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Mortgage Broker News | 27 Jul 2011, 07:00 AM Agree 0
RBC may be priming the pump for an interest rate hike at the Central Bank, its economists arguing prime should soon be pushed up in order to block vulnerable buyers from entering the housing market – that warning coming as banks continue to cut rates in order to win greater mortgage volumes.
  • Chad | 28 Jul 2011, 02:21 AM Agree 0
    Hmmm.. Wasn't that the point of the MQR rate.
  • Chris | 28 Jul 2011, 02:21 AM Agree 0
    Did Eric forget that in order to qualify for a variable rate mortgage you have to qualify at the five year posted? This was done for this very reason he's mentioning.
  • Pam | 28 Jul 2011, 03:26 AM Agree 0
    Exactly, am I missing something here?
  • Marie | 28 Jul 2011, 03:35 AM Agree 0
    I really dont know what RBC is talking about. if they are concerned about the lower rates then maybe they need to stop deep discounting on their variable rate closed product, its falrly common to get .85-.90 off prime at RBC. Qualifing at posted takes care of people geetting in over their heads. they also dont adjust the payments when rates increase, there is one big blow up waiting to happen with unsupecting customers.
  • Doug | 28 Jul 2011, 04:02 AM Agree 0
    RBC is the leader of the pack when it comes to deep discounting on VRMs. Apparently RBC can't control themselves and need the gov't to do it for them. While some lenders like CIBC FirstLine stood firm & changed their discounting on VRMs to P-.50, RBC is still being the "crazy kid" on the mortgage block offering P-.90 all day long. RBC sounds like a rambling fool here.
  • Elfie Hayes | 28 Jul 2011, 04:03 AM Agree 0
    Sorry Folks, from my perspective RBC wants to raise rates to make money! It’s got nothing to do with protecting “vulnerable home buyers.

    Let's not forget that when clients apply for a mortgage Brokers still use the same GDSR and TDSR as we always did to make sure they aren't in over their heads with the mortgage. Its what happens after they get their home that cripples them.

    The deferred payments at 28% interest so they can buy appliances, the unsecured LOC offered at their branch as a "helpful" source of cash now that they have a home, the increased limits on their credit cards because they pay on time, the new car that burdens them even more because the payment doesn't have to fit the 32% GDS & 40% TDS that Mortgage Brokers must approve them on.

    It's not the mortgage that's killing Canadians it's all the credit offered to them on top of it! Mortgage Brokers are not the bad guys, but we get beat up on rate, compete with Realtors, Lawyers and now Harold the Jewelry Buyer and when we try to compete with a Bank they give one customer a dream rate because they shop aggressively while charging others as much as they can get away with.
  • Bob | 28 Jul 2011, 04:20 AM Agree 0
    But is their Prime - .90% really that? The RBC Standard Charge Terms outline how 'Compounding' is based upon payment frequency. In other words should a client choose to make weekly pmts on the P-.90% mortgage, the compounding now changes to 52 times a year!
    So much for making the case for Semi-annual vs Monthly compounding...
  • Bob | 28 Jul 2011, 04:38 AM Agree 0
    Someone from my Firm just questioned me as to where I got that info. so I am assuming others may be asking the same question.
    (Page 3 Compounding)
  • Marie | 28 Jul 2011, 07:02 AM Agree 0
    correct, they are really about 3-5bp off their offering as they compound monthly. also they never change the payments, so if prime does go up clients who are at th base payment which in RBC's case is the majority they are underwater right away as iti now extends their amortization.
  • Ron Butler | 28 Jul 2011, 07:47 AM Agree 0
    I think the point of the article is something not just RBC has been saying. Many economists make the point that 2.10% mortgage rates are a historical abberation that causes demand for house purchases to increase abnormally. by increasing interest rates the B of C would attempt to cool a market that might burst if low interest rates continue too long. It is possble they have already continued too long. The point of the article is that the bursting of a real estate bubble is far more damaging to far more people than just seeing interest rates go up one or two percent.
  • Dustan | 28 Jul 2011, 09:14 AM Agree 0
    This sort of editorial from RBC is just disappointing. There seems to be no shortgage of such commentary about 'Canadians getting in over their heads' - the reality I see on a day to day basis is that the majority of Canadians taking mortgages are consistently borrowing less than they qualify for by a solid 20-30%. Considering I am in one of the most expensive markets in Canada that is saying something.
  • rod | 29 Jul 2011, 03:48 AM Agree 0
    You have to love RBC, say one thing, do complete opposite. I had a client, just completed credit counseling, no re-established credit and they gave him prime less 0.90 and a a secured line. I could not get anyone other then B lenders to look at it.They buy it and then have their economists write commentary (crap) like this.
    Maybe they require someone to establish proper lending guidlines for them and they wouldn't have anything to worry about when rates do go up.
  • Walid Ayoub | 29 Jul 2011, 04:07 AM Agree 0
    I agree with the comments before me on qualifying at posted. However,The banks or regulation should make it more difficult for people to borrow on LOC and credit cards beyond what they afford, they should have something like TDSR to qualify them before getting more non mortgage debts
  • D Kraus | 29 Jul 2011, 04:21 AM Agree 0
    RBC is correct, they should protect their own clients and make sure that they limit those "unprepared" Purchasers by raising their own qualification rates. When the financial markets collapse as they are suggesting, they will be in a great position. RBC, you have the power to follow your own advice first. Please proceed.
  • Jake | 29 Jul 2011, 04:29 AM Agree 0
    Low interest rates are here to stay. Prior to the internet it was very difficult to transfer money from one country to another. You almost had to bring it to Canada on a pallet and hope someone would exchange it. We only had 13 million Canadian peoples worth of cash to deal with! Now with the instant transfer of funds worldwide we have 5 to 6 Billion peoples worth of cash! Just a wee bit more than we need! The cash is begging for borrowers!
  • Bonnie | 29 Jul 2011, 05:52 AM Agree 0
    Sounds to me like Royal Bank is not making their billion dollar profits and want to once again take money from the working people of Canada. You would think that at some point people would wake up and stop dealing with the banks for their borrowing needs. I am sure this has nothing to do with being concerned about people but more their bottom line.
  • Jake | 29 Jul 2011, 06:25 AM Agree 0
    I agree Bonnie. Banks are like used car dealers. They have an asking price and you have to try and get what ever you can get out of them. Why are the Bank looked upon as such highly respected INSTITUTIONS!
  • Torrington Capital | 29 Jul 2011, 07:26 AM Agree 0
    If RBC is so concerned why don't they just take the lead change their underwriting guideline to protect these poor innocent people. Perhaps they should also look at their policies on the limits they give to these same clients on their credit cards.

    I tend to agree with Dustan, I have more clients taking far less money than they qualify for than I do clients taking every cent they can get.
    Ron; I think that the MQR has largely taken care of the bubble that 2.1% rates would cause. I still do not think the MQR was necessary because brokers should be discussing with EVERY client they deal with how they are going to manage their mortgage when rates go up. I am comfortable saying this is RBCs attempt to boost their profits.
    Bob; Thanks for the link.
  • Jake | 30 Jul 2011, 02:22 AM Agree 0
    I agree, the MQR change was not needed. I think it was implimented to take away the advantage that Mortgage Brokers had in qualifying their high ratio mortgage clients. It seemed at the time that the mortgage industry was gaining ground. In the US a huge percentage of mortgages are through Mortage Brokers.
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