Canada has seen a surge of international migration over the last few years. With all these new faces in town wanting to plant roots in this great country, it’s a good time to review some of the details surrounding mortgages and how individuals new to Canada can qualify to be homeowners.

Check out some details below on how to get your first mortgage in Canada!

If you are already a Permanent Resident or have received confirmation of Permanent Resident Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.

If you have limited credit, or have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Sagen™ and Canada Guaranty Mortgage Insurance. Please note, for these programs you will typically require a valid work permit is valid up to 3 months post-purchase date.

To qualify for these New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had three months minimum full-time employment in Canada.

• For 90% credit, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.
• If you are seeking credit of 90.01% to 95% you need an international credit report (i.e: Equifax) demonstrating a strong credit profile OR two alternative sources of credit (i.e.: hydro/utilities, telephone, cable, cell phone or auto insurance) demonstrating timely payments (no arrears) for the past 12 months

Depending on your residency status and credit history, another option are alternative or private lenders as well who can fund your mortgage.

If you are unsure of your options or want to make sure you get the best mortgage product possible, please don’t hesitate to contact me. As a dedicated mortgage professional, I have access to dozens of lender options, which will allow me to find you the best options. I would love to set up a virtual appointment to discuss your financial history, goals and the mortgage process.

(This article is from the DLC June 2022 Newsletter)

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Recently, Angela was invited onto the Stress Test, a podcast hosted by the Globe and Mail, to answer some questions about everything one would need to know about mortgages in the current market. Here is what she said:

Pre-approvals, why do I need one and at what point should I get it?

“They’re critical. If you are thinking of buying a home in the next five years, you need to start thinking about your pre-approval now because you need to understand, based on today, ‘Where my income is? And where my credit is?  What plan am I going to put in place to ever buy a home? How much income do I need to show?’ As an example, in today’s market, $100,000 in provable income qualifies you for a $400,000 mortgage. So, what does that mean for you? What type of property does that look at? What type of down payment do you have? How are you getting a down payment? Financial planning is critical, and you can’t create a plan without a map. The biggest mistake people make is, that as soon as they get a job they buy a car. Well, if they have an $800 per month payment, that takes away $200,000 in mortgage qualification. So, if homeownership is one of your goals, then way before you even think you’re going to need it. You need to understand your income, debt, and how you can save for a down payment to plug every dollar in the best possible place to get you a return. Not only on your taxable income but in every single way to ensure that you are setting yourself up for success. Because this isn’t something you just think ‘Okay I need to move next month, I need to go get a pre-approval. It’s a plan, so you need to start way before you think you do. So you can set up a plan to make sure you’re plugging your money in the best places.”

Tell us a little more about getting a rate hold. How long can I get a rate held for? We see rates rising almost week by week, month by month. How long can I lock in for?

“Some lenders will do up to 120 days, is average. Now again, with the variety of lenders that are out there. Some lenders that have the best rates, don’t do pre-approvals at all. Some lenders do pre-approvals for 120 days. Some 90 days. There is a cost to that. There is a why behind everything in the banking and mortgage and finance industry. When you think about that why, well it costs money for the lenders to hold money. Pre-approvals, only about 4 out of every 10 pre-approvals go live. So, for the banks to be holding money at a lower cost than they can lend out money at a higher cost or it no longer becomes available to them. There is a cost to that.”

Angela, how are the mortgage requirements different for self-employed workers or those in the gig economy? My understanding is that lenders like to see two years of consistent income.

“Correct, and again, it is about piecing it together. So if you’re in the same industry, maybe you have contracts with specific lenders. Well then, if we can piece it together and it makes sense and the story makes sense, and it’s the same type of industry but you just kind of shifted a little bit about how you get compensated, then there are lenders who have exceptions to that. So again, when you invest the time, and you invest in yourself, and see exactly what you need to do and where to go to get there. You’re going to have the clear picture, but you have to invest the time and it’s document-heavy.”

Let’s talk a little bit about interest rates, which are rising now. Buyers are subject to a stress test when they are getting a mortgage. For people who are applying for a mortgage, can you tell us how that works?

