31 Mar

Why Are Mortgage Rates Rising?


Posted by: Debra Carlson

Over the past month, the Bank of Canada has lowered its overnight rate by a whopping 1.5 percentage points to a mere 0.25%. Many people expected mortgage rates to fall equivalently. The banks have reduced prime rates by the full 150 basis points (bps). But, since the second Bank of Canada rate cut on March 13, banks and other lenders have hiked mortgage rates for fixed- and variable-rate loans. That’s not what happens typically when the Bank cuts its overnight rate. But these are extraordinary times.

The Covid-19 pandemic has disrupted everything, shutting down the entire global economy and damaging business and consumer confidence. No one knows when it will end. This degree of uncertainty and the risk to our health is profoundly unnerving.

Most businesses have ground to a halt, so unemployment has surged. Hourly workers and many of the self-employed have found themselves with no income for an indeterminate period. All but essential workers are staying at home, including vast numbers of students and pre-school children. Nothing like this has happened in the past century. The societal and emotional toll is enormous, and governments at all levels are introducing income support programs for individuals and businesses, but so far, no cheques are in the mail.

In consequence, the economy hasn’t just slowed; it has frozen in place and is rapidly contracting. Travel has stopped. Trade and transport have stopped. Manufacturing and commerce have stopped. And this is happening all over the world.

What’s more, the Saudis and Russians took advantage of the disruption to escalate oil production and drive down prices in a thinly veiled attempt to drive marginal producers in the US and Canada out of business. This has compounded the negative impact on our economy and dramatically intensified the plunge in our stock market.

Many Canadians are now forced to live off their savings or go into debt until employment insurance and other government assistance kicks in, and even when it does, it will not cover 100% of the income loss. The majority of the population has very little savings, so people are resort to drawing on their home equity lines of credit (HELOCs), other credit lines or adding to credit card debt. Businesses are doing the same.

The good news is that people and businesses that already have loans tied to the prime rate are enjoying a significant reduction in their monthly payments. All of the major banks have reduced their prime rates from 3.95% to 2.45%. So people or businesses with floating-rate loans, be they mortgages or HELOCs or commercial lines of credit, have seen their monthly borrowing costs fall by 1.5 percentage points. That helps to reduce the burden of dipping into this source of funds to replace income.

So Why Are Mortgage Rates For New Loans Rising?

These disruptive forces of Covid-19 have markedly reduced the earnings of banks and other lenders and dramatically increased their risk. That is why the stock prices of banks and other publically-traded lenders have fallen very sharply, causing their dividend yields to rise to levels well above government bond yields. As an example, Royal Bank’s stock price has fallen 22% year-to-date (ytd), increasing its annual dividend yield to 5.31%. For CIBC, it has been even worse. Its stock price has fallen 30%, driving its dividend yield to 7.66%. To put this into perspective, the 10-year Government of Canada bond yield is only 0.64%. The gap is a reflection of the investor perception of the risk confronting Canadian banks.

Thus, the cost of funds for banks and other lenders has risen sharply despite the cut in the Bank of Canada’s overnight rate. The cheapest source of funding is short-term deposits–especially savings and chequing accounts. Still, unemployed consumers and shut-down businesses are withdrawing these deposits to pay the rent and put food on the table.

Longer-term deposits called GICs, which stands for Guaranteed Investment Certificates, are a more expensive source of funds. Still, owing to their hefty penalties for early withdrawal, they become a more reliable funding source at a time like this. As noted by Rob Carrick, consumer finance reporter for the Globe and Mail, “GIC rates should be in the toilet right now because that’s what rates broadly do in times of economic stress. But GIC rates follow a similar path to mortgage rates, which have risen lately as lenders price rising default risk into borrowing costs.”

To attract funds, some of the smaller banks have increased their savings and GIC rates. For example, EQ Bank is paying 2.45% on its High-Interest Savings Account and 2.55% on its 5-year GIC. Other small banks are also hiking GIC rates, raising their cost of funds. Rob McLister noted that “The likes of Home Capital, Equitable Bank and Canadian Western Bank have lifted their 1-year GIC rates over 65 bps in the last few weeks, according to data from noted housing analyst Ben Rabidoux.”

