September 2024 Newsletter

General Angela Calla 27 Sep

Welcome to the September issue of my monthly newsletter!
It is already September and I am excited to share my latest newsletter with you! This month, I have some details about the upcoming Fall market, along with expert tips for staging your home! Scroll down for all the details and have a great month.

2024 Fall Market Outlook

The initial Bank of Canada rate cuts this past summer did not spur housing activity as anticipated, but potentially more on the way will continue to affect the housing market outlook. New listing levels are expected to rise as sellers who may have held back enter the market with the hope that lower mortgage rates will attract additional buyers.

While the current Bank of Canada rate of 4.5% may still not be enough to make a dent in home affordability, it does provide a glimmer of hope for potential buyers as interest rates continue to fall.
Canadians across the country are anxiously awaiting additional rate cuts, promoting future home affordability. While consumer confidence is beginning to rise, mortgage affordability will need to be balanced with rising unemployment to reduce the number of households with strained budgets.
In addition, while home prices have cooled a bit, home prices in Canada remain among the highest in the world’s most advanced economies (Japan, France, Germany, Italy, and the UK). These still -high prices have resulted in many potential first-time home buyers to withdraw for now. Higher property taxes, higher qualifying stress-test rates, and the current wave of mortgage renewals will also factor into how successful the Fall market will be.
In 2023 alone, the country saw an influx of 46% of new Canadians, which also contributes to housing demands and pricing. As rates continue to drop, the hope is that prices will stabilize owing to increased supply as demand rises.
If you are looking to get into the housing market as a buyer or seller, or simply have questions so you can best prepare yourself for a future move, don’t hesitate to reach out to me!

Expert Tips for Staging Your Home

Even in a sellers’ market, there are some ways you can improve your chances of increasing the number of offers and selling your home for the best value.

Check out these expert tips for staging your home to help make the best first impression possible:

  1. Clean and Declutter: Clean, clean, and clean some more! While you might not be able to stage each room in your home, it is vital to ensure that each space is cleaned and decluttered. Especially ensure that counters, carpets, flooring, and appliances are spotless! This not only signals pride of ownership, but it helps display the potential of the spaces to buyers.
  2. Depersonalize: While you’re working through and cleaning your spaces, make sure to depersonalize along the way. Ideally, any family photos, kids’ drawings, etc, should be removed or replaced with more general photography to better appeal to potential buyers.
  3. Focus on Key Spaces: The primary areas in your home are your living room, kitchen, dining room, and master bedroom. If you are not able to get to each room, these are the ones you should focus on to ensure your home is represented as best as possible.
  4. Consider a Fresh Coat: Did you know? According to a RE/MAX Canada Renovation Investment Report, 36% of buyers prefer a fresh coat of paint! This can go a long way to making your home look new and revitalized.
  5. Boost Curb Appeal: While you’re staging your home, don’t forget about curb appeal! The exterior of your home is just as important as the interior – if not MORE important for first impressions. A good place to start would be renting a power washer to scrub down your driveway and exterior walls.

Economic Insights from Dr. Sherry Cooper

As the Bank of Canada cuts interest rates, housing activity has remained relatively weak. Existing home sales were well below historical averages in July, while new listings edged upward. Prices have plateaued, and residential mortgage originations are tepid.

Mortgage balances grew by 3% annually in Q2, the second slowest quarterly pace since 2000.

This portends a further dip in household debt-to-income ratios—welcome news, as elevated leverage drives household financial vulnerability. The central bank is widely expected to continue to cut the overnight policy rate at the remaining meetings this year and well into 2025. Monetary policy remains highly restrictive, with the policy rate at 4.5%, well above the 2.5% inflation rate.

We believe interest rates will continue to fall as the overnight rate heads for 2.75%. By later this year, housing activity is likely to pick up gradually.

In the meantime, Canadian homebuilding remains sturdy despite softness in the resale market and ongoing capacity pressures. Housing starts surged again in July. The data series is volatile, but the trend is strong at just under its recent all-time highs posted in 2021. The strength of residential starts has been dominated by multi-unit construction, while single-family starts have historically been very weak.

