Date the rate, marry the home

IN Partnership with

Ample opportunity remains for brokers and their clients despite a slower market, says leading executive

WHILE RISING interest rates may be scaring off some buyers looking to purchase a home, one mortgage broker is advising clients that now could be a good time to buy. “In many cases, it may actually be more affordable today to buy a home, when you consider that values have come down,” Hugo Dos Reis, mortgage broker and partner with Vine Group Mortgage Alliance, told Canadian Mortgage Professional. “If they run the math, many borrowers will find that monthly payments are the same as or better than they were in early 2022 … The market as a whole, depending on where you live, is anywhere from 10 to 30 percent down” in terms of house prices, though places like Alberta are, according to what he is seeing in his Calgary office, seeing prices going up.

Named the #1 team in Canada with Mortgage Alliance in 2017–2021, Vine Group-Mortgage Alliance’s network of lenders, partners, resources, and tools is unmatched in the industry. Vine Group’s philosophy is simple: “We’re in the people business; we just happen to do mortgages.”

Find out more Career Opportunities

“In many cases, it may actually be more affordable today to buy a home, when you consider that values have come down”

Hugo Dos Reis, Vine Group

But he cautions that there are cases where smaller mortgage payments may not be the reality compared to earlier in 2022. In fact, there are cases where “this is not true at all.” With interest rates now higher than before, Dos Reis said the company was often recommending shorter terms of one to three years to allow clients to ride out that rate uncertainty and reassess at the end of their term regarding the best way to proceed, based on their own risk tolerance and market conditions. Dos Reis is sympathetic to buyers who look warily at the rising rates. “A lot of people, when they look at mortgages, they look at the rate because that’s the black-and-white metric they can look at to interpret where we’re at in this market,” Dos Reis said. “For a lot of people, they look at that rate and they just think, ‘Wow, that’s too expensive. I can’t afford it.’ But if you actually work out the monthly payment, because it’s a smaller mortgage, you could actually end up having a smaller adjusted payment.”

Finding the right term For Dos Reis, there are advantages to be had if you tap into the right type of mortgage. “Take a short-term mortgage – maybe it’s a one-year term, maybe it’s a two-year term, whatever you’re comfortable with,” he said. “You’ll be able to secure a decent rate for the next one or two years. But more importantly, you’ve bought into that discount so that in the next 12 months-plus, when the market rebounds and starts its ascent again, not only will you have all this appreciation built in, but you’ll also be in a position now to reset your rate to something that’s more appropriate.”

And just when might we see lower rates? The consensus appears to be that they may start to fall again at some point toward the end of 2023 or beginning of 2024, Dos Reis said, meaning that if borrowers are able to cope with the next one or two years of high monthly payments, they’re likely to face a lower rate on renewal, “which should give [them] some comfort.” Dos Reis is also seeing a shift in his customers’ priorities. While the purchase side of the company’s business has dropped by between 30 and 50 percent, depending on the province, “the refinance part is up. Historically we would do around 50 percent refinances, 50 percent purchases.” Now, he says, it’s more like a 70/30 split. The ability of the Vine team to eke out business in a slowing market, Dos Reis added, is a testament to the quality that shines through at the company.

“The strategy that we took as a company was a hedge strategy. We reached out to clients by mining our database, and identified clients who were most at risk with increasing rates – namely, variable rate holders,” he said. “We told them back in February and March that we should get a rate hold done over the next 120 days.” Rates at that time were in the 3.69 percent to 3.99 percent range for one-to-two-year fixed terms.

“If you work out the monthly payment, because it’s a smaller mortgage, it could end up having a smaller adjusted payment”

Hugo Dos Reis, Vine Group

“By the time we got to June-July, and rates were getting close to five percent, we were able to convert a lot of clients to these shorter-term rates as a hedge against further rate increases.” Having the right mortgage strategy in place can help navigate these times, but he added that having access to emergency funds may be necessary, like using a home equity line of credit. Dos Reis has advice for his fellow brokers: keep an optimistic outlook, even when fielding what he terms “distress calls” from clients.

“Every time the Bank of Canada announces rate increases, I get a dozen-plus emails and a bunch of phone calls,” he said. “We’re being very positive and not thinking the sky is falling.” With all this uncertainty, he advises agents to “continue to engage your clients, because in a time of distress and a time of uncertainty, the best thing you can do is educate your clients – continue to add clarity to what’s actually going on, educate them so they can feel a little more comfortable.” Mortgage brokers have an important role to play during these difficult times, partially through maintaining those business relationships. “This is how you create goodwill, build relationships, so that when things are better you have a very solid foundation to create opportunities and build your business,” said Dos Reis.

News

Mortgage Industry

Best in Mortgage

Specialty

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

Executive Team

Founding partners:

David Goncalves, Hugo Dos Reis, Christopher Darwiche

Across Canada:

Bob Dhindsa

(Saskatchewan), mortgage associate

Charles Kornbluth

(Ontario), director of national sales

Kim Nguyen

(Alberta), regional team lead

Paul Tsu

(British Columbia), regional team lead

Vine Group Mortgage Alliance at a glance

Provinces: Ontario (Toronto, Vaughan, and London), Alberta (Calgary), British Columbia (Vancouver), and Saskatchewan (Regina)

Specialties: Residential and commercial mortgage financing

Of note: Named #1 team in Canada with Mortgage Alliance, 2017–2021

“As a mortgage team, we’ve got a lot of successful agents and our whole business model has been bringing on the best of the best,” he said. “Success breeds more success. And when you have a bunch of people who are very ambitious, some of the biggest performers in the country, all of these amazing ideas come out of these discussions. So we’re always trying to think ahead – how can we create opportunities that don’t exist, in a market that’s very slow and in declining mode?” Spring rise A company discussion at the end of the second quarter saw executives map out a new strategy to get ahead of what they predicted would be a slow 18 months to two years in the midst of that rising-rate environment.