Canadians’ appetite for mortgage credit expected to expand by 10% this year,

Canadians’ appetite for mortgage credit expected to expand by 10% this year,
followed by another 10% in 2006

Canadian Institute of Mortgage Brokers and Lenders releases report on Canada’s residential mortgage market


October 19, 2005 (Toronto, ON) – Ninety per cent of Canadians are satisfied with the terms of their mortgages, according to a report released today by the Canadian Institute of Mortgage Brokers and Lenders (CIMBL). The information, gathered by Pollara in a phone survey in September and analyzed by Canadian housing analyst and economist Will Dunning, indicates that low interest rates are the primary reason for this satisfaction and low rates are expected to continue to fuel growth in the residential mortgage market.


“We are pleased and impressed that most Canadians say they are satisfied with the mortgage market,” said Ron Swift, President of the Canadian Institute of Mortgage Brokers and Lenders. “As a result, we expect that Canadians will continue to borrow – whether they are taking out a new mortgage, or renewing or refinancing an existing mortgage. The residential mortgage market could expand by 10 or 11 per cent by the end of this year, to $660 billion and by the end of 2006 we expect another 10 per cent growth for a year end figure of $725 billion.”

The mortgage credit market is a big component of the Canadian economy. In the second quarter of 2005 there was $617 billion in outstanding residential mortgage credit in Canada. During the past 15 years, residential mortgage credit has expanded at a rate of 6.4 per cent, which is slightly faster than the growth rate of total household and business credit (5.8 per cent). Mortgage credit has also expanded more rapidly than the Canadian economy, which has grown at an average rate of 4.7 per cent per year over the past 15 years.

Yesterday, the Bank of Canada announced that it will raise its target for the overnight national interest rate by one-quarter of one percentage point to 3 per cent. CIMBL expects that this will not deter potential home buyers, but it may prompt some consumers to refinance their mortgages.

“The growth of the mortgage market is also due to the volume of new approvals which not only includes new mortgages, but also includes transfers between lenders as well as refinances of existing mortgages,” said Swift. “The trend towards refinancing is rooted in the fact that Canadians have a choice and often this choice is provided by a mortgage professional that is able to shop around and find the best mortgage solution for his/her client.”

According to the September survey, mortgage holders report that, on average, they consulted 1.92 mortgage professionals when they obtained their current mortgage. The types of lenders consulted most frequently, according to survey respondents, are major Canadian banks (74 per cent), credit unions (27 per cent) and mortgage brokers (25 per cent).

Among those who renewed or refinanced their mortgages in the past 12 months, 40 per cent increased the amount of the mortgage and 60 per cent did not. For those who increased their mortgages, the average increase is estimated at $25,100.

Based on survey results and market analysis, CIMBL expects mortgage credit to continue its rapid expansion during 2006 and approvals of residential mortgages (including new mortgages, transfers between lenders and refinancing of existing mortgages) could rise from $161 billion in 2004 to $180 billion in 2005 and $189 billion in 2006

Have we lost the Art of Saving

“A penny saved is a penny earned.” Benjamin
Franklin, who coined this phrase, must be turning in
his grave now, as the personal savings rate in both
the US and Canada is hovering around zero. Is the
dismal North American savings rate a cause for
concern or is it only a statistical mirage?

A Slice of the Realestate pie.

A slice of the real estate pie
Investing in companies tied to the housing market takes
the stress out of dabbling in real estate

House and condo owners aren't the only investors who've been making sweet profits
during the recent boom in property values across Canada and the United States.
Investors who prefer a more hands-off approach to real estate have also been doing
well -- and with just a fraction of the stress that comes with actual property
ownership. That's right, you can enjoy today's real estate bonanza without opening a
door, dipping a paintbrush or negotiating with a whining tenant.

How? By investing in companies whose fortunes are tied to real estate. Some of these
equities actually rise faster than the housing market itself, making them a leveraged
bet on house prices. Others are only indirectly connected to the housing market,
making them a more secure investment if the housing boom begins to cool.
The most straightforward approach is to invest in a real estate investment trust, or
REIT, that owns a portfolio of apartment buildings. REITs are types of income trusts
that trade on the stock exchange like regular stocks. But most are high-yielding
equities because they distribute most of their earnings -- derived mostly from rent --
to investors in the form of regular cash distributions.


As property values rise, REITs tend to perform well. Last year, the Standard &
Poor's/TSX capped REIT index (which includes a number of REITs that own offices,
hotels and shopping centres, in addition to those that own apartments) produced a
return of 14%, including distributions. So far this year, the performance has been
even stronger, with a total return of 19% in just nine months.