The home construction sector has suffered ongoing capacity pressures, including a shortage of construction workers, zoning restrictions and supply bottlenecks. These capacity pressures have delayed housing completions, bringing the number of dwellings under construction to fresh record highs.

Homebuilding has remained remarkably resilient, albeit at a much slower pace than the torrid population growth. The government plans to cool the growth in temporary immigration, but the Bank of Canada recently suggested that the slowdown is likely to be delayed and smaller than originally projected.

Meanwhile, Canadian labour markets are easing. Job vacancy rates have plunged, and unemployment has risen, especially for young workers and new immigrants.

Economic growth has slowed to about 1% this year and will pick up only moderately next year. Inflation is falling without a recession. To be sure, some sectors have slowed meaningfully, especially manufacturing. Canadian businesses are bracing for billions of dollars in losses if the country’s two national railways shut down this week.

More than 9,000 workers at Canadian National Railway Co. and Canadian Pacific Kansas City Ltd. could either be on strike or locked out if no labour agreement is reached by Thursday, disrupting the supply chain industries.

Housing markets will begin to recover as lower interest rates do their job this fall.

 

Angela Calla is an 19-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 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. 

 

 

Attainable Housing Initiative Heather Lands

General Angela Calla 25 Sep

The Attainable Housing Initiative (AHI or Initiative) provides approximately 2,600 strata leasehold homes at an initial 40 percent below market value at the Heather Lands in Vancouver.

The Initiative is intended to provide homes that middle-income, first-time homebuyers can own themselves and live in. It is not intended as an investment vehicle, to generate homes for rent, or to benefit households living outside of B.C.

Read more HERE.

 

Angela Calla is an 19-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 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. 

ENHANCE Your Expertise: IRD Penalties

General Angela Calla 25 Sep

In today’s ever-changing mortgage environment, we understand the challenges, especially when it comes to understanding as a clients the intricacies of Interest Rate Differential (IRD) penalties. We’re here to support you every step of the way. Our products that we offer you before we go to one of the big banks are designed to not only meet your immediate needs but also to protect your long-term financial interests. One way we do this look at monoline lenders with a fair IRD penalty calculation.

Take this example:  one of the big banks has offered you a rate 10 bps lower than what you have been discussing with a mortgage broker. But that lender uses discounted rates. Before you start thinking THIS IS ALL ABOUT THE RATE  learn how the math impacts your future if you are like 7/10 Canadians that will look to break there mortgage for a variety of reasons either with the market or your personal lifestyle on what that lower rate could mean later if they need to break their mortgage in two years:

Let’s compare:

 Client has a slightly lower payment with the other lender and saves about $780 in interest over the two years.
But when they need to break their mortgage, client penalty costs are $23K+ higher.
Client wanted to break the mortgage to take advantage of lower rates. However, due to the high penalty, it doesn’t make sense for the clients to break their term. They are forced to stay with the other lender.
At the end of the term with the other lender, clients will end up with higher interest costs + higher payments for the last 3 years of the term.

How can you avoid costly mistakes and gain Penalty Protection?

  • Understand The Journey – Assess both immediate needs and future financial goals, ensuring you always covered.
  • Understand with Confidence – Life is unpredictable, and most clients will need to break their mortgage. A slightly higher monthly payment can act as insurance against hefty penalties helps protect financial well-being.
  • Leverage Our Expertise – We provide you with extensive product knowledge and transparent penalty information, so you can confidently be guided through any scenario.
  • Review  a Visual – Utilize impactful tools like penalty comparisons that not only make the math clear, but helps you understand the conversation beyond just rates.
  • Keep the Conversation Going – Your Mortgage Broker is here to support you as an expert resource, empowering you with timely and accurate information, ensuring they feel secure in every decision. We advise and you the client always instructs.

Angela Calla is an 19-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 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. 

