Credit Score TidBit

Here’s a tidbit of info for those that don’t know. Have you ever had a client tell you that their credit score was good because they just pulled it through Equifax’s consumer platform, only to pull a report yourself and see it way lower than your client thought? This is because the consumer is seeing their “Credit score,” and we are seeing their “Beacon score.” Seeing as they likely won’t know what the difference is, here are a few specific differences between the two:

1. The Beacon score is specific to the mortgage industry and the factors there within / The Credit score is more broad and includes predicted habits in all areas of credit.

2. Beacon looks at one’s past 24 months of reporting / Credit looks only 6 months back.

3. Beacon only recognizes a trade line as an influence after 3 months of reporting / Credit recognizes trade lines after first report.

4. Beacon predicts potential delinquency within the next 2yrs / Credit predicts within the next 1yr.

These are the reasons why Credit scores are generally higher than Beacon scores. Consumers can obtain their Beacon score but I believe it is an extra $30 or so. I’m sure we can all remember multiple times a client has said that their score is great, only to hear us tell them it actually isn’t.

Stress Test Causing National Housing Slump: CREA

The Canadian Real Estate Association (CREA) blames the mortgage stress test introduced in January for slow activity across the nation in April.

The housing market has cooled in all respects from April of last year, when the market peaked: the average sale price declined by 11.3 per cent to $495,000, and home sales by 2.9 per cent, reaching the lowest level seen in more than five years.

“The stress test that came into effect this year for homebuyers with more than a 20 per cent down payment continued to cast its shadow over sales activity in April,” said CREA President Barb Sukkau.

All federally regulated lenders must now qualify applicants for their uninsured mortgage at the Bank of Canada’s benchmark rate (currently 5.34%), or their contract rate plus 2 per cent, whichever is higher. This new guideline has priced many out of the market, or forced them into less expensive types of properties.

This becomes apparent when we look at the difference in activity among market segments. Apartment units posted the largest year-over-year price gains at 14.4 per cent, whereas detached homes, typically the most expensive market segment, were down 4.8 per cent.

OSFI, the bank regulator, instituted these new rules in response to overheated markets in the Greater Toronto and Vancouver areas, but its effects are far-reaching, to markets that weren’t considered in need of a cool down in the first place.

Alberta, Saskatchewan and Newfoundland and Labrador were profoundly affected, says CREA, adding to their economic woes of declining natural resource prices. “This is exactly the type of collateral damage that CREA warned the government about,” says Gregory Klump, CREA’s chief economist.

Meanwhile, prices in British Columbia inched up one per cent, driven by high condo sales, and the average selling price remains over $1 million. Toronto has fared worse, with prices down double digits, mostly due to falling sales of detached houses over $2 million. The average selling price is now just under $805,000,

The only markets that saw price gains year-over-year are small cities: Halifax, Montreal and Ottawa.