You would think that given the economic climate the real estate market and subsequently the amount of mortgages a mortgage brokerage is funding would be down, but that isn’t the case. While the number of real estate transactions may be down, the number of mortgages being completed by Mortgage360 is up.
2015 has been a record year for Mortgage360, funding more mortgages in the first six months than any other previous year – even with the economic uncertainty that has plagued Calgary’s oil industry.
While we are not certain what has contributed most to us outperforming the industry we think it has to do with several factors.
First, we aligned ourselves with a great charity called Mealshare earlier this year. Every mortgage that we do now provides 100 meals to people in need. We think that’s pretty cool – apparently so do our clients.
Working with an awesome charity isn’t the only reason it has been a good year. We have found that many energy sector workers who applied for mortgages in late 2014 or early 2015 and decided to wait to purchase, either hoping that home prices would fall or uncertain of their employment situation going into 2015, have realized that the sky really isn’t falling and have followed through with their home purchases.
It was almost as if the oil industry was waiting to see what would happen during spring breakup, and when the economy didn’t crash, they decided to jump into the housing market as if nothing was wrong.
What is interesting about our numbers however is that the percentage of people borrowing under $500,000 has increased, while the percentage borrowing over $500,000 has decreased.
This is likely due to the low supply of moderately priced housing combined with the still positive net migration that our city is experiencing. Moderately priced houses are still selling.
The Bank of Canada cutting rates twice since January also helps, sending a clear signal to Calgarians that low rates are likely here to stay for quite a long period of time. My guess is that if you have a variable rate mortgage it is very likely it will stay below the current 5-year fixed rate for the entirety of the term.
The reality is that 5-year fixed mortgages in Canada are really just 5-year adjustable rate mortgages that mascaraed as a safer alternative to a variable. At the end of five years the rate adjusts anyways, which is why we are placing our bets on variable rate mortgages where the client will qualify for them.
For those who aren’t sure about variable rates, we have also introduced the made to measure mortgage into our repertoire. The made to measure can be any combination of fixed and variable rate mortgages.
Say for example you feel a little bit, but not entirely comfortable with variable rates, you could have 70% of you mortgage in a fixed rate and 30% variable. This combination would allow you to reap the benefits of a variable for a portion, but still have the perceived safety of the fixed.
The great thing about the made to measure mortgage is that you can choose any split you like between variable and fixed, and the product is available to everyone, including first time homebuyers who only have a down payment of 5%.
Speaking of first time homebuyers, 61% are now consulting a mortgage broker according to the Canadian Association of Accredited Mortgage Professionals Profile of Home Buying in Canada. Young consumers are quickly realizing that if Uber can get you there faster and cheaper than a taxi, a mortgage broker can get you a mortgage faster and cheaper than a bank.