Great News On the Canadian Inflation Front in August

General Angela Calla 17 Sep

More Good News On The Canadian Inflation Front

The Consumer Price Index (CPI) rose 2.0% year over year in August, the slowest pace since February 2021, and down from a 2.5% gain in July 2024.  core inflation measures averaged 2.35% y/y and excluding mortgage interest, headline inflation was a mere 1.2%– well below the Bank’s target inflation level of 2.0%.  this opens the door for a possible acceleration in Bank of Canada easing.  Governor Macklem has suggested that a 50 bp rate cut is possible if inflation falls too fast as unemployment rises.

The deceleration in headline inflation in August was due, in par, to lower gasoline prices, a combination of lower prices and base-year effect.  The decline in August 2024 was mainly due to lower crude oil prices amid economic concerns in the United States and slowing demand in China.  Excluding gasoline, the CPI rose 2.2% in August, down from 2.5% in July.

Mortgage interest costs and rent remained the most significant contributors to the increase in the CPI in August.  The mortgage interest cost index continued to rise at a slower pace year over year in August (+18.8%) for the 12th consecutive month after peaking in August 2023 (+30.9%).

The CPI fell 0.2% m/m in August after increasing 0.4% in July.  Lower prices for air transportation, gasoline, clothing and footwear, and travel tours led to a monthly decline.  The CPI rose 0.1% in August on a seasonally adjusted monthly basis.

The central bank’s two core inflation measures decreased, averaging a 2.35% yearly pace from 2.55% a month earlier, matching expectations.  According to Bloomberg calculations, a three-month moving average of those measures fell to an annualized pace of 2.4% from 2.8% in July.

August marked the eighth month of headline rates within the central bank’s target range.

Bottom Line

The inflation print is the first of two CPI reports before the Bank of Canada’s next rate decision on Oct. 23.  After the data was released, overnight swaps traders upped their bets on a larger-than-normal reduction at that decision, putting the odds of a 50-basis point cut at just over a coin-flip.  Prices declined in five or eight subsectors every month, which could trigger worries about deflation among central bank officials i it becomes a trend.  Macklem has recently said that bank cares as much about undershooting the 2% inflation target as it is overshooting it.

Markets now suggest a 47% chance of a 50 bps BoC cut on October 23 and a 57% probability of a 25 bps cut.  Next week’s GDP data and the October 15 CPI report loom large in the 25 versus 50 bps debate.

Further rate cuts will no doubt spur a housing recovery, though we suspect a shallow one initially due to affordability issues in Ontario and B.C.  However, three new mortgage rule changes (effective December 15) could speed things along.  the changes will allow all buyers to get a longer 30-yuear mortgage for a new build, first-time buyers to get a similar term for all properties (both new and old), and buyers to get an insured loan on a home priced up to $1.5 Million (versus $1.0 million currently).  The latter change will allow smaller down payments and lower borrowing costs than an uninsured loan.  The 5-year extended term will lower monthly mortgage payments by about 9%.

Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

 

Angela Calla is an 19-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 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. 

July 2024 Newsletter

General Angela Calla 2 Jul

Welcome to the July issue of my monthly newsletter!

Things are starting to heat up as we head into July! For those first-time buyers looking to purchase a home, I have all the details for you below! For those other homeowners hoping to stay cool and enjoy their spaces this season, scroll down for tips on how to turn your backyard into a staycation paradise! Have a great summer!

Entering the Housing Market

With the first Bank of Canada rate drop having occurred in June, many individuals are looking at the housing market with renewed vigor and an expectation that rates will continue to come down to a more sustainable level.

If you are someone who is considering entering the housing market this summer, there are a few things you should keep in mind:

Determine Your Budget: Download my app from Google Play or the Apple iStore to help you calculate mortgage payments, affordability, the income required to qualify, and even estimate your closing costs! It also allows you to connect directly with me through the app so that I can answer any questions you have right in the palm of your hand.
Save For a Down Payment: Your typical down payment should be at least 5% of the purchase price, though 20% down is preferable as anything below that requires default insurance. Your down payment can be done through your own savings account or RRSP’s.

