TD Bank (TD-T74.330.520.70%) is revamping its mortgage program, making it easier for homeowners to tap into their equity and harder for them to switch to another lender when their mortgages come up for renewal.

At the heart 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 under certain circumstances, so the homeowner can easily borrow more money if their property increases in value.

Unlike traditional mortgages, the collateral mortgages are difficult to transfer from one lender to another, because they must be paid in full to be cancelled. That means if someone wants to change lenders, they need to renegotiate from scratch.

While other banks offer variations on the collateral mortgage, TD is the first to switch exclusively as of Oct. 18. Existing mortgages aren’t affected by the change.

The bank’s move comes as the housing market cools and fewer Canadians apply for mortgages. It’s an attempt to entice buyers who expect to tap into rising values and don’t plan to shop around for better rates in the future.

Competition for new business is intensifying; record low mortgage rates weren’t enough to stop a slowdown of new buyers in the market during the summer. Sales fell by more than 30 per cent in Toronto and Vancouver, sending lenders scrambling to secure new business with innovative products and even lower rates.

Bank of Montreal currently offers the least expensive five-year fixed term at 3.59 per cent, although only its best applicants are likely to qualify at the special rate. Bank of Nova Scotia offers its customers the ability to split mortgages into two or three different components, each with its own terms.

TD said its new offering will ensure customers don’t pay additional charges to tap into their rising equity, which it called “great news for both you and your customer” in an internal memo to its mortgage brokers.

“Customers may under many circumstances choose to register their collateral charge for more than the approved principal amount of the mortgage, up to 125 per cent of the property value,” the e-mail stated. “This will allow them to borrow additional funds in the future without having to re-register … eliminating any solicitor and in-house registration fees.”

A homeowner can’t simply call the bank and access the extra money they were approved for, however. The deal is dependent on values rising, and in each instance the bank said it would need to inspect the home.

“Part of our credit approval includes an assessment of the current value of the property – an appraisal of the property – to ensure the existing value can support the increased borrowing,” said spokesperson Kelly Hechler.

The move has sparked anger among the country’s independent mortgage brokers, who see the change as a direct shot at an industry that has been gaining market share from the big banks by competing fiercely on mortgage rates.

“Credit unions have always gone this route so it’s not like they are reinventing the wheel,” said Mike Averbach of Vancouver’s Averbach Mortgages. “People literally have to cash out if they want to change over, so it’s just another way for them to be handcuffed to the bank.”

Statistics Canada has released its Investment in non-residential building construction for the third quarter of the 2010, and the figures show that investment reached $10.4 billion in the third quarter. That’s a 2.9% increase from the second quarter and the third consecutive quarterly gain. The increase was mainly the result of higher spending on commercial and industrial buildings.

Investment decreased in Alberta however, due to lower institutional spending. The other only province where investment fell was Saskatchewan, due also to lower spending in the institutional components as well as in the industrial ones.

Commercial component

Investors put $5.9 billion into commercial projects, up 4.1% from the second quarter. It was thee third consecutive quarterly gain, as a result of higher spending on transportation and recreational buildings, especially in Ontario and Alberta.

Industrial component

Investment in the industrial component increased 4.3% to $1.1 billion in the third quarter. It was the second quarterly increase in a row, due to higher investment in the construction of primary industry buildings in eight provinces and the construction of utilities buildings in six provinces.

Provincially, the most substantial contributions to the quarterly increase came from Ontario, where investment rose 7.3% to $453 million, and from Alberta, where it was up 6.5% to $237 million.

Institutional component

Investment in institutional construction edged up 0.4% in the third quarter to $3.4 billion. The biggest contributing factor was higher spending on educational facilities in nine provinces.
Alberta saw the largest decline, mainly the result of lower spending in the construction of health care facilities and government buildings.

More detailed data on investment in non-residential building construction are also available in free tables online from the Key resource module of the Statistics Canada’s website under Summary tables.

For more information, or to enquire about the concepts, methods or data quality of this release, please visit Statistics Canada at

http://www.statcan.gc.ca/daily-quotidien/101018/dq101018b-eng.htm

Canadian existing home sales rose in September for a second straight month while average prices reversed the falling trend with a 1.9% increase from August, the Canadian Real Estate Association said in its latest report.

Seasonally adjusted unit sales rose to 33,913 homes from 32,933 units in August, the group said. Sales in September were 20 percent below year-ago levels and the average price for a home was little changed at C$331,089 ($329,180), the group added.

“Supply and demand are rebalancing, and that’s keeping prices steady in many markets,” said Georges Pahud, president of CREA.

The interest-rate environment continues to help the housing market. While the prime lending rate has jumped after the Bank of Canada raised its overnight lending rate three times since June to 1 percent from a record 0.25 percent, long-term rates continue to fall. Canada’s mortgage rates are now close to the lowest since the Korean War  The central bank said in July it expects housing to contribute 0.6 percentage point to Canada’s 3.5 percent growth this year.

Most analysts now expect the Bank to hold off on any further rate hikes this year while it gauges the effects of recent tightening on the domestic economy, and watches the very uncertain situation south of the border. However, the overall tone of the Bank’s statement was more hawkish than expected, and this has led some economists to suggest this may not be the last hike of the year. Much will depend on economic data out over the next month and a half in advance of the Bank’s next decision on October 19th.

“Mortgage lending rates eased in the third quarter, which helped support sales activity over the past couple of months,” said Gregory Klump, chief economist with CREA. “Interest rates are going nowhere fast, so home ownership will remain within reach for many homebuyers.”