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BLOG / NEWS Updates
Positive News for First-Time Homebuyers…
We welcome the Conservative Governments announcement today proposing to increase the RRSP Home Buyers Plan (HBP) withdrawal up to $35,000 from the current $25,000 for first-time homebuyers. If implemented, a couple buying a home together would have access to an extra $20,000 of their RRSPs to help with their down payment and other expenses relating to their home purchase. Borrowers are considered first-timers if, in the past four years, they have not lived in a home that they or their current spouse/common-law partner owned. (See Conditions.) As you may be aware, CAAMP regularly visits both federal and provincial government officials. This announcement is in line with the kind of recommendations that CAAMP makes during meetings with officials in the Ministry of Finance Office and the Prime Ministers Office. The government respects our industry-leading research and sees your association as a positive resource. Our latest research report released in June A Profile of Home Buying in Canada prepared by CAAMP Chief Economist Will Dunning shows withdrawals from RRSPs (including via the HBP) accounted for 10% of down payment funds for first-time buyers. If put into action, this proposed HBP withdrawal increase would go a long way in helping first-time homebuyers across Canada. Todays announcement follows Stephen Harpers first big-ticket promise of his campaign: another tax break for home renovations made earlier this month. Taxpayers would be able to claim up to 15% of the cost of permanent substantial renovations to homes, condos and cottages. The tax credit would apply to renovation costs between $1,000 and $5,000, allowing a taxpayer to get back up to $600 per year. We look forward to more positive housing-related announcements from other campaigns leading up to the fall election.
Construction intentions for multi-family dwellings in Montréal continue to climb
In October, the value of permits for both single-family and multi-family dwellings increased in the CMAs of Montral and Toronto. However, in the Vancouver CMA, both residential components fell, offsetting the gains in September. Municipalities in the CMA of Montral issued $538.1 million in permits for multi-family dwellings in October, higher than in Toronto ($409.2 million) and Vancouver ($330.6 million). In regards to single-family homes, Toronto registered $451.3 million in permits, followed by Vancouver ($148.1 million) and Montral ($122.4 million). The Montral CMA issued permits approving the construction of 2,956 new units, stemming mainly from multi-family dwellings (2,720). October marked the fifth consecutive month where the number of units approved for multi-family dwellings exceeded 2,000. Vancouver approved the construction of 1,860 new units for multi-family homes, while Toronto (1,691) approved fewer despite having a higher value for the component.
Housing Market Digest by Will Dunning, Economist for Mortgage Professionals Canada
The Office of the Superintendent of Financial Institutions (OSFI) now requires that all residential mortgages by federally-regulated lenders must be stress-tested, at two percentage points above the contract interest rate (or the 5- year posted rate, if that is higher). In combination with the requirements for mortgage insurance, about 90% of all new mortgages will be tested. This can be expected to reduce housing activity by 10-15%. It is on top of the impact from recent rises for mortgage interest rates (another 5-10% drop in activity). The combined 15-25% drop in housing activity will affect the broader economy. In two years, employment could be 150,000-250,000 lower than it would otherwise be. There is a risk that house prices will fall. In a modern economy, a sustained drop in house prices is one of the most dangerous things that can happen: as happened in the US a decade ago, falling house prices can turn into widespread economic decline. Resale activity recovered a bit more in September, to 492,900, due to partial rebounds in BC and Ontario. Activity is flat in most other areas. CREAs House Price Index was flat in September. The year-over-year change is now 10.7% (down from the peak of 19.7% that was seen in April). The sales-to-new-listings ratio (SNLR) was 55.7% in September, slightly above the balanced market threshold of 51%. This indicator points to an outlook for stable prices (at worst). But, as noted, OSFIs stress test policy creates a risk of falling prices. We should, in general, expect that resale activity will trend upwards over time, because the population is growing and the housing inventory is expanding. Therefore, it is useful to look at sales on a per capita basis. Recent activity is below the long-term average.