  • Thanks to the Federal Government’s Home Buyer’s Plan, first-time homebuyers can leverage up to $60,000 from their RRSPs (maximum of $120,000 for a couple).
  • PRO TIP: The First Home Savings Account (FHSA) is specifically designed to help first-time homebuyers save for their down payment without having to pay taxes on the interest earned on their savings.

Take Advantage of First-Time Buyer Programs: Did you know? First-time home buyers are eligible for an exemption, reducing the amount of property transfer tax paid, depending on the property’s value.

  • PRO TIP: In addition, Ontario, British Columbia, Prince Edward Island, and the City of Toronto offer land transfer tax rebates for first-time homebuyers.

Get Pre-Approved: This means that a lender has stated (in writing) that you qualify for a mortgage and what amount, based on submitted documentation of your current income and credit history. A pre-approval usually specifies a term, interest rate, and mortgage amount and is typically valid for a brief period, assuming various conditions are met.

There are a few benefits to pre-approval such as:

  • It confirms the maximum amount you can afford to spend.
  • It can secure you an interest rate for 90-120 while you shop for your new home
  • It lets the seller know that securing financing should not be an issue. This is extremely important for competitive markets where lots of offers may be coming in.

Understand the Closing Costs: Closing costs are a one-time fee associated with the sale of a home and are separate from the mortgage insurance and down payment. Typically, these costs range from 1.5-4% of the purchase price, depending on your location. Factoring these costs into your maximum budget can help you narrow down an entirely affordable home and ensure future financial stability and security.

Here are a few closing costs to keep an eye out for:

  • Land Transfer Tax: This is calculated as a percentage of the purchase price of your home, with the amount varying in each province. Some cities, such as Toronto, also have a municipal LTT.
  • Legal Fees and Disbursements: You can expect to incur a minimum of $500 (plus GST/HST) on legal fees for the preparation and recording of official documents.
  • Title Insurance: Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and is typically $300 or more.
  • PST on CMHC Insurance: Though CMHC insurance itself is financed through the mortgage, PST on the insurance is typically paid at the lawyers and sometimes deducted from your advance.
  • Home Inspection Fee: A home inspection is highly recommended as a condition of your Offer to Purchase to prevent any future surprises. This can cost around $500.
  • Appraisal Fee: An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually $400 – $600 but is typically covered by the lender.
  • Property Insurance: Property insurance covers the cost of replacing your home and its contents, and must be in place on closing day. This is paid in monthly or annual premiums.
  • Prepaid Utility Bills: You may need to reimburse the previous owner of your property for prepaid costs such as property taxes, utilities, and so forth.
  • Property Taxes: Property taxes are due on an annual basis and are calculated as a percentage of the home value and vary by municipality. You also may need to reimburse the previous property owner if he/she has already paid property taxes for the full year.

Getting Proper Coverage: Purchasing a home is likely the largest investment you will make, and you want to ensure it is protected.

Various insurance items can be obtained for your home, including:

  • Title Insurance: Required by most lenders to protect against losses should a property ownership dispute arise. This insurance is done through your lawyer/notary and typically runs $100-$300.
  • Mortgage Protection Insurance: An optional debt replacement that protects your family should anything happen in the future. Many homeowners believe they are covered through their life insurance policy, but the Manulife Mortgage Protection Plan is different. Before closing, it’s important to look at the costs and coverage for you!
  • Property & Fire Insurance: Mandatory and needs to be arranged before your closing appointment. Not sure how much to budget for? Get quotes from various insurance companies! Your lawyer/notary or myself can provide recommendations
  • Default Insurance: Only required if you purchase a house with less than a 20% down payment.

Whether you’re looking at a condo, townhouse, rancher, or a two-story property, there is nothing quite like your first home! However, the mortgage process can be intimidating – and that’s where I come in! If you’re looking to get started on your home-buying journey, don’t hesitate to reach out to me today.

5 Ways to Turn Your Home into a Staycation Paradise

We all invest a lot into our homes, so we want to make sure we are enjoying them to the fullest all year long.

As we head into the prime of summer, there is no better time to update your space to turn it into the perfect staycation paradise so that you can fully enjoy the season!