Admittedly, apartment REITs have lagged the overall REIT sector in total returns,
partly because of rising vacancy rates in many urban markets across Canada as more
people buy homes instead of renting them. But there are a number of standouts that
have made the returns on actual home ownership look downright tame.
For example, Boardwalk REIT (BEIun/TSX), which owns multi-family residences in
Western Canada, has produced a total return of 32% over the past 12 months.
Northern Property REIT (NPRun/TSX), which owns residential properties in the
Northwest Territories, Nunavut and Alberta, has done even better, with a one-year
total return of 34.5%.

That beats the best housing market in Canada by a wide margin -- and again,
investors have endured a minimum of legwork for their stellar gains.
Sure, what you're getting here is primarily rental income. But keep in mind that these
apartment REITs own the properties they rent and, in some cases, additional land
that can be either sold or developed.

Killam Properties Inc. (KMP/TSX), for example, which owns rental properties in
Atlantic Canada and Ontario, believes it has enough surplus land to build another 750
to 1,000 units, representing about 15% of the company's existing rental portfolio. It
David BermanFinancial Post could also choose to sell some of that land.

If you don't mind straying into commercial real estate, there are also firms -- usually
giant retailers -- in Canada and the United States that might be considered real
estate companies in disguise. That is, they happen to own vast amounts of property -
- usually with stores on top -- that have grown exceptionally valuable in recent years.
Late last year, for example, Kmart Holdings Corp. suddenly gained recognition as a
valuable real estate company (rather than a troubled retailer) after it announced a
deal to sell 50 stores to Sears Roebuck & Co. for a whopping US$575-million, and a
number of other stores to Home Depot.

Earlier this year, an investment group that included Kohlberg Kravis Roberts & Co.
and Bain Capital LLC acquired Toys 'R' Us Inc. for US$6.6-billion -- and their interest
in the company was largely spurred by the value of the troubled toy retailer's real
estate. Investors who bought Toys 'R' Us shares prior to the takeover bid made a tidy
50% on their investment.

If you want to stick closer to the actual housing market, though, consider investing in
companies that sell mortgages to homeowners. The big banks own a massive chunk
of this business, of course. But you can get a far more pure investment (since big
banks do many other things besides selling mortgages) by buying shares in
companies that specialize in so-called sub-prime mortgages.

These mortgages are aimed at prospective homeowners who don't meet most of the
typical requirements for big loans -- like new university graduates, recent immigrants
and self-employed workers. These people might not have the best credit ratings, but
they're nonetheless financially capable of owning a home.

Home Capital Group Inc. (HCG/TSX) is arguably the biggest and most successful
name here. Through its subsidiary, Home Trust Co., it sells sub-prime mortgages
across Canada. The company charges slightly higher rates to offset the greater risks,
but it doesn't suffer from a high proportion of defaults on the loans. This has resulted
in big earnings growth during Canada's housing boom, with Home Capital's net
income rising at an annual clip of more than 30% in recent years.

Needless to say, Home Capital's share price has also risen. The shares are up more
than 60% over the past 12 months, closing yesterday at $38.60 on the Toronto Stock
Exchange. Just two years ago, the shares were trading at less than $7, giving them a
440% cumulative return. When was the last time you heard of a house rising that
much in just three years?

Michael Goldberg, an analyst at Desjardins Securities, believes the good times will
continue. He estimates Home Capital will produce $1.60 in earnings per share in
2005, up from $1.25 last year. In 2006, he estimates earnings will rise again, to
$2.15, or 34% above this year's estimated earnings. "They primarily sell loans that
have been declined by the banks," Mr. Goldberg says. "So if the housing market turns
down, that can actually increase the size of their business," since the big banks will
be the first to shut their vaults.

Home Capital isn't the only Canadian company having great success selling
mortgages these days. Xceed Mortgage Co. (XMC/TSX) and Equitable Group Inc.
(ETC/TSX) have seen their share prices rise 39% and 33%, respectively, over the
past 12 months.

Meanwhile, other companies have tapped into the housing boom by selling home
improvement materials to people who have either just bought a home or refinanced
one. According to one estimate, about a third of all money generated from mortgage
refinancing is plowed into home improvements -- great news for companies like
Home Depot (HD/NYSE), the second-largest retailer (and largest home-improvement
retailer) in the United States.

In the most recent fiscal year, Home Depot sold an amazing US$73-billion worth of
hammers, wrenches and work benches, generating US$5-billion in net income, up
16% over the previous year.

Curiously, investors have been less than enthusiastic about this stock. Yes, the share
price has nearly doubled over the past two years. But it has declined about 11% so
far this year and is still down about 45% from its record high in 1999 -- possibly
because observers feel the company is going to have trouble growing if the
mortgage-refinancing market dries up in the United States.