“Yes, you are tested for a mortgage on an, on average, 2% higher interest rate than what you are actually paying. So, that test is put there because it is anticipated that they want you to be able to qualify for the mortgage, should rates go up. On average, 2% from the time in which you got it. So knowing that that’s the plan that all the lenders have in place, all of us Canadians should be navigating our mortgage and financial plans for that. And then for whatever reason rates go down or they don’t go up as anticipated, you are the only winner because you have access to the equity in your home that you have protected yourself with in the event that things did change. You could do that in several different ways. You could either do that with your payment, or I recommend doing that on the side so that if you have an emergency come up you won’t have to go into debt outside mortgage at a higher rate to be able to navigate that. While it is important to look at your mortgage, you also have to consider how you plan your budget and navigate that to be able to have the most freedom in changing times.”

Angela, I’ve talked to mortgage brokers over the years and have continually been surprised by their stories of how many people break their mortgage before their renewal date. What happens if I break my mortgage?

Seven out of ten, that’s why I recommend a variable as well. Because a variable is consistent, it always only ever has a three-month interest penalty. You know, we don’t know what’s going to happen with discounts. If rates go up, sometimes discounts go down. Maybe that’ll be the time when people can make their move because properties are not going to multiple offers anymore. So if you adapt a fixed-rate mortgage with a traditional bank, your penalty is going to be much higher; four or five percent to get out of. And that’s the thing, you can’t guarantee the timing of when you’re going to need something. That’s why seven out of ten Canadians end up breaking their mortgage early. So, are you going to be someone in that seven out of ten, or are we going to be lucky and not have any changes in circumstances? I know I like to set myself up for the most amount of success to control what I can. We can’t foresee the future, we don’t know if our relationships are guaranteed to last, and one person is not going to be safe forever. Am I going to change jobs? Am I going to be blessed with a pregnancy? You can’t guarantee all those things in life, we get a lot of curve balls. I like to set myself up to be as successful as possible, utilizing every option that’s out there.”

What is the ideal downpayment?

“There is no ideal down payment. It’s whatever you can afford to get into the market ASAP.”

If I have extra money and I want to pay down my mortgage, how does that work?

“Easy, you either just email or call your lender but don’t do that until you are sure you have six months of emergency expenses aside, and that you can’t plug that money into somewhere else to get a tax refund or more cash on hand. Make sure what you do is in your best interest and no one else’s. It’s a one-way street when you put money down on your mortgage.”

What happens when I’m a homeowner, I’m short on money and I need to miss a payment.

“That’s why you keep the money in your account for six months of emergency expenses! Some lenders have that in their policy, some don’t. You contact them, you work it out, and they’re going to take care of you. But different lenders are different, that’s why when we said gig economy, I know some lenders are terrible for the gig economy and some are really good at it and allow you to skip some payments. Especially if unions go on strike and so forth, so again interview the people you work with, and make sure they get your lifestyle and goals.”

How do you get financing if you’re teaming up to buy a house with a friend or sibling, instead of following the traditional path of going solo or with a partner?

“Very risky, you need to document it up the yin yang. I can tell you the good, the bad, the ugly. I’ve done it myself, and I wouldn’t do it again. I would do it with a spouse or no one at this point. But you got a lot to consider because not everyone is exactly who they are and is influenced by the same people in 5, 10, or 20 years. You can’t guarantee if you will or will not qualify later down the road. So, you need to have a real hard thought about if you really want to do that and what your outs are.”

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

The housing market continues to favour sellers as we move into the summer months. If you’re thinking of selling, this is a great time to do so! Not only will your home likely be listed on the market for a shorter period of time, but most sellers are currently receiving multiple offers on their sale. This is due to the increasingly high demand for housing with limited homes currently available on the market.

However, even in a seller’s market, there are some things you can do to help improve your chances of selling your home and getting the best offer! Here are some tips for selling your home in a seller’s market:

List Your Home on a Friday

Depending on the location, Friday is typically the best day of the week to put your home up for sale. Most individuals have weekends free or can take Friday’s off early should they be interested in a home for sale! Be sure to include multiple photos of the home in your listing, or even a virtual tour video if possible, to get your listing off on the right foot.