Here are my top 5 tips for creating that backyard oasis:

  1. Expand Your Outdoor Entertaining Area: Take your outdoor space to the next level by adding amenities for entertaining. Consider installing an outdoor kitchen or bar area complete with a grill, refrigerator, and seating area. Adding a pergola or canopy can provide shade and shelter, while outdoor speakers and a fire pit create ambiance for evening gatherings under the stars.
  2. Incorporate Relaxation Zones: Create multiple relaxation zones throughout your home to cater to different activities and moods. Designate a cozy corner with plush seating and soft lighting for reading or meditation. Set up a hammock or hanging chair in the backyard for afternoon naps or stargazing. Incorporate a spa-like bathroom retreat with a luxurious bathtub, candles, and soothing music for a pampering escape.
  3. Embrace Indoor-Outdoor Living: Maximize the connection between your indoor and outdoor spaces to blur the boundaries and create a seamless flow. Install sliding glass doors or folding patio doors to open up your living areas to the backyard, allowing for easy access and natural ventilation. Arrange indoor furniture to face outdoor views and encourage indoor-outdoor socializing.
  4. Infuse Tropical Vibes: Bring the vacation vibes home by incorporating tropical elements into your decor. Add pops of vibrant colors, tropical patterns, and lush greenery throughout your home. Hang palm leaf or bamboo curtains, display tropical fruits in bowls, and accessorize with seashells and driftwood for a breezy, island-inspired ambiance.
  5. Curate Outdoor Activities: Make the most of your outdoor space by curating a variety of activities to enjoy during your staycation. Set up a mini-golf course, bean bag toss, or giant Jenga for backyard games. Create a movie night under the stars with a projector and outdoor screen. Arrange a DIY spa day with facials, massages, and foot baths for a rejuvenating retreat at home.

By incorporating these ideas into your home and yard, you can transform your space into a paradise that grants you relaxation, entertainment, and rejuvenation all summer!

Economic Insights from Dr. Sherry Cooper

The Bank of Canada finally began an easing cycle on June 5, taking their overnight policy rate down 25 bps to 4.75%–the first major central bank to do so. The housing market has languished over the past year with extremely weak affordability.

The Multiple-Listing Service Home Price Index fell again in May and is now down 2.4% year-over-year and is off 14.4% from the early 2022 peak when the overnight rate was a mere 25 basis points. Average transaction prices are down 4% y/y and off nearly 15% from the high.

Except for Calgary, housing markets across the country are in a buyers’ market as inventories of active listings have risen and sales have slowed. Calgary prices were up just under 10% y/y in May, pushing new record highs by the month. In the meantime, Vancouver, Toronto, and Montreal prices are all flat or down from a year ago, and they are still tucked below the levels seen at the early 2022 high.

The significant drivers in Calgary’s outperformance have been more substantial population growth (juiced by interprovincial inflows), better affordability, and valuations that might make some sense for investors.

Even with their lackluster performance since the Bank of Canada began hiking interest rates in March 2022, home prices are still high, having tripled in the past two decades, posting an average 5.7% annual rise, while inflation averaged only 2.2% per year over the same period.

Moreover, the total return on the Toronto Stock Exchange over the same period has been much higher still, averaging 7.9% annually over the past two decades. Despite the recent mini selloff in stocks, the TSX has boasted a more robust return than housing over time. And the US stock market has significantly outperformed the TSX.

Of course, there are significant differences between these two asset classes. Stocks are passive investments that do not provide a place to live or require repairs and maintenance. Housing is more than just a financial investment; it is a lifestyle choice that provides the necessary shelter.

The Bank of Canada will continue to lower interest rates as inflation reaches its 2% target. We expect the overnight rate to fall to about 3% by the end of the easing cycle. But even with only one quarter-point rate cut, bond yields have already fallen significantly in anticipation.

Many mortgage lenders, including three of Canada’s Big Six banks, are slashing fixed mortgage rates, a welcome development for those facing renewal in the coming months. Lenders have already started trimming rates in the wake of a nearly 40-basis-point drop in bond yields, which typically leads fixed mortgage rate pricing.