The banks are having to set aside funds to cover rising loan loss reserves, which exacerbates their earnings decline. An unusually large component of Canadian bank loan losses is coming from the oil sector. Still, default risk is rising sharply for almost every business, small and large–think airlines, shipping companies, manufacturers, auto dealers, department stores, etc.

Lenders have also been swamped by thousands of applications to defer mortgage payments.

Hence, confronted with rising costs and falling revenues, the banks are tightening their belts. They slashed their prime rates but eliminated the discounts to prime for new variable-rate mortgage loans. Some lenders will no doubt start charging prime plus a premium for such mortgage loans. Banks have also raised fixed-rate mortgage rates as these myriad pressures reducing bank earnings are causing investors to insist banks pay more for the funds they need to remain liquid.

An additional concern is that financial markets have become less and less liquid–sellers cannot find buyers at reasonable prices. The ‘bid-ask’ spreads are widening. That’s why the central bank and CMHC are buying mortgage-backed securities in enormous volumes. That is also why the Bank of Canada has started large-scale weekly buying of government securities and commercial paper. These government entities have become the buyer of last resort, providing liquidity to the mortgage and bond markets.

These markets are crucial to the financial stability of Canada. Large-scale purchases of securities are called “quantitative easing” and have never been used before by the Bank of Canada. It was used extensively by the Fed and other central banks during the 2008-10 financial crisis. When business and consumer confidence is so low that nothing the central bank can do will spur investment and spending, they resort to quantitative easing to keep financial markets functioning. In today’s world, businesses and consumers are locked down, and no one knows when it will end. With so much uncertainty, confidence about the future diminishes. The natural tendency is for people to cancel major expenditures and hunker down.

We are living through an unprecedented period. When the health emergency has passed, we will celebrate a return to a new normal. In the meantime, seemingly odd things will continue to happen in financial markets.

Dr. Sherry Cooper DLC


30 Mar

Clarification of the Mortgage Deferral Program and Alternative Options


Posted by: Debra Carlson

It was only days ago that the Federal Government announced that it would provide increased flexibility to lenders to defer mortgage payments during the COVID-19 crisis. Shortly thereafter, the big 6 banks announced they would be allowing up to 6 months of mortgage payment deferrals to assist those impacted by COVID-19. The monoline lenders followed suit. Since then, they have all been doing as best they can to accommodate the massive volume of calls and emails, while implementing new programs daily to help handle these inquiries. I have been completely immersed in trying to help my clients who are seeking payment relief during these times. Lenders are updating us daily/hourly as to what the best course of actions is.Here is what I know so far:

  • Many people are under the impression that the government is offering mortgage payment forgiveness or mortgage compensations of some kind. This is not the case. Any deferred payment will be added to your mortgage in one way or another, with interest. A payment deferral will cost you a lot more in the long run. Keep in mind, this is not a free or government money program.
  • I have heard about 2 clients being offered 6 months of deferred payments with no questions asked but please understand that this is not the norm. You will likely be asked about your employment status and other reasons for requesting deferral. Many lenders will ask about your net worth status and liquid assets available. (If you do your regular banking with the same lender that holds your mortgage, they can likely assess this internally). Whether or not your mortgage is default insured, collaterally charged, your loan-to-value ratio, and if you have been set up on accelerated payments or applied any lump sum payments in the past will be considered. Many clients are offered a one-month deferral only and encouraged to re-apply with new status each month. Alberta residents; I’ve had clients in the oil and gas industry asked by the lenders if their layoff was directly due to COVID-19, or other factors. GREAT QUESTION. I believe the answer is circumstantial to your working environment, but I’m trying to find out more.
  • Regardless of how urgent your situation is, please contact your lender; missing a payment could damage your credit rating. It is going to take time to get a response and it can be frustrating to be on hold or wait for an e-mail response; please be patient.
  • Mortgage distress, like any kind of distress, is relative. For some people, mortgage distress is due to worry about the coming disastrous economic effects of COVID-19 on their job or business. For other people, mortgage distress is being suddenly laid off with no income and unable to pay their Mortgage on Tuesday. Both are valid concerns, however, some lenders are prioritizing and only dealing with those not able to pay their mortgage payment due within the next 7 days. If you don’t have concern about missing your next payment, consider sending an email or filling out a form for a call back later. I know waiting can be frustrating. In these times, exercising a little patience and freeing up the phone lines could help your friends and neighbours keep their home.
  • If you believe you have some equity in your home, you might be able to avoid all of this by speaking to a mortgage advisor and setting yourself up to access equity for fallback more affordably. You should do this before there are any negative changes to your income or home value. You may be able to refinance to draw out an emergency fund, set up a home equity credit line, a reverse mortgage, or even private financing to bridge the gap at this time.
  • Self employed and commissioned workers: Many lenders require “proof” that you’ve been laid off or impacted by COVID-19. in order to defer payments. For many of you, that is something that you won’t be able to document for months. Please follow up with me to explore your financing options outside of deferred payments.