Offer Limiting Showings

Another good strategy for maximizing your offers in a seller’s market is to limit your showings. Restricting the hours and days that you show your home will allow you to have multiple buyers touring at the same time, which tends to create quiet competition as the buyers know other individuals are interested.

Lower the Sale Price

While not always necessary, lowering the sale price can make your home even more attractive to potential buyers. If you get multiple buyers interested, it will leave some wiggle room for buyers to bid over the asking price.

Make the Most of a Bidding War

If you do end up with a bidding war on your home, you will want to make the most of it. Firstly, always inform buyers of the competition and encourage stronger offers. Secondly, respond to one offer with a counteroffer and set the others aside until you get a response. Thirdly, accept the best offer.

However! Keep in mind that the highest offer might not always be the best one. Some things to keep an eye out for that are conducive of a ‘strong’ offer include: a cash offer, a large down payment, few to no conditions and a flexible moving date.

If you’re looking to sell this year, make sure you utilize a top realtor who can help you navigate the current market settings so that you get the most out of your home! And don’t forget to reach out to your mortgage professional for all the information around moving and how that affects your mortgage.

(This article is from the DLC June 2022 newsletter)

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Another Jumbo Rate Hike, Signalling More To Come

The Governing Council of the Bank of Canada raised the overnight policy rate by a full 50 basis points once again today, marking the third rate hike this year. The two back-to-back half-point increases are without precedent, but so were the dramatic pandemic rate cuts in the spring of 2020. Indeed, with the surge in Canadian inflation to 6.8% in April, the Bank of Canada is still behind the curve. The chart below shows that inflation remains well above the Bank’s forecasts. Today’s press release suggests they now estimate that inflation rose again in May and could well accelerate further.

Today’s policy statement emphasized that “As pervasive input price pressures feed through into consumer prices, inflation continues to broaden, with core measures of inflation ranging between 3.2% and 5.1%. Almost 70% of CPI categories now show inflation above 3%. The risk of elevated inflation becoming entrenched has risen. The Bank will use its monetary policy tools to return inflation to target and keep inflation expectations well anchored.”

“The increase in global inflation is occurring as the global economy slows. The Russian invasion of Ukraine, China’s COVID-related lockdowns, and ongoing supply disruptions are all weighing on activity and boosting inflation. The war has increased uncertainty and is putting further upward pressure on prices for energy and agricultural commodities. This is dampening the outlook, particularly in Europe. In the United States, private domestic demand remains robust, despite the economy contracting in the first quarter of 2022.”

The Bank said that “Canadian economic activity is strong and the economy is clearly operating in excess demand. National accounts data for the first quarter of 2022 showed GDP growth of 3.1 percent, in line with the Bank’s April Monetary Policy Report (MPR) projection. Job vacancies are elevated, companies are reporting widespread labour shortages, and wage growth has been picking up and broadening across sectors. Housing market activity is moderating from exceptionally high levels. With consumer spending in Canada remaining robust and exports anticipated to strengthen, growth in the second quarter is expected to be solid”.

Bottom Line

The Bank of Canada couldn’t be more forthright. The concluding paragraph of the policy statement is as follows: “With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continues to judge that interest rates will need to rise further. The policy interest rate remains the Bank’s primary monetary policy instrument, with quantitative tightening acting as a complementary tool. The pace of further increases in the policy rate will be guided by the Bank’s ongoing assessment of the economy and inflation, and the Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target.”

The Bank of Canada has told us we should expect at least another 50 bps rate hike when they meet again on July 13. It could even be 75 bps if inflation shows no sign of decelerating. The Bank estimates that the overnight rate’s neutral (noninflationary) level is  2%-to-3%. Traders currently expect the policy rate to end the year at roughly 3%.

This was a very hawkish policy statement. The central bank is defending its credibility and will undoubtedly continue to tighten monetary policy aggressively.

(This article is courtesy of the Sherry Cooper Assoc.)

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Here at the Angela Calla Mortgage Team, we recognize the value of caring for our senior loved ones. In recognition of Personal Support Workers Day, we wanted to share this new award from our partners at HomeEquity Bank that highlights those who see to the care of some of the most vulnerable in our community.