Over 70% of outstanding mortgages will be renewed within two years. Falling mortgage rates could help soften the payment shock expected for the estimated 2.2 million mortgages that will be renewing at higher rates in the next two years.

But just because rates are falling doesn’t mean all lenders will offer equally low rates in their renewal letters. Typically, they don’t just hand out their especially low rates. That’s where a mortgage broker provides real value, educating borrowers about alternative options, which can be used to haggle a better rate even if they decide not to switch lenders.

For insurable mortgages, the borrower does not need to re-qualify when switching lenders. However, for uninsured mortgage switches, OSFI head Peter Routledge recently rejected renewed calls to remove the mortgage stress test for federally regulated lenders. Knowing your options to improve your bargaining power with your existing lender still pays.

There is a record number of resale condos on the market, and new construction is at a record high. While there remains a longer-term shortage of affordable housing for rent and purchase, it will probably be another year before markets equilibrate and sellers have the advantage.

Housing activity has likely bottomed and will increase as interest rates fall.

 

Angela Calla is an 19-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 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. 

Angela Calla on CBC National News – BOC Rate Decrease

General Angela Calla 6 Jun

Angela Calla appeared on CBC National News yesterday to discuss the Bank of Canada’s recent rate decrease and its impact for homeowners and homebuyers.

The 11 minute interview we believe is a must watch for anyone who is up for renewal, or considering a home purchase.

Topics we cover include

  1. Understanding the Rate Decrease
  2. Different Mortgage Types, how they vairy and impact your wealth
  3. Opportunities for Homebuyers
  4. Important Reminder for Renewals

Watch the full interview here by clicking the image below.

 

Angela Calla is an 19-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 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. 

How to Close on a Presale to Preserve Wealth with Reverse Mortgage

General Angela Calla 24 May

As presale closing dates approach, many clients are trying to figure out how to close on the presale they wrote on 2 years ago. If you are 55 years or older, we may be able to help.

For a client purchasing a presale who no longer qualifies for enough of a mortgage on the new purchase, their parents or grandparents can use CHIP to gift the necessary funds. The parents or grandparents can gift the money with no impact on their monthly cashflow (no payments required) and no tax or investment growth impact from taking the money from savings.

Clients 55 years of age or older purchasing the condo for themselves, either as a rental or a home they will eventually move into, have a few options. If they have good equity in their existing home, we can do an interalia over both properties to finance the full purchase price. We will need to payout the mortgage on their existing (if there is one).

Should the interalia not give them enough funds to close, you can also look at doing a reverse mortgage on whichever property will be their primary residence and fund the remaining amount owing through a traditional mortgage on the other property. We do not consider non-subject properties when qualifying.

And, of course, if your clients have enough equity in their primary residence to fund the purchase of the presale, no interalia is required.

If your clients intend on selling one of the properties within the first year, Reverse Open is a good option. If they plan on keeping it for longer they are likely better off to do a traditional reverse and pay the penalty when they sell. I’m happy to run the numbers for both scenario.

 

Recent Client Story – Presale Condo Purchase

Larry (78) and Brenda (74) have a clear title home in Burnaby valued at $3.2M. Their grandson purchased a presale in 2021, closing at the end of May. Not only does he no longer qualify for the mortgage but the appraisal came back lower than the purchase price so he also needs to make up the $80,000 shortfall.

Reverse approved loan amount: $1,242,500

They gifted their grandson $400,000 to close on his presale. The grandson didn’t need that much but Larry and Brenda decided that, rather than gift him just enough to cover the shortfall and qualify, they would gift him enough to help him live more comfortably.

 

Angela Calla is an 19-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 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. 

Canada’s Banking Regulator Announcement

General Angela Calla 16 Apr

Canada’s banking regulator announces cap on banks’ mortgages to highly indebted borrowers

Canada’s banking regulator is capping the amount of highly leveraged loans in lenders’ residential mortgage portfolios.

Last month, The Globe and Mail was the first to report the Office of the Superintendent of Financial Institutions (OSFI) had told banks they will have to limit the number of mortgages that exceed 4.5 times the borrower’s annual income, which is also known as a loan-to-income (LTI) ratio of 450 per cent.