I hope this information helps! 

Kind regards,

Debra Carlson,  Mortgage Advisor

23 Mar

Your Mortgage: What to do? Who to contact?


Posted by: Debra Carlson

Many of our clients, their family and friends are looking for information and so we hope you find the following to be helpful.

If you have any questions about the following I am available and I will do my best to help you in this difficult time. 

Each lender has a separate telephone number and or email address for clients to use to make contact and obtain information regarding payment deferral, skip a payment, miss a payment options.

Please prepare yourself prior to your call or email with the following:

**At this time, due to high call volumes you may want to consider sending an e-mail to the lender**

  • Mortgage statement that shows your account number
  • When were you laid off?
  • Will you be laid off until the pandemic is over?
  • They will ask you about your current assets and income as well all expenses

BMO – 1.877.895.3278
CIBC – 1.800.465.2422
Haventree – 1.855.272.0051
HSBC – 1.888.310.4722
RBC – 1.866.809.5800
Scotiabank – 1.800.472.6842
Servus Credit Union – 1.877.378.8728
Chinook Financial – 403.934.3358
Connect First – 403.736.4000
CIBC FirstLine – 1.877.454.9030
Marathon – 1.855.503.6060
First Calgary Financial – 403.736.4000
TD Canada Trust- 1.866.222.3456

B2B Bank 1.866.684.5637 / b2bbank.com/COVID19
Bridgewater Bank – 1.866.243.4301 / Outside of Canada 403.817.7000 / customer.experience@bridgewaterbank.ca
CMLS – 1.888.995.2657 / service@cmls.ca
Equitable Bank – 1.866.407.5859 / customerservice@eqbank.com
First National Financial –  1.888.488.0794 / accounts@firstnational.ca (include name/ mortgage number / property address and question)
First National Income and Expense Form: Here
Home Trust – 1.855.270.3630 / 416.777.5820 / homehelps@trust.ca
ICICI  Bank– 1.888.424.2422 / Customercare.ca@icicibank.com
Merix / Lendwise – 1.877.637.49111 / customerservice@merixfinancial.com
Manulife – 1.855.518.7546 / banksales@manulife.com
MCAP – 1.800.265.2624 / MYMCAP Portal
Optimum/CW Bank – 1.866.441.3775 / customer.service@cwbank.com
RMG Mortgages – 1.866.809.5800 / mortgagesupport@rmgmortgages.ca


CMLS 1.888.995.2657 / service@cmls.ca

We are currently looking at individualized solutions which may include holding a mortgage payment for 30 days up to 6 months of deferred payments.  Borrowers will be asked questions specific to their situation so that we can best plan the impacts of the crises for the near and far futures.  We ask that you are patient with our agents during this difficult time.  We are working hard to making this a swift and accurate process and wanting to take the time to be able to answer all your questions.

How can I stay up to date on what CMLS is doing for their customers?
We know how important it is that you receive timely information and we will keep our FAQ document as up to date as possible in the following days.