We want to recognize the crucial contributions that PSWs make in the lives of Canadians 55 and up, and in enabling them to age with independence, comfort and dignity.

Nominate a Home Care Hero in Your Life

HomeEquity Bank’s Home Care Heroes Award gives you, our partners, the opportunity to nominate a PSW who has made a positive impact in their life or the lives of their clients. If you have a Personal Support Worker in your life, now is the time to shine a light on the meaningful contributions they have made for you or someone you care about.

Until June 6, Canadians 55 and up, their families, or businesses that engage with PSWs can nominate a PSW as a HomeEquity Bank Home Care Hero. Three Home Care Heroes will be announced by HomeEquity Bank the week of June 13th, with each winner receiving $2,500.

Click here to nominate a Home Care Hero.

Warmly, 

The Angela Calla Mortgage Team

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Mortgages are required to qualify based on the stress test (the higher of 5.25% or your actual contract rate + 2%). Fixed rates are over 4%, putting the stress test at over 6%. Many people opt for variables as rates can be as low as 2.3% allowing them to qualify using 5.25% increasing the maximum allowable mortgage.

As an example, if we took a conventional insured mortgage of $100,000 with a fixed 4.29 rate and a 25-year amortization, the qualifying rate is then 6.29, requiring a $20,000 income. The same mortgage with a 5.25 max variable rate would only require $18,000 income.

Therefore the difference between a fixed-rate and variable-rate mortgage in qualifying rates is about 11%.

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

The trendiest type of home equity line of credit is in the crosshairs of Canada’s banking regulator, which is looking to curb risky borrowing as rising interest rates put added pressure on heavily indebted homeowners.

The product under scrutiny is the readvanceable mortgage – a traditional mortgage combined with a line of credit that increases in size as a customer pays down the mortgage principal. The regulator, the Office of the Superintendent of Financial Institutions (OSFI), calls them combined mortgage-HELOC loan programs, or “CLPs,” and has been watching warily as they have exploded in popularity while home prices have soared.

In the first two years of the COVID-19 pandemic, readvanceable mortgage borrowing increased 34 per cent and the combined-loan products had a total value of $737-billion in the first quarter of 2022, according to Bank of Canada data. That accounted for 42 per cent of all residential secured lending, higher than 37 per cent in the first quarter of 2020 and 36.5 per cent in the same period in 2019.

Now more than ever, owning a house is not a retirement plan

What mortgage rate should you choose right now? Three economists weigh in:

That sharp increase has caught OSFI’s attention. In a January speech, Superintendent Peter Routledge said readvanceable mortgages now make up “a significant portion of uninsured Canadian household mortgage debt.” And while he acknowledged they can be useful financial tools when used responsibly, Mr. Routledge said “they can also create vulnerabilities” for the financial system and increase the “risk of loss to lenders.”

OSFI has said it will announce changes to the rules governing these products this spring, and outlined two key concerns. One is that the ability to borrow back equity from a home after each principal payment has the potential to keep customers deep in debt.

The other is that HELOCs can be used to mask cash flow issues a borrower may have, making it harder for lenders and regulators to detect looming problems, especially in times of crisis.

In a speech last November, Mr. Routledge hinted OSFI might compel banks to classify readvanceable mortgages as loans that are more risky, which would make them more expensive for lenders to carry on their books as they would have to set aside more capital against each loan. He also said the regulator may tighten up the rules about how lenders underwrite these loans.

Bankers and mortgage industry experts say the regulator could also rein in limits on how much homeowners can borrow against their homes, or force them to requalify for increases to their HELOC.

Those changes might help curb some of the most precarious borrowing, but it isn’t clear they would significantly slow the demand. Experts say banks would likely pass on higher capital costs of those mortgages by charging customers higher interest rates.

“It would raise the costs for the lenders, in which case the pricing strategy for those types of products would have to be recalculated for all lenders,” said Maxime Stencer, a director with mortgage lobby group Mortgage Professionals Canada. “If there’s more costs involved in manufacturing that product and holding that product, then it becomes more costly to provide it to the customers, so customers would probably be affected by it.”