In the new rules announced Friday, the regulator said that high household debt poses a risk to the “safety and soundness” of banks and the stability of the financial system.

“High LTI loans originated during the low interest rate time periods have created a long-term vulnerability to the Canadian financial system,” OSFI said. “OSFI’s LTI framework will help prevent a similar buildup of loans on books given to highly leveraged and indebted borrowers in the future.”

Residential mortgages portfolios ballooned as interest rates and prices soared, making Canadian homeowners among the most highly indebted globally.

The new income cap adds to existing mortgage qualification rules, including the federal stress test, which requires borrowers to be able to pay their mortgages if interest rates are two percentage points higher than the negotiated rate.

The measure applies to new mortgages in the bank’s overall portfolio, not to individual borrowers. By comparison, the stress test is applied to the borrower.

Even so, the limits will make it more difficult for some borrowers to get a large enough mortgage to purchase a property.

The number of highly leveraged borrowers has dropped since the COVID-19 pandemic’s real estate boom in early 2022. The amount of new mortgages with a LTI ratio above 450 per cent was 12 per cent in the last quarter of 2023, falling from 26 per cent in the first quarter of 2022, according to data from the Bank of Canada.

The new rule will only apply to new mortgages and not to existing loans or loans that come up for renewal. Banks will be allowed to exceed the income ratio for some clients, which could allow flexibility for borrowers in expensive cities such as Toronto and Vancouver.

In developing the LTI limits, OSFI sought feedback from the industry early last year on mortgage lending risks, and specifically debt serviceability. The regulator said that this approach also allows financial institutions to continue to compete in the market.

The limits apply to loans secured against a property, including a second mortgage from another lender and home equity lines of credit.

The new rule does not apply to insured loans for which the borrower must pay for mortgage insurance because their down payment is less than 20 per cent of the property’s purchase price.

OSFI will assess each bank’s loans above the 4.5 times threshold on a quarterly basis. The measure will take effect in the first quarter of next year.

(Article courtesy of The Globe and Mail – Canada’s banking regulator announces cap on banks’ mortgages to highly indebted borrowers – The Globe and Mail)

 

Angela Calla is an 19-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 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. 

March’s Weak Jobs Report Sets The Stage For A June Rate Cut

General Angela Calla 9 Apr

Today’s StatsCanada Labour Force Survey for March is much weaker than expected. Employment fell by 2,200, and the employment rate declined for the sixth consecutive month to 61.4%.

Total hours worked in March were virtually unchanged but up 0.7% compared with 12 months earlier.

The details were similar to the headline: as full-time jobs dipped, total hours worked fell 0.3%, and only two provinces managed job growth. Among the type of worker, a 29k drop in self-employment was the primary source of weakness, while private sector jobs managed a decent 15k gain. The issue for the Bank of Canada is that wage gains are not softening even with a rising jobless rate. Average hourly wages actually nudged up to a 5.1% y/y pace, now more than two percentage points above headline inflation. With productivity barely moving, these 5% gains will feed into costs and threaten to keep inflation sticky.

The unemployment rate in Canada jumped to 6.1% in March of 2024 from 5.8% in the earlier month, the highest since October of 2021, and sharply above market expectations of 5.9%. The result aligned with the Bank of Canada’s rhetoric that higher interest rates have a more significant impact on the Canadian labour market, strengthening the argument for doves in the BoC’s Governing Council that a rate cut may be due by the second quarter. The unemployed population jumped by 60,000 to 1.260 million, with 65% searching for jobs for over one month. Unemployment rose to an over-seven-year high for the youth (12.6% vs 11.6% in February) and grew at a softer pace for the core-aged population (5.2% vs 5%).In March, fewer people were employed in accommodation and food services (-27,000; -2.4%), wholesale and retail trade (-23,000; -0.8%), and professional, scientific, and technical services (-20,000; -1.0%). Employment increased in four industries, led by health care and social assistance (+40,000; +1.5%).