My company has laid me off for 30 days, can you stop my mortgage payments until I’m back at work?
CMLS can ‘hold’ your mortgage payment for up to 30 days; the amount of the payment can be added to end of the mortgage, or we can increase the remaining payments. At this time CMLS will pay the fee of 75.00 normally associated with this change, on your behalf.  Please contact us directly to discuss which options work best for you.

I read online that other Lenders have stopped mortgage payments for 6 months, is CMLS going to do that?
We are committed to supporting our CMLS Residential Borrowers during this time, each customer situation is unique, and the solution must be unique. To explore all your options please contact us directly.

I own a rental property and the mortgage is with you, the tenant can’t pay the rent because they have been laid off, what can I do?
There are many options available, please call us directly so we can discuss the situation and come to an appropriate solution.

I raised my mortgage payments last year and now my hours at work have been reduced, can I put the mortgage payments back to what they were?
Many of our mortgages will allow payments to be reduced back to the original contract amount. If your mortgage does not allow this option, there are many other ways we can help. Please contact us to discuss all the available options.

Our mortgage payment is supposed to come out when my partner gets paid but they are now laid off, can I change the date of the mortgage payment to the same day I get paid?
Yes you can. Scheduled mortgage payments move into a “pending status” three days from the date of posting. If your next payment is less than 5 days away contact via us phone. If the next mortgage payment is more than 5 days away, please send us an email via the Customer Portal, all emails will be responded to within 48 hours.

I’m making extra payments on my mortgage every time a payment comes out, we can’t afford it right now, can I stop those extra payments?
Yes you can. Pre-payments are completely flexible and can be stopped at any time. Scheduled mortgage payments, including the Pre-Payment or Privilege Payment portion, move into Pending Status three days from the date of posting. If your next payment is less than 5 days away contact via us phone. If the next mortgage payment is more than 5 days away, please send us an email via the Customer Portal, all emails will be responded to within 48 hours.

How much will it cost me to put a temporary hold on my mortgage payment?
At this time for all customers impacted by COVID-19, CMLS will pay the transaction fee of $75.00 on your behalf.

Can I pay just the interest on my mortgage for the next six months?
Currently CMLS does not offer this option, however there are many other options available to make sure your mortgage remains in good standing, please contact us to discuss your unique situation.

Manulife 1.855.518.7546 / banksales@manulife.com

Here is a really important piece of information that not many brokers realize and one which I think is extremely important.   In todays unique situation many people have concerns over how to make payment to their mortgage and secured LOC’s.

Under the Manulife One, a client can allow, if room under the LOC limit, both the mortgage payment and the LOC accrued interest to capitalize and NOT have to make any form of payment.

This capitalization can continue indefinitely as long as there is room within the LOC.


MCAP 1.800.265.2624 / MYMCAP Portal

Call volumes are expected to be higher. While wait times may be longer than usual, we assure you that all Homeowners will be serviced.

  1. We recognize there may be impacts to your employment status. For homeowners affected by income loss, Hold-a-Payment or Skip-aPayment options are available to assist you.
  2. There will be no negative impact to your credit rating for using MCAP’s Hold-a-Payment or Skip-a-Payment options.
  3. MCAP will waive ALL fees associated with the above options to help as much as possible during this stressful time.
  4. Our market-leading self-serve portal, MyMCAP is available for you to access your mortgage details and make any changes from home at the push of a button.
  5. The health and safety of our people is paramount. We are offering flexibility and other appropriate measures to ensure that their families are protected. This includes rotating work-from-home schedules utilizing the best secure mobile technology available.
  6. Our teams are working hard to ensuring plans related to people, processes and technology are put into action to meet the critical needs of our homeowners.
  7. If you are not registered for our self-serve portal MyMCAP, please refer to the notices on mcap.com. We understand this is a very difficult time for all. We are experiencing a very high call volume. We apologize should you experience any delays in responding to your mortgage inquiries during this very challenging time. We thank you for your business and for being a MCAP homeowner.


