ABCP stands for asset-backed commercial paper. It’s used by a handful of non-bank lenders to raise capital for mortgage lending. ABCP got a bad name when it froze up on investors during the credit crunch of 2007-2008. Today, it’s a safer and fully restructured market.
Having access to ABCP lets smaller lenders reduce their overall funding costs. That helps them offer better mortgage rates to you and me. In turn, those lower rates force the major banks to be more competitive.
The role of small “wholesale” lenders, which sell mortgages mainly through brokers, cannot be underestimated. When people see a broker offer a great rate from one of these lenders, they either choose that lender and rate – or they ask a big bank to match it. That ecosystem keeps mortgage costs significantly lower than if small lenders did not exist.
But the future of ABCP and other private mortgage securitization techniques is now in question, at least as a way to fund insured mortgages. The federal budget, released in March, plans to prohibit lenders from selling insured mortgages to investors through any securitization method that is not managed by federally-run CMHC.
Click here for the full Globe and Mail article.
People still willing to jump into real estate bidding wars might want to ask themselves why they want to be part of such a buying frenzy in this softening market.
It always costs you, if you are buying. But apparently some Canadians are still willing to do the bidding of organized real estate and go to war over price.
A new survey from Bank of Montreal finds 72% of buyers are unwilling to get into a bidding war. Among first-time buyers, 37% are willing to go “over budget,” BMO said in a news release Tuesday.
Taken the other way, there are still 28% of people ready to play this shell game and it’s even higher among the novices who might not be expected to know better.
First of all, people need to understand that the whole idea of a so-called asking price is nothing more than an artificial construct. It’s meaningless, many times just a marketing game to draw people into the home.
Click here to read the Financial Post article.
The price gap between homes in Canada and the US remains “yawning” despite the changing fortunes of the two real estate markets, but that’s bound to change. The US housing market, where the financial crisis began, has been on the upswing after years of depression, while the Canadian market has cooled over the past several months as policymakers try to engineer a soft landing, which, by all appearances, appears to be working.
Home sales have plunged in Canada, but prices have generally held up.
BMO Nesbitt Burns compared the two markets, and found that, while US prices surged on an annual basis to March, average prices in Canada remain a “towering” 62% above those in America.
“That’s right in line with last year’s average gap, but compares with little difference for a 25-year period up until 2006,” said BMO Chief Economist Douglas Porter.
Click here for more from the Globe and Mail.
When you begin shopping around for a mortgage, the importance of your credit history and score becomes evident.
Your credit score is an important item that will determine what interest your mortgage agent will be able to offer you. It should be a priority because it can save you thousands of dollars. If you take care of your credit, your credit will take care of you! Whether you have had credit for a long time or are completely new and just beginning, the reality is that you will have to at some time or another prove that you are a low enough risk for lenders to lend to.
If you are just beginning to build credit a good way is by using a credit card.
Click here to read more from the Globe and Mail.
Hosting an Open House is an effective real estate sales tool that your agent will likely recommend, but how can you be sure your security will be kept in check?
“Ask your Realtor questions about how to prepare for visitors,” says Carla Bouchard, a broker with Royal LePage Metro. “Make sure that you understand what occurs during the open house, and how to safeguard your possessions and your home.”
Click here for five tips for a safe Open House courtesy of News Canada.