TD changing to collateral loans for mortgages – the bad news

TD is changing their mortgages to collateral loans as standard.

We think this is to keep people from refinancing with another bank because TD is not offering competitive rates. There are also some other negative points to the new TD mortgage listed below:


  1. Most chartered banks will not accept “transfers” of collateral mortgages from other chartered banks. If the consumer wishes to switch their collateral mortgage to another lender upon maturity, there will be legal & appraisal costs. Approx $750-$1000
  2. Upon maturity, would the lender offer only a posted fixed rate or just a slightly lower rate knowing the costs associated with transferring to another lender has legal & appraisal costs.
  3. Collateral charges allow lenders to change the interest rate and/or loan more money to qualified borrowers after closing. On secured lines of credit, the interest rate registered at Prime + upwards of 10%.
  4. Collateral loan involves the other debts you may have. Under Canadian law, a lender may seize equity to cover other debt you have with the same lender. So, in essence, you’re possibly securing all your loans that you have with that financial institution; be it credit cards, unsecured lines of credit, car loans, or overdraft etc.

Now the Pros:
I can’t think of any!

Ensure you do your home work on TD mortgages. There are lots of other lenders and lots of alternatives.

Canadian Prime staying at 3% – maybe for half a year

Comment – this article exactly summarizes our thoughts for how things will play out:

Prime will stay at 3% for 6 months, mortgage rates will stay low as long as the stock market bounces all over the place and now is a great time to take advantage of the situation by redoing our mortgage or buying.

Bank of Canada holds key rate at 1%

OTTAWA — Interest rate hikes are on hold until at least the spring and maybe as long as late 2011, analysts say, as the Bank of Canada decided Tuesday to keep its policy rate unchanged amid weaker-than-anticipated growth, especially in the United States.


The Canadian dollar fell by more than two cents at one point following the decision, as the central bank signalled the country would need to rely more on net exports for growth — a sign, economists added, the loonie’s value would be a key consideration in future rate decisions.


The central bank said it scaled back its growth projections for this country as the global recovery enters a “new phase.” It now expects GDP to expand just three per cent this year and 2.3 per cent in 2011, compared to expectations in July for advances of 3.5 per cent and 2.9 per cent, respectively. Second-quarter GDP growth, at two per cent annualized, was well below the central bank’s forecast of three per cent expansion.


Further, the Bank of Canada said it does not envisage the Canadian economy reaching full potential until the end of 2012, or one year later than previously expected. The same timeline applies to inflation — which guides all interest-rate decisions — as the “significant” excess slack would keep consumer prices increases from reaching the desired 2% level for another two years.

“This is not just a data watching central bank that is keeping its powder dry in order to evaluate developments over coming months — this is a central bank that has totally revised its outlook and market guidance,” said analysts at Scotia Capital. “To us, the Bank of Canada is saying they are on hold until late next year.”

The central bank also signalled the composition of growth is set to change, with less emphasis on consumer spending and increased reliance on business investment and net exports.

The Canadian dollar recovered slightly after its initial drop. It was trading around 96.92 cents U.S. at 11 a.m., down from Monday’s close of 98.61 cents U.S..

Jonathan Basile, economist at Credit Suisse Securities in New York, said this indicates the Bank of Canada “will be watching the Canadian dollar more closely” as strength in net exports is predicated on a loonie that doesn’t strengthen too much against its U.S. counterpart.

The statement “appears to be a pretty clear signal of the Bank of Canada’s intention to pause,” said Michael Woolfolk, managing director at BNY Mellon Global Markets in New York. “Moreover, it suggests that the central bank may pause longer than expected. With the Bank concerned now about the economy’s increasing reliance on net exports, it will take particular care not to unnecessarily bolster the loonie through future rate hikes.”

Economists at Royal Bank of Canada and Toronto-Dominion Bank told clients that March of next year might be the earliest at which the central bank resumes rate hikes.

“The economic outlook for Canada has changed,” said the central bank, led by governor Mark Carney. “(A) more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending” as real-estate activity slows and consumers deal with their personal debt.

The decision to keep key rate unchanged leaves “considerable monetary stimulus” in place to achieve the central bank’s preferred two per cent target, the central bank indicated.

Plus, Basile said the central bank signalled three factors that stand in the way of future rate hikes: a weaker U.S. outlook; constraints curbing growth in emerging-market economies; and domestic considerations, most notably household debt.

Tuesday’s rate statement reflects a more dovish tone from the central bank compared to its last decision roughly six weeks ago, when it opted to raise its benchmark interest rate by 25 basis points for a third consecutive time. More detail regarding the central bank’s outlook will emerge Wednesday when the Bank of Canada releases its latest quarterly economic outlook.

The big game-changer, analysts say, is the tepid U.S. economy and the signals from the U.S. Federal Reserve that it’s preparing to inject additional liquidity in the economy through asset purchases, with a dual goal of lowering borrowing costs and boosting inflation expectations.