RFA/ Street Capital

Should your client be inquiring about deferral or skip a payment options, they will need to contact their specific customer service centre.  A financial assessment will be completed to ensure the client is eligible for the insurer program.  Our customer service contact information is below.  If you are looking to fill out consent forms please read below:

Street Capital Clients 

Please Use the Authorization to Disclose Form attached – Docusign NOT available for this form

  • Please use RFA Broker Consent Form
  • Docusign IS available
  • You will know that it is a RFA mortgage ( versus a Street Capital) if the mortgage number starts with the #9

Mortgage Numbers Starting with 4

P 1.866.939.5005
F: 1.866.325.2563 or 416.593.9343

RFA Bank of Canada
Mortgage Servicing Centre
Suite 1200, North Tower
100 University Avenue
Toronto, ON
M5J 1V6

Mortgage Numbers Starting with 6

F: 1.866.683.8090

RFA Bank of Canada
Mortgage Servicing Centre
1080 Grande Allee West
PO Box 1907, Station Terminus
Quebec City, Quebec
G1K 7M3

Mortgage Numbers Starting with 7, 8 or 9

P: 1.833.228.5697
F: 1.833.228.6312

RFA Mortgage Corp 
Mortgage Servicing Centre
Suite 100 – 451 Phillip St
Waterloo, Ontario
N2L 3X2

RMG 1.866.809.5800 / mortgagesupport@rmgmortgages.ca

Given recent global events, RMG understands that these may be difficult times for our homeowners. In order to provide some assistance, RMG wishes to highlight that under the terms of their mortgage, RMG homeowners may skip a payment or hold a payment at any time subject to certain conditions. Under the terms of RMG’s Skip a Payment Program, homeowners may skip a payment at any time. For the Hold a Payment Program, a payment may be deferred for a specified period of time. Should your RMG homeowner elect to skip or hold a payment, RMG will waive any applicable fees and this will not impact their credit rating.




13 Mar

Understanding Mortgage Payout Penalties


Posted by: Debra Carlson

It is very common for people to believe that the rate is the most important consideration when selecting a mortgage product. In many cases, this is a reasonable assumption, many times customer are deciding between mortgage products that are very similar in rate. In this case, as in most, understanding the terms of the mortgage are more important then the interest rate. It is unfortunate that too many  Canadians find themselves learning  about one of the most important terms which has very negative  effect on their financial situation when it’s too late, Payout Penalties.

When calculating a mortgage payout penalty, banks and broker lenders use the greater of:

  1.  A 3 month interest penalty or
  2.  The interest rate differential (I.R.D)

This is where the similarities end.  Banks calculate their I.R.D. based on the discount off the posted rate for the nearest term at the time of payout, while the broker lender uses a re-investment rate.  The bank discount is the discount you received at the time of approval.

The example that I am using is a mortgage with a balance of $400,000.00 at 2.79% with 26 months left on the original 5 year term.  The 2.79% rate from your bank was a 2% discount off the original 5-year posted rate of 4.79%.  The broker lender does not deal in posted rates as such.

Interestingly enough, the bank posted rate for the nearest term of 2 years was 3.24%, and the reinvestment rate for the broker lender was also 3.24%.

For the broker lender, the reinvestment rate was higher than the rate on the mortgage paid out, so the 3-month interest penalty is charged.  The penalty worked out to $2,790.00.

The bank penalty was calculated using the original 2% discount subtracted from the 3.24% posted rate for a 2 year term.  This resulted in the penalty being charged as the difference of 2.79% minus the 1.24% or 1.55% differential for the remaining 26 months of the term.  The result was a penalty in the amount of $13,433.33 or a difference of $10,643.33.  The banks not only get to charge the higher penalty but also get to reinvest the money at the higher rate.  Win, win for the banks but lose, lose for the borrowers.

In the past three years, many Albertans had to sell their homes due to unforeseen circumstances. Do you not think that the $10,000.00 plus in penalty differences would have been better in the hands of these Albertans or your hands versus going to the Ivory Towers on Toronto’s Bay Street?

For all your mortgage financing requirements, please contact Jencor Mortgage Corporation.

By: Dave Melnyk
Jencor Mortgage Corporation