It seems HSBC Canada may start selling through mortgage brokers once again. The bank had a “Head of Mortgage Broker Channel” job posting on its website until this morning. We then confirmed with a separate reliable source that the news appears to be true. HSBC was not able to comment by press time.
The move would be a major boost to mortgage brokers given that HSBC mortgage rates are by far some of the most competitive in the nation. In fact, HSBC at times posts mortgage rates that even brokers can’t touch. At the moment, for example, it’s got the lowest conventional 2-year fixed, lowest conventional variable and lowest high-ratio variable of any lender in Canada. Features-wise, its variable-rate product is outstanding (given it is completely open after 36 months and lets customers convert to its fully transparent, ultra-low online fixed rates).
If the bank does re-launch in the broker market as we expect, especially if brokers are able to “buy down” those rates further, it’ll be a terrific win for consumers.
HSBC sold through mortgage brokers before. It exited Canada’s broker channel in 2010, choosing to focus on branch, online and call centre distribution instead. For it to re-enter after a decade suggests: (A) it has found a way to improve the economics of its broker originations, and (B) it wants to ramp up its Canadian mortgage business big time.
Mortgage brokers control about one-third of the country’s mortgage market.
Google to Speed Up Mortgage Processing
It keeps getting faster and easier to get a mortgage — and that’ll be even more true when Google’s Lending DocAI arrives. A company spokesperson told us today, “…the Google Cloud team has plans to bring the solution to Canada in the near future.”
DocAI automatically “processes borrowers’ income and asset documents to speed up loan applications—a notoriously slow and complex process,” Google says. It does so with “industry-leading data accuracy,” automating “many of the routine document reviews,” leading to faster completion of mortgage applications.
Consumers may not enjoy its benefits right away, however. When it comes to new credit-related technology, “The biggest short-term obstacle is lender buy in,” says mortgage technology expert and Newton CEO Geoff Willis. But give it a few years and automated document processing should be commonplace at all forward-thinking lenders.
57% of first-time homebuyers plan to get a fixed rate
20% plan to get a variable rate
23% don’t know what they’re going to get.
The survey also shows that 56% of first-time purchasers depend on financial help from family to buy a home (the number is almost 6 in 10 in British Columbia and Ontario).
These first-timers expect over $44,500 in assistance, on average.
Almost 1 in 4 millennial buyers (23%) expect $100,000+. It’s nice to have well-off parents.
“…We typically advise prospective buyers not to spend more than 30% of their monthly income on housing,” said Hassan Pirnia, BMO’s Head, Personal Lending and Home Financing Products. But, unless someone is living in the likes of Timmins, Ontario, or 100 Mile House, B.C., that usually isn’t realistic.
TD: “…Despite the increased demands Canadians are making on their living spaces, very few (3%) have gone ahead and purchased a new house, vacation home or property since the pandemic hit.”
Stealth Bond Yield Control
With further government stimulus in the wings, most mainstream economists expect higher bond yields in 2021, albeit not considerably higher. (Bond yields heavily influence fixed mortgage rates.)
That said, central banks could continue repressing government bond yields for months. If they do, it’ll limit the speed of any rate ascent, if not cap rates altogether.
Constant BoC buying is discouraging many investors from selling government bonds. Given bond prices and bond yields move in opposite directions, that’s keeping rates low.
This Bloomberg story talks about this phenomenon from a U.S. perspective. But Canadian rates are similarly influenced given the Bank of Canada has the same M.O. as the Fed.
Homebuyers Largely Insulated from Unemployment
“No less than 80% of the jobs lost since February were in low-paying occupations,” leaving homebuyers “in a better position to take advantage of low interest rates,” CIBC economist Ben Tal told FP.
In a separate Brookfield RPS presentation this week, Tal said “two-thirds of the economy is in a V-shaped recovery and one-third is stuck in an L-shaped recovery.” That one third will be a drag on inflation, likely keeping rates from flying too high in 2021.
Tal and other economists in that presentation projected 2022 as the soonest we’d see “normal levels” of economic activity. But remember, the bond market can price in future recoveries two years before they happen. In other words, if you wait for GDP to reach its pre-pandemic level before locking in a fixed mortgage rate, it’ll likely be too late. (And no, we’re not recommending that most borrowers in ultra-low variable rates lock in. If you’re well-qualified, risk-tolerant and have prime – 1.00% or better, keep riding that pony!)