Still, the stock trades at a reasonable 15 times its trailing earnings and should
continue to generate mammoth profits if the housing market remains buoyant.
The shares of rival Lowe's Cos. Inc. (LOW/NYSE) have enjoyed a steadier ride.
They're up 11.4% so far this year and have tripled in price since 2000. The company
sold US$36.5-billion of building supplies last year and reported net income of US$2.2-
billion.

In Canada, your best bets are Canadian Tire Corp. (CTR/TSX), whose shares have
risen 28.7% in 2005, and Rona Inc. (RON/TSX), whose shares are up 10% over the
same period.

Finally, you can bet on the companies that actually do the home-building. Toll
Brothers Inc. (TOL/NYSE), which makes luxury homes in the United States, saw its
shares hit a record high of US$58.67 earlier this year, up almost 500% over the past
three years. The shares have since declined to US$43.47 on fears the housing market
is due for a pause or correction.
© National Post 2005
Copyright © 2005 CanWest Interactive, a division of CanWest Global Communications Corp. All rights reserved.

Renovations even hotter than Sales

Renovations even hotter than sales

Even Canadians who didn't buy a new
home in the past few years probably know
this country is immersed in an
unprecedented housing boom. But there's
another market growing at a pace so
furious, it may even dwarf new-home
buying. In a word: renovations.
Whether it's putting a Jacuzzi in the
backyard or spending $500,000 to rip
apart an entire house, Canadians are
spending like never before on facelifts for
their homes -- to the tune of $38-billion
last year.


And that number is only expected to rise.
A report by Clayton Research suggests
renovation spending in Canada will hit
$40.7-billion this year and $43.5-billion in
2006. And the market is expected to grow
by 7.2% a year, twice the rate of the
Canadian economy as a whole.

Another study, by Ipsos-Reid, found as
many as two-thirds of Canadian
homeowners say they will likely overhaul
their homestead this year.

That isn't news to the staff at Calgary's
building permit department, who have
seen the reno trend move in lockstep with
soaring housing prices and one of the
country's hottest job markets.

Canada's oil capital happens to be in a
province expected to boast the fastestgrowing
renovation market in the country
next year. "There's an extensive amount
of work being done in this city," says Gary
Klassen, director of Calgary's development
and building approvals department. "In the last three to five years, the numbers have
just kept rising. We're approaching one million in population, and it's a really strong
employment centre, too."
Peter Brieger
Financial Post
CREDIT: Dollhouse Courtesy of Little
Dollhouse Company, Toronto,
www.thelittledollhousecompany.com. Photo:
Brent Foster, National Post
A dollhouse.


CREDIT: Jason Payne, CanWest News
Service
About 72% of Canadian homes are over 20
years old, and "many of those houses are in
need of repair," Rona's Sylvain Morissette
says.

Take a look at any residential street and start counting those big steel dumpsters
filled with dust, doors, plaster and carpeting. BFI Canada Income Fund does just that.
Though it won't release numbers, the waste management giant says it has seen a
spike in demand for monster trash receptacles.
If you're still not convinced, just ask Mark Jackson, a general contractor who heads up
Jackson & Associates Inc. in Toronto. "Right now, you could be the worst contractor in
the world and still get work," he says.
But why are Canadians redoing their homes in record numbers? "Cheap money," Mr.
Jackson says. "I think that's really it in a nutshell."
Those record low interest rates propelling new home sales are undoubtedly driving
the reno market too. But low borrowing costs are just one piece of the puzzle. The socalled
"cocooning" trend that grew out of Sept. 11 has many people rediscovering
living -- and entertaining -- at home.
Others want to hike the value of their house if they decide to sell. Still others weigh
the hassle and cost of buying a more expensive house, and opt to stay put instead --
inevitable disputes with contractors notwithstanding. After all, why move when you
can remake a home to suit your tastes, says lawyer Adrienne Rutherford, who
recently plunked $70,000 into her mid-town Toronto home. "I don't really want to buy
someone else's renovation," she says. "Prices for new homes are insane, and we
weren't going to be able to get a house that was close to the kids' school."
One of the biggest factors behind the renovation boom is the age of Canada's housing
stock. In many urban centres, the most sought-after properties are downtown, and
those homes are getting a little long in the tooth.
About 72% of Canadian homes are over 20 years old, according to Sylvain Morissette
at home improvement giant Rona Inc. "Many of those houses are in need of repair,"
he says. "They need to rebuild the roof, patio, bathrooms and windows."
Robert Macpherson, co-founder of Lieux Architects Ltd., says many neighbourhoods
are undergoing an "accidental preservation," one that sprouted out of a resurgence in
downtown living. "Almost all the most desirable neighbourhoods in Toronto have
houses that are 60 to 100 years old," he says. "But many of these people aren't living
downtown for the reasons you might see in a left-wing city councillor who bikes to
work. Most of them have two cars, and they've got money."
A big bank account comes in handy, since most home renos end up being pricier than
expected. The Ipsos-Reid poll found half the Canadians who expect to renovate this
year plan to spend less than $5,000. About one-quarter aren't sure how much they'll
shell out, and 28% expect to spend more than $5,000.

