On March 2014 we had so many Mortgage related news including Flaherty’s Quit, BMO’s offer of 2.99%, Big Banks’ 1st Q Earning Announcement, Bank of Canada’s Decision on the Overnight Rate and Stephen Poloz’s Speech in Halifax and …


t the beginning of March, the Bank of Canada announced maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1.25% and the deposit rate is 0.75%.

Since June 01, 2010 Prime Rate has been unchanged and it has been & will be a good time for borrowers in a discounted variable-rate mortgage and as the Bank of Canada stated that inflation is well below 2% target and they also want to stabilize debt-to-income ratios for households, we shouldn’t be seeing any increase on the Prime Rate anytime soon.


n March we saw another solid quarter for Canadian banks and from a mortgage perspective, all major banks saw their residential mortgage portfolios continue to rise or at least hold steady so even the low rate didn’t kill their earning as the penalty would be so much for the people who break their mortgages during the “Low Rate” period. See below a snapshot of their earnings:

Royal Bank of CanadaRBC logo
Q1 net income: $2.09 Billion
(+2% Y/Y)
Earnings per share: $2.38

TD BankTD Bank's logo
Q1 net income: $2.04 Billion
(+15% Y/Y)
Earnings per share: $1.07

Q1 net income: $1.18 Billion ($2.88 per share)
(+6.3% Y/Y Excluding one-time Aeroplan transaction)
Earnings per share: $2.31 a share

ScotiabankScotia bank logo
Q1 net income: $1.7 Billion
(+6.5% Y/Y)
Earnings per share: $1.32

Bank of MontrealBMO logo-2
Q1 net income: $1.06 Billion
(+2% Y/Y)
Earnings per share: $1.58

National Bank of CanadaNBC logo-2
Q1 net income: $384 Million
(+2% Y/Y)
Earnings per share: $1.15 a share


he biggest news on March was Jim Flaherty’s resignation

He had been finance minister for 8 years and during this term he made policies with good and bad impacts on the Canada’s mortgage landscape. As a mortgage broker I didn’t like most of those policies as he had been tightening the mortgage rules but he saved Canada during the global financial crisis.

Rob McLister wrote that Mr. Flaherty took on the following seven roles as he managed the mortgage market throughout his tenure:

1. Financial crisis hero: When bad mortgages endangered the world’s financial system, Mr. Flaherty bolstered Canada’s by purchasing $69-billion worth of mortgage-backed securities. It was a shrewd move that added no new risk to taxpayers (as the mortgages were already insured). That plan motivated the banks to keep lending at reasonable rates, helping the country avert a liquidity crisis.

2. Mortgage loosener: From 2006 to 2008, under Mr. Flaherty‘s watch, the government backed 100 per cent financing (even for rental properties), lower down payment requirements to avoid default insurance, 40-year amortizations and more lenient stated-income financing than we have today.

3. Mortgage tightener: With debt-to-income ratios, mortgage rates and home prices breaking record after record, Mr. Flaherty did an about-face. His regulators slashed amortizations from 40 to 25 years, banned insured refinances and rental financing without 20-per-cent equity, cut the ratio of debt that borrowers could carry, and brought a host of conventional mortgage restrictions. On insured mortgages alone, he stiffened rules four times in four years.

4. Funding cost raiser: He capped government-backed Canada Mortgage and Housing Corporation (CMHC) insurance at $600-billion, limited the use of insurance on mortgages with 20 per cent or more equity, put new curbs on mortgage securitization (selling mortgages to investors), and prohibited government-backed mortgages in covered bonds and non-CMHC securitization. These and other measures raised mortgage funding and regulatory costs, which in turn boosted the mortgage rates Canadians pay.

5. Market meddler: Setting national policy wasn’t enough. Mr. Flaherty did what no finance minister ever has – or should. He used his influence to push individual banks to raise their privately-set mortgage rates. His media comments publicly called out institutions like Bank of Montreal and Manulife Financial Corp. This fear of reprisal from the finance department is still fresh in lenders’ minds, and it’s a big reason we haven’t seen banks widely advertising 2.99 per cent five-year fixed mortgages (BMO did it after Flaherty was gone)

6. International conciliator: As skepticism of Canada’s richly valued housing market grew internationally, Mr. Flaherty’s efforts to rein in housing reassured international governments and investors. That was key for reducing the risk premiums that government and lenders have to pay to finance themselves.

