit fees due to holds

• An institution may not charge a borrower an amount for surpassing their credit limit as a result of a hold on their credit card.

Consent for increases in credit limits

• An institution may not increase the credit limit on a borrower’s credit card account without first obtaining the borrower’s express consent to do so.
• If consent is given orally, they must later get confirmation in writing, paper or electronically, and simple use of the card doesn’t count

Debt collection

Debt collectors must inform debtors of the following when they’re in hot pursuit (and interestingly this was the longest section, must have been causing some problems):

• the details of the debt, such as the amount owed and the type of debt; and
• the identity of the person attempting to collect payment on behalf of the bank and the relationship with that bank
• banks can’t communicate with the debtors, family, friends, teammates that can be considered “harassment” (very vague) and here are some examples:

- Swearing or coercive language
- Unreasonable pressure
- Making public or threatening to go public about the failure to pay (so no tweets about this)
- That the person guaranteed to pay
- That the person guaranteed to pay

• The collection agency can contact the debtor’s employer only to confirm if they’re employed, title and work address, unless the debtor gives them written authority.
• This part was brilliant, the debt collector’s can’t contact the debtor, their family , household, friends or neighbours:

- on Sundays (except 1-5pm local time) or holiday
- and only between 7am-9pm during the week
- Except….by cell phone

These must be very conscientious debt collectors…

Changes coming in on September 1, 2010.

Minimum grace period for new purchases

• Account statements must be sent without delay after the last day of the billing cycle
• The credit card company can’t ask for a minimum interest payments within 21 days after the last billing cycle
• If the minimum payment due date is on Saturday or a holiday, it must be considered the next business day (so feel free to worry about it over the weekend…)
• No interest can be charged on purchases of goods or services if the outstanding balance is paid in full. This doesn’t apply to cash advances it seems.

Allocation of payments

If different interest rates apply to different amounts owing for a particular billing cycle on a credit card account, the institution must allocate any payment made by the borrower that is greater than the required minimum payment for that billing cycle among those amounts using one of the following methods:

• by allocating that payment first to the amount with the highest interest rate and then allocating any remaining portion of the payment to the other amounts in descending order, based on their applicable interest rates;

I guess I won’t need the phone call after all, but let’s see how long it takes…

Credit card limits

Before: Prior to January 1st, 2010, under Canadian law, credit card companies were able to increase the limit on credit cards. Always thought this was odd that each few months your statement would say that your limit has increased by $2,500. Not sure if you want university students to be able to go out and buy a new card on their brand new credit card.

After: The new law requires the card holders consent to increase credit limits.

Amex specific: Your approval (written, electronic or voice) will be required prior to increasing your credit limit, if qualified.

Debt collection

Before: If you had debt outstanding to a credit card company, only collection agencies were regulated by the provinces for debt practices.

After: The new federal law applies to banks and ensures fair and transparent practices to collect a debt. Hopefully this means no men with tire irons visiting you late at night.

Credit card T & C’s

Before: Not sure if there were laws outlining what needed to be included in the terms and conditions.

After: However, now the new federal law requires clear communication of card terms and conditions and applicable fees.

AMEX then goes on to say that customers will receive further notices about how interest will be calculated, applied to outstanding balances and how the statements will change. If anyone has details on this we’d love to hear about it.

In our next follow up story, we’ll dig up what’s going to change in September 2010.

The new rules include:

While these are great initiatives to help protect consumers, there are still ways that the credit card companies can still affect card holders. There is no limit on the interest they can charge and they can still reduce the credit limit on card’s already issued and create new fees. President Obama says its not perfect but a good first step and hope it will cut down on unfair practices.

Canadian credit card regulations

New credit card regulations were fairly high profile last year when the government proposed changes to Canadian rules, but then it went quiet. All the mortgage and housing market news must have overshadowed the credit card changes, but we just looked on the Department of Finance website and the credit card regulations did go through.

Most of the regulations went into effect on Jan 1, 2010 while a few are delayed until September 1, 2010.

The new regulations include:

The regulations apply to credit cards issued by federally regulated institutions. Some provisions in the regulations have broader application to other financial products, such as fixed- and variable-rate loans and lines of credit.

We’ll do some more digging and find out which ones are already in effect and which changes will be in Sept 2010.