These days, the sky's the limit: Italian faucets, marble countertops, home theatres,
spa-style bathrooms and stainless steel refrigerators equipped with TV screens. Some
people spend upwards of $60,000 on a kitchen alone, and $500,000 renos aren't
uncommon.

More and more, homeowners are also willing to hire an architect who can take their
ideas -- often soaked up from design magazines -- and put that vision on paper, says
Mr. Macpherson.
Sandra Turley-Ewart, a Toronto IT professional, did just that before she and her
husband put down $150,000 to turn their 1957 house into an "ultra-modern" living
space styled as an open-concept New York pad. Materials were specially ordered, and
the couple won inspiration for their piece de resistance -- a conversation pit in the
refinished basement -- from 1964's The Pink Panther.

Carpeted bright orange, the sunken pit features a small glass table in the centre and
a wood-burning stove to keep guests warm during late-night chats. A sheepskin rug is
draped down the steps of the mini-amphitheatre. "The days of the white fridge are
over," Mr. Macpherson says. "We're finding people are much more open to things now
than we would have ever thought."

Conversation pits are rare, of course. Home theatres are not. In fact, they're the top
trend in home renovation, according to the Appraisal Institute of Canada, which
values residential and commercial properties. "How big a scale do you have?" says
James Marshall, director of custom installation at Toronto's Bay Bloor Radio, when
asked about demand for home theatres. "It's pretty alarming. Flat-screen TV sales
were up 450% last year."

For some people, home theatre rooms are a place to gather with family. Others just
want to flex their bursting wallet. "There's definitely the bling factor with some people
who want the cooler, bigger plasma TV than the neighbour," Mr. Marshall says.
"Designers will hate me for this, but a plasma is cheaper than buying that 16thcentury
French provincial armoire, and it looks nice on the wall."
Buying your very own Carnegie Hall, with top-quality sound in every room and an
entertainment refuge boasting "Cineplex-type" sound and video, can cost as much as
$40,000, Mr. Marshall says.

Elaine Khotek-Holmes, a 43-year-old Toronto financial planner, had Bay Bloor equip
her overhauled home with plasma screens and central sound -- all controlled by an
easy-to-use keypad.
Ms. Khotek-Holmes and her husband considered buying another home, but figured
they might do better enlarging their 1,500-square-foot house, picked up at a thrifty
price. And she has no plans to leave -- at least not for the time being.
That's a key question for aspiring renovators because expensive work may not show
up in a home's selling price, says Mike Garcelon, a Saskatchewan-based real estate
appraiser.

"People naturally assume if they put $10,000 into their home, they'll get $10,000
out," he says. "Unfortunately, that isn't always the case. There are thousands of
variables, including big ones like the home's location and health of the local
economy."
The Appraisal Institute's study found renovating bathrooms and kitchens or slapping
on a fresh coat of paint generate the best returns -- anywhere from 75% to 100% of
the cost. Building a deck, finishing the basement or installing a fireplace tend to give
renovators a lower bang for their buck. The worst updates on that scale include
landscaping, installing a skylight or breaking ground on a new pool, the report found.
Homeowners can also customize their abode too much, shrinking the number of
possible buyers, Mr. Garcelon says.