Readvanceable mortgages are now a staple product for most major lenders. Banks pitch them as a powerful borrowing tool that allows customers easy access to the equity in their homes.

A website promoting Bank of Montreal’s Homeowner ReadiLine puts the concept of the readvanceable mortgage succinctly: “Apply once. Borrow some. Pay back some. Borrow again. Pay down your mortgage. Borrow even more.”

Other banks have branded their readvancable mortgages with punchy names such as TD’s Home Equity FlexLine and CIBC’s Home Power Plan. Spokespeople for Canada’s five largest banks declined to say what proportion of their overall mortgage lending these products represent.

But regulators say the products also risk allowing customers to spend beyond their means and accumulate persistent debt that can make them more vulnerable in an economic downturn.

As national home prices skyrocketed late last year, Mr. Routledge said in November that the ability readvanceable mortgages give homeowners to boost their borrowing “may be simultaneously fuelling and helping Canadians afford rising home valuations.” That is because homeowners can borrow on lines of credit tied to their existing homes to buy vacation and investment properties.

Today, the housing market has cooled dramatically owing to higher mortgage rates. Economists predict the typical home price in Canada could decline by double-digit percentages this year.

That would lower the value of a homeowner’s property relative to the size of their mortgage and push them closer to a level of debt that OSFI views as troublesome: Borrowers who owe their lender more than 65 per cent of the value of the home, also known as a loan-to-value (LTV) ratio, which is a key metric used to assess risk in the financial system. A higher ratio represents a high level of indebtedness that could pose more problems for the financial system.

“That subset of borrowers who owe more than 65 per cent LTV poses the greatest risk,” said OSFI spokesperson Carole Saindon in an e-mail this week.

According to Bank of Canada data, borrowers above that threshold represented 28 per cent of the outstanding combined mortgage loans in the first quarter of this year. In the first quarter of 2020, the percentage was 42 per cent.

It is not clear whether that higher-risk borrowing level declined because home prices are up significantly, or because borrowers were drawing smaller amounts from their HELOCs.

Regardless, with home prices starting to cascade down, the lower prices will put upward pressure on homeowners’ LTV ratios.

“It is critical to note that these figures are calculated on the current market value of the homes and are subject to change as the market moves,” Ms. Saindon said. “If housing prices pull back from those peak levels, we would expect current LTVs to increase and the portion above 65 per cent to increase as well.”

That means borrowers could suddenly find themselves with a much higher ratio. If they breach the 65 per cent LTV threshold on the HELOC portion of their combined loan, they will have to start paying down some of the HELOC principal. For borrowers who are stretched to the max, this could wreak havoc on their finances.

Most HELOCs only require customers to pay the accrued interest, not the loan’s principal. And because the loans are secured against a borrower’s home, they typically carry lower interest rates than unsecured debt.

One reason banks like offering readvanceable mortgages is that they make consumers less likely to switch to a competitor. It is easy to assign a traditional mortgage from one bank to another, but a CLP must be fully discharged from one lender and re-registered with the new one. That process requires the borrower to pay fees and go through administrative hassles.

It is unclear whether these combined loans pose an imminent risk to the financial system. Bank of Canada data show that a large proportion of customers have relatively low levels of debt. As of the first quarter of this year, 41 per cent of combined loan borrowers had an LTV at or under 50 per cent.

The mortgage industry says OSFI is overreacting. They say HELOCs give borrowers easy access to the equity in their homes at a lower interest rate than other loans such as credit cards, personal lines of credit and payday loans.

HELOCs are commonly used for home renovations, investments in rental properties, to consolidate more costly debt from credit cards at lower interest rates, as well as a source of emergency funds if a borrower needs a quick cash infusion.

For example, if a borrower loses their job and no longer has employment income to pay their mortgage, drawing on a HELOC could be a low-cost, stopgap measure to make their mortgage payments while they look for another source of income.

“HELOCs prevent a lot more defaults than they cause. The reason is simple. When times get tough and you have no fallback liquidity, readvanceable mortgages let you continue paying your mortgage,” said Robert McLister, mortgage broker and strategist.