Average hourly wages among employees rose 5.1% (+$1.69 to $34.81) year over year in March, following growth of 5.0% in February (not seasonally adjusted). This is still too high for the Bank of Canada’s comfort.

Bottom Line

The central bank meets again next Wednesday, and a rate cut is unlikely. I still expect rate cuts to begin at the following meeting in June. The Canadian economy, though resilient, will suffer from rising mortgage costs as many mortgages come under renewal over the next two years. Delinquency rates have already risen. Moreover, the planned reduction in temporary residents will also slow economic activity.

With the US jobs market still booming, it is likely the BoC will begin cutting rates before the Fed.

Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

 

Angela Calla is an 19-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 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. 

Great News On The Inflation Front

General Angela Calla 22 Mar

The Consumer Price Index (CPI) rose 2.8% year-over-year in February, down from the 2.9% January pace and much slower than the 3.1% expected rate. Gasoline prices rose in Canada for the first time in five months, which led many analysts to forecast a rise in February inflation as seen in the US. However, offsetting the increase in gas prices was a deceleration in the cost of cellular services, food purchased from stores, and Internet access services.

Excluding gasoline, the headline CPI slowed to a 2.9% year-over-year increase in February, down from 3.2% in January. Prices for rent and the mortgage interest cost index continued to apply upward pressure on the headline CPI.

On a monthly basis, the CPI rose 0.3% in February, the same as in January. The most significant contributors to the monthly increase were higher travel tours and gasoline prices.

On a seasonally adjusted monthly basis, the CPI rose 0.1% in February.

Prices for food purchased from stores continued to ease year over year in February (+2.4%) compared with January (+3.4%). Slower price growth was broad-based, with prices for fresh fruit (-2.6%), processed meat (-0.6%), and fish (-1.3%) declining. Other food preparations (+1.4%), preserved fruit and fruit preparations (+4.0%), cereal products (+1.7%), and dairy products (+0.6%) decelerated in February.

 

February was the first month since October 2021 that grocery prices increased slower than headline inflation. The slower price growth is partially attributable to a base-year effect, as food purchased from stores rose 0.7% month over month in February 2023 due to supply constraints amid unfavourable weather in growing regions and higher input costs.

While grocery price growth has been slowing, prices continue to increase and remain elevated. From February 2021 to February 2024, prices for food purchased from stores increased by 21.6%.

 

The Bank of Canada’s preferred core inflation measures, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trim slowed two ticks to 3.2% in February, and the median also declined two ticks to 3.1% from year-ago levels, as shown in the chart below.

Bottom Line

The next meeting of the Bank of Canada Governing Council is on April 10. Before then, we will see two more important data releases:

  1. The Bank of Canada Business Outlook Survey and Canadian Survey of Consumer Expectation and;
  2. The Labour Force Survey for March.

Neither of these reports will likely derail the central bank’s move to cut interest rates by the June 10 meeting. Indeed, they could begin to cut rates at the April meeting. This would no doubt trigger a whopping Spring housing market, which is likely to be strong. There is significant pent-up demand for housing, and the prospect of home price increases could well move buyers off the sidelines if a surge in new listings comes to fruition.

The Canadian economy is particularly interest rate sensitive because of the vast volumes of mortgages that will be renewed in the next two years. Mortgage delinquency rates are already rising, so a gradual decline in interest rates is welcome news.

As the chart below shows, the three-month rolling average growth rates for the CPI trim and median core measures averaged 2.2% in February–their lowest reading in three years.

According to the Royal Bank economists, “Building on the January CPI report that was already showing broad-based easing in price pressures in Canada, the February report today reaffirmed those trends. Different measures of core inflation decelerated, and the diffusion index that measures the scope of inflation pressures also improved. That measure, however, was still showing slightly broader price pressures than pre-pandemic “norms”, suggesting there’s still room for more improvement.”

With the economy’s slow growth trajectory, the central bank has every reason to begin cutting interest rates soon.

 

(Article Courtesy of Dr. Sherry Cooper, Chief Economist, DLC)

 

Angela Calla is an 19-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 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. 

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