© National Post 2005

No Money Down: Big Risk in Future

No money down; big risk in future
Covers legal, other fees: Debt premised on assumption
house prices will rise
Wednesday, October 05, 2005
For some people, borrowing 100% or more of a home's purchase price is the ultimate
speculative tool for getting in on the real estate boom. You'd have to think that
someone willing to take on that ratio of mortgage debt must believe house prices are
going to keep on rising.
But while there may be an element of this in no-money-down mortgages, experts say
the emotion of owning a home may actually be trumping more practical
considerations. They also say that even those who do have faith in real estate
investing might want to shift their thinking away from where rates and prices are
headed, and take a more balanced approach to their overall debts.
Paul Mims, vice-president of CIBC Mortgages, jokes that the 100%-plus borrowing
tool is actually paying him to buy a home on Toronto's tony Bridle Path. Kidding
aside, this kind of borrowing is likely premised on the assumption that house prices
"will keep rising forever," he says. "We've got a short memory, but house prices are
only up in a strong economy. Just around the corner they could drop, and you're
going to have to pay it all back."
Mr. Mims does say the product might work for one of the target markets cited by
advertisers --young professionals like doctors and lawyers who have great credit and
strong income potential, but also have big student loans and no savings.
But that's really just a marketing tool, and few people in this category are actually
going for no-money-down mortgages, according to Vince Gaetano, senior mortgage
consultant with broker Monster Mortgage. "It really tries to tempt the people who are
keeping up with the Joneses," he says. "When you go over for that dinner party, you
don't see the type of mortgage product they have plastered on the front door."
If they did post their mortgage costs for everyone to see, a 100%-plus borrower
would no doubt surprise the neighbours with 150 extra basis points tacked on to their
rate.
Mark Goode, a consultant with Mortgage Intelligence, a broker owned by General
Motors Acceptance Corp., says he uses the company's 107% borrowing product, the
i107, in his "tool bag." It allows homebuyers to borrow over the cost of the home to
cover legal and other fees.
But there's a big premium associated with this kind of mortgage. On a $300,000
home, Mr. Goode says an i107 client would pay on average 5.9% interest on a threeyear
fixed mortgage. That compares to a rate of 4.25% to 4.5% for a customer with
a 10% down payment for the same term, he says.
Comparing them is a bit like comparing apples and oranges, he says, noting the
different amount each client is borrowing, plus the fact that no-money-down
customers simply don't have the option of paying $50,000 or so upfront to cover fees
and a down payment.
Lori McLeod
Financial Post
For the sake of analysis, however, let's take a look at how much you'd pay off in
principal and interest over three years in these two scenarios, based on biweekly
mortgage payments, a 25-year amortization and interest compounded semi-annually.
Using the Mortgage Intelligence calculator, if you borrow 107% on a $300,000 home,
after three years you'll have paid off $18,658.23 of the principal and incurred
$54,496.76 in interest charges.
If you put 10% down, at the more conservative 4.5% rate, you'll have paid off
slightly more of your principal -- $18,884.42. But here's the big kicker: you'll have
only paid $34,913.15 in interest.
That means a 107% borrower pays $544 a month more in interest alone for the same
home. Plus, at the end of the three-year term, their mortgage will still be almost
$2,500 more than the price of the home. So that investment could actually end up
costing money, if the home's value has declined and the owner wants to sell.
Somewhat surprisingly, however, there's actually a lower forfeit rate on higherborrowing
mortgages, according to Mr. Goode. He puts that down to a more rigorous
screening process for people to qualify. The people who are more at risk of getting
into trouble, he says, are those who are taking triple advantage of low interest rates.
They qualified for higher-priced homes, borrowed for home renovations, and took out
lower-rate variable mortgages, and they could be sunk if rates go up.
The low-rate environment, combined with soaring hydro and energy costs, could
definitely get homebuyers with no cushion into trouble, says Mr. Gaetano. "There's no
wiggle room in houses. My income's not going up 30% like the cost of these staples."
In his opinion, part of the blame falls on Canada Mortgage and Housing Corp., which
"isn't responsible enough to look at revising qualifying ratios at times like this."
High-borrowing mortgages aren't intended for people looking to flip a house quickly
for profit, says Mr. Goode. But they are a good option for young professionals,
students who live in the dwelling (up to a four-plex) and rent the other units for
income, or newly divorced people with good credit but depleted savings after splitting
up their assets.
For the truly house-hungry who have no savings, Mr. Gaetano says they'd be better
off to exercise a little patience and reap the rewards of putting something down on
their homes. He leaves investors with a final thought to chew over when mulling a
100%-plus mortgage: "It's never no money down. It's a transaction that feeds a lot
of people -- realtors, bankers, appraisers, everybody else except you."
© National Post 2005

Welcome to Mortgage and Economy News

Hi

Welcome to my future blog site where you can get mortgage news, facts on the economy, housing trends, general tips for saving money. Home news, upgrades renovations and anything else pertinent to being a home owner .

In the meantime please visit my website. www.calgarymortgageagent.ca

Jerry Schindel
Mortgage Consultant
Mortgage Intelligence- A GMAC CompanyAssisting Canadians in funding over $6.47 Billion in mortgages for 2004

"I WILL CHALLENGE YOUR BANK"

Ph: 403-287-0174 or 403-830-8884.
Fax 403-295-0418
http://www.calgarymortgageagent.ca