What worries regulators is when stopgap measures turn into permanent solutions – a cycle of borrowing that the Financial Consumer Agency of Canada has labelled a “home equity extraction debt spiral.”

(This article is from the Globe and Mail)

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Canadian Housing Market Feels The Pinch of Higher Rates

Statistics released today by the Canadian Real Estate Association (CREA) show that the slowdown that began in March in response to higher interest rates has broadened. In April, national home sales dropped by 12.6% on a month-over-month (m/m) basis. The decline placed the monthly activity at its lowest level since the summer of 2020 (see chart below).

While the national decline was led by the Greater Toronto Area (GTA) simply because of its size, sales were down in 80% of local markets, with most other large markets posting double-digit month-over-month declines in April. The exceptions were Victoria, Montreal and Halifax-Dartmouth, where sales edged up slightly.

The actual (not seasonally adjusted) number of transactions in April 2022 came in 25.7% below the record for that month set last year. As has been the case since last summer, it was still the third-highest April sales figure ever behind 2021 and 2016.

Jill Oudil, Chair of CREA, said, “Following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue. For buyers, this slowdown could mean more time to consider options in the market. For sellers, it could necessitate a return to more traditional marketing strategies.”

“After 12 years of ‘higher interest rates are just around the corner,’ here they are,” said Shaun Cathcart, CREA’s Senior Economist. “But it’s less about what the Bank of Canada has done so far. It’s about a pretty steep pace of continued tightening that markets expect to play out over the balance of the year because that is already being factored into fixed mortgage rates. Of course, those have, for that very reason, been on the rise since the beginning of 2021, so why the big market reaction only now? It’s likely because typical discounted 5-year fixed rates have, in the space of a month, gone from the low 3% range to the low 4% range. The stress test is the higher of 5.25% or the contract rate plus 2%. For fixed borrowers, the stress test has just moved from 5.25% to the low 6% range – close to a 1% increase in a month! It won’t take much more movement by the Bank of Canada for this to start to affect the variable space as well.”

New Listings

The number of newly listed homes edged back by 2.2% on a month-over-month basis in April. The slight monthly decline resulted from a relatively even split between markets where listings rose and those where they fell. Notable declines were seen in the Lower Mainland and Calgary, while listings increased in Victoria and Edmonton.

With sales falling by more than new listings in April, the sales-to-new listings ratio eased back to 66.5% – its lowest level since June 2020. This reading is right on the border between what would constitute a seller’s and a balanced market. The long-term average for the national sales-to-new listings ratio is 55.2%.

More than half of local markets were balanced based on the sales-to-new listings ratio being between one standard deviation above or below the long-term average in April 2022. A little less than half were in seller’s market territory.

There were 2.2 months of inventory on a national basis at the end of April 2022, still historically very low but up from slightly lower readings in the previous eight months. The long-term average for this measure is a little over five months.

Home Prices

The non-seasonally adjusted Aggregate Composite MLS® HPI was still up by 23.8% on a year-over-year basis in April, although this was a marked slowdown from the near-30% record increase logged just two months earlier.

Bottom Line

The fever broke in the Canadian housing market last month. Nevertheless, despite the sizeable two-month slide in sales, activity is still almost 10% above pre-COVID levels and the raw April sales tally was still one of the highest on record.

Markets in Ontario are weakening most, significantly further outside the core of Toronto. Sales in the province slid 21% in April and are now in line with pre-pandemic activity levels. The market balance has gone from drum tight with “not enough supply” to one that resembles the 2017-19 correction period. Elsewhere, Vancouver and Montreal look better with relatively balanced markets, while others like Alberta and parts of Atlantic Canada remain pretty strong.

The Bank of Canada will likely hike interest rates by another 50 bps on June 1.

(This article is from the Sherry Cooper Assoc.)

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

With interest rates increasing and market conditions beginning to change, we asked mortgage broker Angela Calla three questions about what’s happening in the mortgage market today. Here’s what she told us.

What lending advice can Realtors give their clients as interest rates climb?

Advanced planning is the key to success. Over the last few months, we saw that those who got a rate hold pre-approval were able to secure fixed rates in the 2 per cent range compared to those who did not and now feel discouraged with fixed rates being over 4 per cent in a very short period.

