As we all know, predictions and forecasts are all well and good but they usually aren’t worth the paper they are printed on. While I might be able to predict, with some level of certainty, what is going to happen tomorrow, the longer the timeframe, the harder it is to “hit the nail on the head”, so to speak.

Last December, The Globe and Mail had an article – Five Canadian Mortgage Market Predictions for 2014. I thought it would be fun and interesting to revisit this article and see how accurate it really was.

Now, keep in mind that Rob McLister of CanadianMortgageTrends, the author of The Globe and Mail article, is one of the top in the industry when it come to shooting straight from the hip when it comes to this industry and where it’s going. Here’s what he said would happen in 2014:

  1. New mortgage rules – Expect more rule tightening in 2014 designed to reduce mortgage risk for lenders, mortgage default insurers and the government. By definition, those rules will make it slightly harder to get approved for some mortgages and further slow the housing market.
  2. Credit unions will steal market share – Since they’re provincially regulated, credit unions have more flexible lending guidelines than federally regulated banks. They’ll use that to their advantage in addition to marketing more heavily, both online and to mortgage brokers. We’ll also see some big mergers this year as credit unions seek out economies of scale.
  3. Stronger online player – A new breed of online mortgage broker is sacrificing commissions for volume, and selling cut-rate mortgages. This trend will heat up competition industrywide, delivering greater mortgage discounts to all consumers.
  4. Hybrid mortgages will grow more popular – Economists and government officials have been warning us of higher rates for four years. So far they’ve been wrong, and now many consumers aren’t sure what to believe. More Canadians will hedge their rate bets with hybrid mortgages (part fixed and part variable).
  5. Consumer IQs will increase – For those in the mortgage industry who prefer an uninformed consumer, your days are numbered. Canadians will spend more time researching rate comparison websites, online mortgage forums, news portals, blogs, calculators and other online mortgage tools. They’ll become increasingly savvy about fine print like penalty calculations, rate blend policies and refinance restrictions.

Well, when it comes to new mortgage rules, we certainly saw lots of changes in 2012 and 2013, but fewer in 2014. We had CMHC cut their Self-Employed/Stated Income and Second Home products but we still have Genworth and Canada Guaranty – the two private insurers – so this hasn’t had a significant impact on approvals. We’ve also seen many lenders who were still using interest only payments, for debt servicing purposes, on personal lines of credit make changes to use 3% repayment but we still have a couple of lenders who will use the lower payment amount, provided it can be proven. I expect that these last remaining lenders will discontinue this practice at the end of this year so predict more restrictions in 2015 than we saw in 2014.

Credit Unions are definitely becoming more considered in my business. While I can’t say that I am using them more, they are certainly a more talked about option with clients. The down side is that rates tend to be a little bit higher than the best rates on the market, but the flip side is that they can do things that OSFI regulated lenders just can’t.  I expect it will take a lot longer than one year to see Credit Unions really make a noticeable dent in market share, and only if they don’t heed the pleas of OSFI to comply as the other federally regulated financial institutions do.

Online brokers seem to be working for those customers that are all about rate, but your mortgage should be more than just rate, in my opinion. The benefit of using a mortgage broker isn’t just the great rate they can get you, it’s service, education and a desire to ensure your protected based on where you plan to be in the future (i.e. penalties and features like portability). Online brokers are getting shut down by many lenders because of their cut rate practices – a good thing for consumers, as far as I am concerned. If you wanted to be served by someone with little to no experience in the mortgage industry, or financial services in general, with little to no customer service model and no follow through, wouldn’t you just go to your bank?

Hybrid mortgages are definitely talked about more, but I’ve found that clients want the stability of a fixed rate payment, or the advantage of the lower payment/rate that a variable offers. Only the savvy, yet risk adverse, investors want to talk hybrid mortgages. For your average home owner, this just adds a level of complication they just aren’t ready for.

Consumer IDs are most certainly on the increase. The internet has brought about change and transparency in the industry and that has only benefited consumers. The younger generation also educates themselves online prior to making any sort of purchase – another great thing for the industry. I love to work with clients who come into my office, armed with great questions and their goal is to learn even more. The perfect client! This will only continue as the amount of available information grows.

Soon we’ll be discussing what’s coming in 2015 and I’m sure we’ll be saying something about rising interest rates as we have been for the last four years!

Stay tuned!