As a result, a pause from the Bank of Canada “is entirely justifiable,” said Eric Lascelles, chief Canadian strategist at TD Securities, in a note to clients prior to the release of the central bank’s decision. “The thought that if the U.S. needs (further easing), the economic prospects for the U.S., and by extension Canada, are also threatened.”

The Bank of Canada said the global economic recovery is entering a “new phase,” as the factors supporting growth in advanced economies, such as the rebuilding of inventories and pent-up demand, subside just as fiscal stimulus is wound down.

“The combination of difficult labour market dynamics and ongoing de-leveraging . . . is expected to moderate the pace of growth relative to prior expectations,” the central bank said. “These factors will contribute to a weaker-than-projected recovery in the United States in particular.”

Growth in emerging economies is expected to ease as governments in those markets put the brakes on stimulus spending and raise borrowing costs. As it happened, China raised interest rates earlier Tuesday.

And recent moves by emerging markets and advanced economies to intervene in foreign-exchange markets was highlighted by the Bank of Canada as a further risk to the global economic recovery. “Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery,” the central bank said.

The warning emerges just days before a key Group of 20 meeting of finance ministers and central bankers in South Korea in which foreign-exchange policies is now expected to dominate the agenda. Both Carney and Finance Minister Jim Flaherty are set to attend the meeting.

© Copyright (c) Postmedia News

TD mortgages get harder to get out of


TD mortgages just became less appetizing as they are now very difficult to get out of. We do not use them much and now even less.

TD bank overhauls mortgage program

| Wednesday, 13 October 2010
TD bank is redesigning its mortgage program to make it easier for homeowners to tap into their equity and harder for them to switch to another lender when their mortgage renewal comes up.
The main difference of the overhaul is a switch to collateral-charge mortgages, which are similar to lines of credit. The bank is encouraging employees to approve customers at 125 per cent of a home’s actual value with certain conditions, so the homeowner can easily borrow more money if the property value increases.
Unlike traditional mortgages, collateral mortgages are difficult to transfer from one lender to another because they must be paid in full to be cancelled.

Prime to stay the same until March 2011

Report says BoC likely to hold rates until March 2011

This month’s RBC Financial Markets Monthly publication reports that the Bank of Canada is likely to hold rates until March 2010.

Report Excerpts:

Canada takes a breather after sprinting out of recession

With real GDP standing a hair’s breadth away from its pre-recession peak and final domestic demand already treading into new territory, reports of more moderate activity in July did not prove too surprising. The sharp recovery in the housing market started to stall in mid-2010 because pent-up demand generated during the recession was satiated and buying—ahead of the mild tightening in mortgage rules and the implementation or increase in the HST in three provinces—was exhausted. The robust sales pace left a high level of household debt in its wake resulting in the debt-to-income ratio rising to an all-time high in the first quarter.

Recent growth has not been strong enough to exert significant downward pressure on the unemployment rate and inflation pressures have been moderate with the core rate at 1.6%. The headline inflation rate was 1.7% in August, thereby holding below the Bank’s 2% target, even after the harmonization of provincial and federal sales taxes in Ontario and BC were incorporated into the price measure. Unlike in the US, where we expect that core inflation will remain very low, we forecast Canada’s core rate to hold just below the 2% target during the forecast horizon and gravitate above 2% in mid-2012.

Rate increases likely to resume in early 2011

Our overall assessment of the Canadian outlook has changed little in the past month, so we are maintaining our call that the Bank will gradually raise the overnight rate to 2.25% in the second half of 2011. This gradual reduction in policy accommodation will keep a lid on the degree that term interest rates will rise especially against a backdrop of very low U.S. rates. We trimmed our 2011 forecast for yields looking for the two-year rate to end 2011 at 2.85% and the 10-year bond yield at 3.75%.

Other highlights from this month’s Financial Markets Monthly:

  • U.S. data have been a mixed bag and confirm that the U.S. recovery is continuing, albeit slowly. The risk of deflation, not inflation, appears to be at the top of the mind for policymakers now with the Fed likely to implement another round of quantitative easing to ensure that growth and inflation do not slow further.
  • The uncertain global outlook is likely to be the dominant factor in the Bank of Canada shifting to the sidelines for the remainder of 2010.
  • Policymakers in the UK are unlikely to deliver a further easing in policy unless conditions become much worse.
  • The RBA stayed on the sidelines this month although the statement showed a clear tightening bias which sets up for a hike before year end.
  • Canada’s economy sputtered in July after very robust domestic demand earlier in the year.
  • Inflation remains mild with both the headline and core rates below the Bank’s 2% target.
  • The uncertain global outlook is likely to be the dominant factor in the Bank shifting to the sidelines for the remainder of 2010.