7. Regulator: One of his wisest moves was placing the CMHC, one of Canada’s biggest financial institutions, under the watchful eye of banking/insurance regulator OSFI (Office of the Superintendent of Financial Institutions). For a $600-billion insurance company, that move was a long time coming.

In protecting Canadians homeowners from themselves and lenders from excesses, Mr. Flaherty ultimately made it harder for millions of families to get mortgages. But he also reinforced the very foundation of Canada’s banking system. We ended up with a safer mortgage market because of him.



nother big news on March was made by BMO as it released its economic report on March 13th advising the people to go for the fixed rates rather than the variable rates and on March 27th (when Flaherty was gone) BMO decreased it’s 5 year fixed rate from 3.49% to 2.99% and made the media to put it on the news and some of the analysts believe it was arranged to guide the people’s mind to the fixed rate to sell that “Special Product” after 2 weeks and that’s why we hear “Economists are paid to guess wrong”

I called it special product because it has special limitation/restriction as it is limited to a fully-closed term (barring bona fide sale or refinance with BMO), a non-discounted penalty calculation, lower pre-payment privileges (10% annually), lower optional payment increases (10% annually), no optional HELOC (ReadiLine), no BMO Cash Account (a great feature), no Skip-a-payment and a 25-year maximum amortization and it was for more than a month that I and couple other brokers were offering 2.99% with no special restriction/limitation

Calum Ross, one of the VERICO brokers in Ontario challenged the BMO’s 2.99% in an interview on BNN. BNN interview with Calum Ross

Click HERE to watch



ank of Canada published its Annual Report for 2013 which is proved to be a challenging year for the Bank of Canada. Inflation continued to drift below target, and the economy failed to move onto a more sustainable track. The 2013 Annual Report highlights key achievements over the year, describes the Bank’s corporate governance, and presents the financial statements in conjunction with Management’s Discussion and Analysis.

Click Bank of Canada’s Annual-Report-2013 to download its PDF format



ank of Canada Governor Stephen S. Poloz discussed the demographic forces and the hangover from the global financial crisis that are holding back economic growth in Canada and the world

 “A period of subdued growth after a financial crisis can still be regarded as cyclical, in the sense that it will eventually prove to be temporary,” Governor Poloz told members of the Halifax Chamber of Commerce. “But the global economy may not be just suffering through a hangover from the financial crisis. There are other, longer-term forces at work as well.”

In his speech, Governor Poloz described these factors as separate but working together. On the one hand, weak global demand is limiting the growth of Canadian exports and business investment in structures, equipment and software.

On the other hand, Canada’s demographic profile means that not only is labour’s contribution to the potential growth of the economy expected to decline as the baby boomers retire, but also that more people are putting away more savings as they prepare for retirement. How baby boomers, Canada’s largest population cohort, allocate those savings could have implications for potential growth and merits careful consideration.

“When a large swath of the population is making similar decisions, the impact on the broader economy can be significant,” the Governor said. “Savings that fund infrastructure and business investment are ‘being put to work,’ which can help improve productivity, while savings that go into housing are seen as contributing less to productive potential.”

The world economy is healing, and Canada will benefit in the form of stronger exports, followed by more investment and new firm creation, he said. At its recent meeting in Sydney, Australia, the G-20 underscored the importance of structural reforms for future growth, setting out an aspiration to collectively boost global GDP by 2 per cent over the next five years, or about 0.4 per cent per year in growth terms, on average, the Governor noted. The G-20 goal is reasonable, he said, and Canada shares it.

“Raising our trend growth rate by only 0.1 or 0.2 percentage points per year through such structural reforms would mean an income boost of $25,000 to $50,000 over a typical 30-year career – certainly worth having,” Governor Poloz noted.

Ramin Aminian