No one can control the market, but you can protect yourself by being prepared and securing a formal rate hold when looking to buy. The same goes for the ongoing service you provide to your clients. If they have a renewal coming up, don’t wait. Renewing early can potentially save your clients thousands.

Different options can also present different opportunities. Right now, borrowers will qualify for the highest amount if they take a variable rate. Remember, variable rate mortgages can be locked in at any time with no cost or need to re-approve.

Can you see the government adjusting the stress test and what impact would it have?

I don’t foresee that happening, but it’s likely that the federal government could implement the changes they suggested during their latest campaign:

• Raising the dollar cap of insured mortgages to $1.25 million (from $1 million); and
• Increasing the amortization period.

Both would present more opportunities for buyers to get more value for their money and offset the increase in rates. We saw the pendulum swing in this direction back in 2006/2007, when rates were still higher than they are today.

Some banks that specialize in extended ratios and don’t follow the insured guidelines are only accessible through mortgage brokers. They already have 40-year mortgage amortizations, which isn’t new, it’s just priced differently and had been paused from time to time and started back in 2006.

What opportunities does this lending environment create for consumers in a good financial position?

Looking at the Canadian landscape, over 30 per cent of homes owned are mortgage free. This presents an opportunity for multigenerational wealth planning so families can benefit from investing in real estate as early as possible.

The key is to start early. There are non-taxable ways for parents to gift funds to their children to purchase a home or income/vacation property without impacting their cashflow through reverse mortgages. Consumers can design the life they want to live, build their family legacy, and still enjoy life while supporting our economy.

(This article is courtesy of the Real Estate Board of Greater Vancouver)

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

If you have a static payment Variable Rate Mortgage (where your payment does not change, even if the Prime Rate rises), here is a decent article about the “Trigger Rate” (This was something I also wrote about in my book The Mortgage Code).

The Trigger Rate is reached once your payment is no longer enough to cover the interest payments. All lenders treat this a little differently, and most of us have a while to go before we even reach this Trigger Rate.

(If you have an iPhone and do not have a Globe and Mail subscription, you should be able to open the article in a “Private” tab to read)

Why Variable-Rate Penalties are Cheaper

“Ever wonder why prepayment penalties are often so much greater with fixed-rate mortgages? Standard variable-rate penalties are only three months’ interest – roughly $800 per $100,000 borrowed, at today’s rates.

But fixed-rate mortgage penalties are usually based on the higher of three months’ interest or the interest rate differential. They can go up to $2,500 to $5,000 per $100,000 borrowed if rates are flat to trending down – depending on your lender and interest rates at the time.

“Fixed-rate mortgages are backed by investors looking for non-fluctuating returns,” says Andrew Gilmour, managing director at CMLS Financial. In other words, the investors and banks who fund fixed mortgages don’t like surprises.

When a borrower breaks their fixed-rate mortgage early, penalties help those investors recoup the return they originally planned on, “which is why the penalty increases as rates on new mortgages go lower,” he says.

“On the other hand, floating-rate mortgages are usually quoted as a spread to a floating benchmark, the prime rate for example,” he adds. That spread usually doesn’t change dramatically over the course of the mortgage term.

As a result, if you break a variable-rate mortgage early, the investor can usually reinvest at close to the return that was originally planned, “since the same benchmark would be used for a new mortgage,” Mr. Gilmour says.

What’s more, funds for floating-rate mortgages are more often supplied from a bank’s internal sources (deposits, for example), notes Albert Collu, chief executive of Marathon Mortgage Corp. “Those internal costs of funds are not nearly the same as the liability of providing a guaranteed return when securitizing and hedging a fixed-rate mortgage,” he says.

That’s why fixed-rate mortgage penalties can be drastically larger, particularly when rates are falling. And falling rates are indeed likely after our central bank gets inflation under control. At that point, hundreds of thousands of Canadians will be rushing to refinance. And many will be learning about penalties the hard way.”

(You can read the full article here at the Globe and Mail)

Angela Calla is an 18-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. 

In August of 2020, at the young age of 37, Angela surpassed $1 Billion dollars in funded personal mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog.