Garth Lyon

THINK OUTSIDE THE BOX:  The following is the fourth quarterly 2023 national review on key market findings: Inflation holds at 3.1%, but rate cuts are still expected in 2024 

THINK OUTSIDE THE BOX:  With home prices down significantly in certain markets, and a stabilizing of fixed mortgage rate increases, affordability should begin to improve.  Click here to read article

Let me begin with my heartfelt hope that this finds you and your loved ones in good health. I wanted to reach out with some words of reassurance. In short…I’m here. We are in uncharted territory, and the mortgage marketplace is continually shifting to keep pace with economic realities and the needs of Canadian homeowners. Several announcements have been released in quick succession: by the government, lenders, and mortgage insurers. Here is a quick summary of some of the most common questions to help you make sense of it all. I encourage you to give me a call at any time if you have questions about your own situation.

Q Mortgage payment deferrals have been announced. What does it mean and how do I access that?

A Mortgage insurers – Canada Mortgage and Housing Corp (CMHC), Genworth, and Canada Guaranty – have joined with lenders to announce that eligible clients can delay mortgage payments. These are “compassionate” programs for homeowners who are in serious financial straits and are unable to make their mortgage payments for a period of time. You will need to apply to the program, and assistance will be determined on a case-by-case basis – so please do not just start skipping payments. If you urgently need this kind of help, get in touch, and I can help you find the right channels to apply. Lenders have been swamped with calls, so you may need some patience to get through this process. But we can also talk about financing options that might help you at this time.

Q The Bank of Canada has lowered interest rates a few times. Won’t that help me with my variable mortgage or line of credit?

A Yes, any lowering of the Bank of Canada rate will likely mean that your interest rate will also drop. Keep in mind that it usually doesn’t happen instantly, and your own rate won’t necessarily move in lock-step with the Bank of Canada rate. Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in mortgage defaults.

Q So if the rates have dropped so low, should I lock in my variable mortgage? Or trade for a low fixed rate?

A I can go over the pros and cons with you. There is no simple answer.

Q What about my fixed-rate mortgage?

A If you’ve got a fixed-rate mortgage, then nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage. However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to re-negotiate your mortgage to take advantage of today’s rates. I can do a cost/benefit analysis to see if the switch can save you money.

Q I have some credit-card and/or loan debt that now has me worried.

A If you’re carrying high-interest credit card debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings.

We are all navigating turbulent waters and many things are changing. The most important advice I can give you is to get in touch early if you’re anticipating any challenges. Right now we all need to take things as calmly as we can, evaluate our priorities, and make decisions that are needed for the long term.

THINK OUTSIDE THE BOX:  If you are still receiving your normal income and have enough money to make your next mortgage payment, please delay a call to your lender until you are in that situation. Or better yet contact the mortgage professional that you originally worked with when you obtained your mortgage. They will be happy to review all of your options with you!  Below is timely information provided today from VERICO.

6. Deferred Payment Programs are typically capped at six months.

Deferring the first payment will be easier than deferring the second one, and so on. Right now, six months is about the longest deferment you should expect to receive, but no lenders will do this all at once. Most of them will require that you reach out with a request for each individual payment that you are going to miss.

7. Communication is the key.

If you are going to miss your mortgage payment, contact your lender first! Be honest with them about your circumstances and have a plan for how you are going to get back on track. If you are about to miss a payment and cannot get through on the phone lines, send your lender an email. Lenders may waive NSF fees if you miss a payment but can demonstrate to them that you attempted to notify them in advance.

8. A mortgage deferred payment program is for your mortgage payment only.

Property tax installments and insurance premiums are entirely separate from these programs and must continue to be paid. If municipalities and insurance companies offer similar programs (which most municipalities are currently doing),they should be contacted separately .

9. Other options may be available.

In addition to rolling missed payments back into your mortgage for a specified period of time, lenders also have the ability to refinance your mortgage to pay out other debt (subject to qualification), restore your original amortization (which lowers your payment amount),hold a payment (during a temporary suspension of income), or offer you a reduced payment for a specific time. We recommend that you contact your mortgage professional to review these other options. Note: Interest-only payments  are usually not available under these programs.

10. Rental property investors may also be eligible.

Property investors with tenants who have stopped making their rent payments will also be considered, however they will be assessed by the same rigorous standards as noted in # 3 above. Note: Some provincial governments have introduced tenant relief programs. Rental-property owners can also encourage their tenants who have been adversely impacted by COV/D-19 to apply for these programs if available.

Please remember that these are challenging timesfor not only customers butfor the lenders themselves. They are all working extremely hard to try to provide all their customers with first class service and to help those borrowers who are being adversely impacted by COVID-19. It may take you a significant amount of time to reach a customer service representative at your particular lender, so when you dofinally get a live person on the other end of the phone, remember that they are doing their best in difficult times and treat them with the respect they deserve.

THINK OUTSIDE THE BOX:  An increase in the eligible RRSP withdrawal amount to $35,000 (previously $25,000) as well as the announcement of the new CMHC FirstTime Home Buyers Incentive Plan will give eligible first-time homebuyers the ability to lower their borrowing costs.

Mortgage Professionals Canada welcomes aspects of the housing affordability component of today’s Federal Budget.
 
The announcement of a new CMHC First-Time Home Buyers Incentive Plan represents a shared equity mortgage program that would give eligible first-time homebuyers the ability to lower their borrowing costs by sharing the cost of buying a home with CMHC.

The incentive would provide funding (equity sharing) of up to five percent of the purchase price of an existing home, or 10 percent of a newly constructed home. No ongoing monthly payments are required. The buyer would repay the incentive, for example at resale. The government has budgeted up to $1.25 billion over the next three years to support this program.
 
For example, if a borrower purchases a $400,000 home with five per cent down and a five per cent CMHC shared equity mortgage ($20,000), the size of the borrower’s insured mortgage would be reduced from $380,000 to $360,000, helping to lower the borrower’s monthly mortgage bill. This would make it easier for Canadians to buy homes they can afford.
 
The program limits eligibility to households earning a maximum of $120,000 annually, and lets them borrow no more than four times their annual household income. This limits a home purchase to roughly $505,000. This Incentive Plan will be discussed more fully in the coming days, but it is not expected to begin until fall, 2019. In principle, the increased equity share eligibility for newly constructed homes will help incent new construction and supply across Canada.

Further analysis is needed, however, some aspiring homebuyers, especially at the lower end of the economic ladder, will have greater opportunities to purchase a home with the assistance of this new program.

Also of note is an increase in the eligible RRSP withdrawal amount through the Home Buyers’ Plan (HBP). Previously $25,000, this has been increased to a maximum to $35,000.
 
The budget included a lengthy defense of the current stress tests but does suggest that adjustments may be made in future. We will continue to discuss this issue with policymakers.
 
While we did not see immediate movement on the stress tests, and the new Home Buyers Incentive Plan can be seen as an alternate and more targeted response than an insurable 30 year amortization, we are encouraged by the announcements made today.

The forthcoming federal election will provide opportunities to continue the conversations with policymakers and candidates in the coming months. We will continue our ongoing market analysis and maintain our support for a stable housing market for our members and their customers.

Mortgage Professionals Canada  March 19, 2019

THINK OUTSIDE THE BOX: Mortgage Professionals Canada is renewing its call for action to help millennials and other first-time buyers. The association estimates government stress tests will have affected 200,000 families by the time the October election is held; having either reduced or completely eliminated their home purchasing power.

Housing appears to be taking root as a key issue in upcoming federal election.

We got a preview of that when NDP leader Jagmeet Singh hinted at what an NDP government would do as he launched his campaign in a British Columbia by-election.

Singh was light on details but said his Party’s program would get 500,000 affordable housing units built over a 10 year period. He also called for the elimination of the GST on the construction of affordable housing, and a doubling of the first-time buyer’s tax credit to $1,500.

In the 2015 election the current Liberal government came to power, in part, on a pledge to revamp Canada’s National Housing Strategy and entrench the “right to housing”. It also promised to help the middle class and those working to join it. Presumably that included making sure housing would remain affordable for those buyers.

Steps taken by the Liberals since then have fallen short according to critics and the political opposition. More than a year ago the Liberals unveiled their $40 billion, 10-year strategy for housing and launched ongoing consultations. But advocates say the government has gone quiet on the issue of the right to housing. Many feel it is now too late to get legislation passed before Parliament rises in June, ahead of the October election. The Liberals says they have spent nearly $6 billion building and repairing affordable housing, so far.

Overall housing affordability for the middle class also remains an unresolved concern. Rising interest rates, taxes, fees and financial stress tests are seen by many as undue impediments to middle class home ownership.

A recent poll by Abacus Data suggests the price of housing is a top issue for millennials, who will outnumber baby boomers when Canadians vote in the fall.

Mortgage Professionals Canada is renewing its call for action to help millennials and other first-time buyers. The association estimates government stress tests will have affected 200,000 families by the time the October election is held; having either reduced or completely eliminated their home purchasing power.

MPC has put forward a proposal that would make the current B-20 rules less onerous by reducing the stress test interest premium to just 0.75%, from the current 2.0%.

First National Financial January 28, 2019

THINK OUTSIDE THE BOX: Ted Rechtshaffen: The government has effectively decided to support home buyers who do not necessarily have the funds to buy a house

I used to think paying down debt and having a good credit rating would reward me.

Then I went to renegotiate my mortgage and was told that my five-year fixed mortgage rate would be 3.84 per cent. I thought that was pretty good until the neighbour’s 27-year-old kid told me the rate on his mortgage was 3.39 per cent for the same term.

Wait. What?

How did that kid get such a great mortgage while I’m paying an extra 0.45 per cent a year?

The answer is that in 2018, he is a much better credit risk for the bank. This may not make sense on the surface, but let me explain how crazy our mortgage system has become. From the bank’s perspective, they would rather lend to someone who put down very little but had their loan guaranteed by the Canadian Mortgage and Housing Corporation (CMHC), than to someone borrowing $300,000 on a $1.5 million house with no insurance or guarantee on the payment of that mortgage.

Now, it is true that in order to qualify for the low mortgage rates you would have to pay a one-time insurance payment to CMHC or another Insurer. At the moment, this insurance cost is usually a little more than the mortgage rate benefit of getting a lower rate for a low down payment, although there have been times this year, when it was actually better to pay for the insurance and get a much cheaper mortgage.

To understand how we got here, let’s start with the concept of an insured mortgage, an insurable mortgage and an uninsurable mortgage. These terms are key in 2018 to understanding the mortgage-rate mayhem.

Today, an insured mortgage is one where the value of the home is under $1 million, the down payment is less than 20 per cent, the amortization period is at a maximum 25 years, and the home is not a rental property. A person in this scenario can get a rate as low as 3.39 per cent on a five-year fixed mortgage. The borrower pays the mortgage default insurance premium. Mortgage insurers in Canada are CMHC, Genworth and Canada Guaranty.

An insurable mortgage is one where the value of the home is under $1 million, the homeowner puts down more than 20 per cent of the purchase price and the amortization period must be a maximum of 25 years. This person can get a rate as low as 3.74 per cent on a five-year fixed mortgage. The rate is higher as most lenders are insuring these mortgages at the lender’s cost. In other words, the lender is paying the mortgage default insurance premium instead of the borrower.

An uninsurable mortgage covers everything else, but is often simply one where the value of the home is more than $1 million. It also includes refinancing an existing mortgage or equity takeouts (meaning borrowing more to take some cash out of your home), or an amortization period up to 30 years. This person can get a rate as low as 3.84 per cent on a five-year fixed mortgage. The rate is the highest of the three scenarios as the lender cannot acquire default insurance for these mortgages.

(The bank) would rather lend to someone who put down very little but had their loan guaranteed by CMHC

According to Walter Lee, director of business development at First Financial Inc., the person in better financial shape, and with an uninsurable mortgage is facing one more hurdle they didn’t expect.

“Not only are these types of clients facing higher rates, but the renewal rates they receive from their current lender are less competitive than before, because the lender knows that you will face a stress test if you go elsewhere,” said Lee.

By stress test, Lee is referring to the new rule whereby you must qualify for a mortgage based on a formula that assumes you are borrowing at a rate two per cent higher than the actual rate you have negotiated or the Bank of Canada Qualifying Rate — whichever is higher. These days the Bank of Canada Qualifying Rate is 5.34 per cent. While this stress test may not really affect those with high income and good credit, for many people it is restricting the funds available to them to buy a house. With less credit comes lower house prices.

Based on these rules, is it any surprise that more expensive homes are suffering the most in terms of price decreases?

According to Lee, “clients often are shocked at the rate difference. They say ‘You are telling me I can get a better rate to put down less?’” Not only that, but many irst-time buyers say that they are not going to wait another year to save up more, when they think mortgage rates will be higher in a year. Essentially, the message to them is put down less and buy today.

Most people in the market for (a $1 million house) can't purchase it without a mortgage. … with higher rates, they're less likely to pay as much for it.

The government has effectively decided to support home buyers who do not necessarily have the funds to buy a house. This may get me in trouble but why do we want this at this stage of the housing cycle with increasing rates? Don’t we want people to buy a house when they can afford to do so? Especially now?

On the other end of the spectrum, what about the person who has no mortgage but owns a house worth more than $1 million. Even without a mortgage, there is clearly a challenge for them. Most people that are in the market for that house can’t purchase it without a mortgage. Because they are now facing a higher rate on their borrowing cost, they are less likely to pay as much for that house. More importantly, because they can get less total credit from a lender, they are less likely to pay the asking price. The big crime is that this person owns a house worth over $1 million.

The current mortgage environment is a prime example of how politicians have decided to interfere with the natural market and the result is some very strange rules that make winners of the banks and put higher costs on those who should have the lowest costs in a free market system.

Whether it is right or wrong, the end result is a situation that is built in Ottawa and the provincial capitals. It is one that has become misaligned in terms of borrowing costs and borrower risk. In the lending world, that is almost never a good situation.

Ted Rechtshaffen is president and wealth advisor at TriDelta Financial, a boutique wealth management firm focusing on investment counselling and estate planning.

THINK OUTSIDE THE BOX: Let your mortgage broker help you come up with a financial plan to ease the stress and assist in making your dream a reality.

This is Credit Education Week in Canada and a new report from credit card company Capital One and the credit counselling organization Credit Canada Debt Solutions suggests a lot of Canadians worry about their money. It indicates that a striking 44% of Canadians are so stressed about their finances they feel it is hurting their mental health.

The study finds that, on average, Canadians spend about an hour a day fretting over their finances. That is more time than most people spend eating each day.

The results indicate that 76% of Canadians have already missed out on special experiences in order to save money. More than half have skipped vacations and more than a third have scrimped on personal grooming. Nearly 60% say they would take drastic steps to become debt-free, including never travelling or vacationing, never eating out, and adopting a “no-spend” diet.

The study does not specifically address worries about mortgage finances. But given homeownership levels in Canada and the amount of mortgage debt in the country, it would be naive not to consider mortgages as a key source of financial stress.

For mortgage brokers, this kind of anxiety represents an opportunity. Easing client worries with appropriate, thoughtful and timely mortgage advice will go a long way toward winning their trust, respect and business.

First National Financial LP November 12, 2018

THINK OUTSIDE THE BOX: Market watchers who are forecasting another Bank of Canada rate increase next month have been handed more backing for their prediction.

Last week the U.S. Federal Reserve pushed up its policy rate for the eighth time since December of 2015. The Fed increased its benchmark rate by 25 basis points (a quarter of a percent) to a range of 2% to 2.25%, the same level it was at in April 2008, before the height of the global financial crisis. The U.S. central bank also made it clear it intends to continue along that path.

The Fed says it expects one more increase this year and is projecting at least three hikes in 2019. It has also changed some of the language in the accompanying statement, eliminating the phrase “the stance of monetary policy remains accommodative.”

The effects of U.S. rate increases routinely ripple across the border influencing bond rates and the value of the Canadian dollar. A declining loonie could trigger further inflation, as the cost of imported goods increase.

The Bank of Canada is already facing an inflation rate that is running on the high side of its 1% to 3% target range. Unemployment is at generationally low levels in Canada, and working people exercising their spending power can also fuel inflation.

Given these pressures and the BoC’s stated desire to normalize interest rates another quarter-point increase seems very likely on October 24^th.

First National Financial LP October 1, 2018

THINK OUTSIDE THE BOX: The slower economy and tougher job market may have robbed Alberta of its traditional title as “fastest growing province”, but its population growth remains among the strongest in the country.

The Owl – ATB Financial’s Economics & Research Team September 28, 2018

THINK OUTSIDE THE BOX: Many economists believe it would a low-risk stance for the Bank to wait until October before making any move due to the uncertainty surrounding NAFTA and the continuing worries about the debt load being carried by Canadians.

There are more interest rate hikes coming. Bank of Canada Governor Stephen Poloz remained on message during the annual meeting of central bankers in Jackson Hole, Wyoming over the weekend. Of course, the questions that also remain are: How many and when?

Poloz has been consistent in his message that the Bank will make its decisions based on data, and will move gradually. He maintained that stance in Wyoming. Poloz discounted inflation pressures, saying July’s jump to 3% was not unexpected and was caused by “transitory factors” such as higher energy prices and mandatory minimum wage increases. He says the Bank’s reading of core inflation remains near its 2% target.

The Bank of Canada Governor did highlight a key concern that will have to be taken into account as further rate increases are considered – uncertainty about NAFTA. Poloz says the nature and pace of the re-negotiations and ongoing threats, out of the White House, to tear up the deal have put a drag on investment in Canada.

The uncertainty surrounding NAFTA and the continuing worries about the debt load being carried by Canadians mean the central bank may not be able to respond to a rate increase by the U.S. Federal Reserve that is expected in September. Many economists believe it would a low-risk stance for the Bank the wait until October before making any move.

First National Financial LP August 27, 2018

THINK OUTSIDE THE BOX: The housing market shift that is supposed to be led by empty-nest Baby Boomers has been slow to arrive. But a new survey from realtor, Royal LePage, suggests it is coming. Although it might not be as dramatic as forecast.

The Boomer Trends Survey suggests as many as 1.4 million Boomers (those born between 1946 and 1964) will be in the market, buying and selling, over the next five years. That is about 17% of this major demographic. That is significant but it is muted by the finding that nearly 60% intend to stay put and renovate their current home, rather than sell and buy another home.

For mortgage brokers this represents an opportunity when it comes to refinancing and home equity lines of credit.

The long expected shift to downsizing appears to have been stalled by the Great Recession that started in 2008, which led to the rapid escalation of home prices. The survey indicates that 56% of Boomers consider their local housing market to be unaffordable. That jumps to 63% in Ontario and a whopping 78% in British Columbia. Affordability concerns coupled with the fact that the children of Boomers tend to be staying in the family home longer, appear to be holding Boomers in place.

Boomers, though, do appear to be keen to have their children benefit from home ownership. Nearly half of the older generation indicated they would help fund a child’s home purchase, with just over 40% saying they would contribute up to 25% of the purchase price.

First National Financial LP August 13, 2018

THINK OUTSIDE THE BOX: If you’re looking to free up more monthly cash flow, this new product may be a great solution.

There’s a great new flexible interest-only mortgage product that could prove beneficial for a number of borrowers, including first-timers, real estate investors, professionals, seasonal workers and others looking for lower monthly mortgage payments.

Designed to help borrowers increase monthly cash flow by providing maximum flexibility, this product can be used for both purchases and refinances.

I recently tried this product out and was really impressed!

My client was a newly-separated single mother who needed a break on monthly mortgage payments. I was able to improve her monthly cash flow on a $354K mortgage from $1,470 down to $1,261 – a savings of $209 per month/$2,508 annually!

This savings was possible thanks to the ability to place 50% of the mortgage as an adjustable rate mortgage (ARM) and 50% as interest only.

Product Highlights

• Interest-only available up to 65% loan to value (LTV) or 2 components of interest-only and amortizing payments up to 80% LTV
• Interest-only portion must consist of at least 50% of total mortgage amount
• Fixed and adjustable rate options available
• Applicable mortgage amounts range from $200,000 to $2 million
• Qualification based on 30-year amortization for interest-only portion
• 20% prepayment privileges, convertible and portable

If you’re looking to free up more monthly cash flow, this new product may be a great solution. I’d be happy to review your current mortgage to ensure you’re matched with a product that makes the most sense for your unique needs.

Steve Garganis July 31, 2018 CanadaMortgageNews.ca

THINK OUTSIDE THE BOX: The Canadian Bankers Association (CBA) brings the discussion on digital ID system.

Mortgage borrowers could be verified quickly, safely and securely, if Canada adopts a digital ID system.

The Canadian Bankers Association says that a federated digital ID model would protect consumers’ personal data by only revealing the data necessary for a transaction.

The body has published a white paper setting out the benefits of the system, which as well as being used in the mortgage application process would also be used for other financial, business, and government transactions.

“A federated digital ID approach – one interconnected network – would transform the way Canadians identify themselves to government, businesses and each other, with ease and rock-solid security,” said Neil Parmenter, President and CEO, Canadian Bankers Association.

The key benefits
The proposed system has been developed in collaboration with banks, telecommunications companies, law enforcement and government.

Among its main benefits, the CBA report says, would be:

• Save costs and eliminate the duplication of identity collection between the public and private sectors.
• Reduce fraud by removing weaknesses in Canada’s current physical ID systems and greatly limiting exposure to online fraud and identity theft.
• Improve regulatory compliance by streamlining how governments monitor and report complex transactions.
• Enhance privacy and transparency for Canadians by putting the control and visibility of who accesses their most important information back in the hands of consumers.
• Make Canada future ready to adopt leading cyber security practices in the digital economy.

“We hope to kick start an important conversation between the private and public sectors to define a pathway to building a digital ID model that positions our country as a world leader in this increasingly important field,” added Parmenter.

Steve Randall     Real Estate Professional       04 Jun 2018

THINK OUTSIDE THE BOX: OTTAWA - The Bank of Canada kept its key interest rate target on hold Wednesday, but hinted that rate hikes could be coming as it noted the Canadian economy was a little stronger than expected in the first quarter.

The central bank held its target for the overnight rate _ a key financial benchmark that influences the prime lending rates at the country's big banks _ steady at 1.25 per cent.

“Exports of goods were more robust than forecast and data on imports of machinery and equipment suggest continued recovery in investment,'' the Bank of Canada said in a statement.

“Housing resale activity has remained soft into the second quarter, as the housing market continues to adjust to new mortgage guidelines and higher borrowing rates. Going forward, solid labour income growth supports the expectation that housing activity will pick up and consumption will continue to contribute importantly to growth in 2018.''

The central bank also said global economic activity remains broadly on track, but added that ongoing uncertainty about trade policies is dampening global business investment and stresses are developing in some emerging market economies.

It noted that recent developments have reinforced its view that higher rates will be warranted to keep inflation near its target, but added that it will take a gradual approach and be guided by the economic data.

“In particular, the bank will continue to assess the economy's sensitivity to interest rate movements and the evolution of economic capacity,'' it said.

Economists had predicted the Bank of Canada would keep its key rate on hold Wednesday, but many have suggested the rate may be headed higher later this year.

The central bank's decision to keep its trend-setting rate on hold came as inflation sits above the two per cent midpoint of its target range of one to three per cent and core inflation has crept past the two per cent mark for the first time since 2012.

It noted that inflation will likely be a bit higher in the near term than was forecast in its April monetary policy report due to recent increases in gasoline prices, but that it will look through the transitory impact of the fluctuations at the pump.

The central bank has raised its key rate three times since last summer, increases that have prompted the big Canadian banks to raise their prime rates which are used to set the rates charged for variable-rate mortgages and other variable-rate loans.

Its next scheduled interest rate decision is set for July 11 when it will also update its outlook for the economy and inflation in its monetary policy report.

Craig Wong   Canadian Press    30 May 2018

THINK OUTSIDE THE BOX: The Canada Mortgage and Housing Corporation has reported its latest dividend payment to the Government of Canada, its only shareholder.

Ahead of its latest full quarterly report, the crown corporation says it paid a dividend of $1 billion.

In a statement accompanying the announcement, CMHC said:

“As a Crown Corporation, we are the only mortgage insurer whose proceeds benefit Canadians. The dividend balances returning excess capital to the Government, while retaining sufficient capital to protect against housing market risks. Our dividend framework is informed by our risk appetite, stress testing and scenarios analysis. We intend to continue to return excess capital to the Government while establishing a dividend that allows us to maintain capital in line with our long-term capital needs.”

The corporation says that it intends to continue providing quarterly announcements of its dividend payments, subject to the approval of its board of directors.

Steve Randall   REP     25 May 2018

THINK OUTSIDE THE BOX: Amid ever-increasing price and supply pressures, Canada’s millennials are now more open to the idea of becoming landlords and sharing their spaces with other people, according to CIBC’s latest poll of Canadian home owners.

The CIBC study found that Canadians aged 18-34 are far more likely to be landlords than any other demographic. 30% of millennial home owners are already landlords, while 17% are planning to be. This is in stark contrast to only 29% of home owners aged 35-54 and 12% of those aged 55+ being landlords.

55. of millennial landlords said that they already own properties exclusively for rental purposes, while 40% are renting out portions of their homes for extended stays of a year or more (30%) or short-stays (10%).

For those who would be buying homes right now, 54% of millennials said that they would go for homes with sources of rental income, versus 25% of baby boomers.

The numbers uncovered by CIBC bore out the economic rationale for space-sharing: Those who earn income by renting out space in their homes reduce their average housing costs by as much as 70%. Also, Canadians who own a separate rental property earn on average $2,189 per month, 50% greater than their monthly costs.

 “Younger Canadians are more open to sharing their space because they see it as financially advantageous,” according to real estate investor, contractor, and television personality Scott McGillivray.

“There’s definitely a shift in attitudes and a growing interest in income properties, in part driven by a desire to offset high housing costs, but also because it can be a smart way to create extra income and build wealth.”

While 30% of landlords said that their top concern is dealing with unexpected maintenance and repair costs, 52% expressed a belief that it’s “worth the headache”, whether for generating passive income now (22%) or in retirement (28%).

Ephraim Vecina      REP     25 May 2018

THINK OUTSIDE THE BOX: As co-ownership becomes a popular antidote to unaffordability, expect to hear about ensuing acrimony.

“On paper, it seems like a great idea, but in reality…”

Steve Arruda, a Century 21 Regal Realty sales rep, agrees that unaffordability in cities like Toronto and Vancouver is catalyzing creating living arrangements, but he can see myriad problems arising from ones like co-ownership.

“Everybody has the best of plans, and on paper it looks perfect, but when they move in with each other, who’s responsible for what? What if one person wants to sell early because they got a job on the other side of the country or far outside of the city?”

While co-ownership between friends can be tricky, it becomes amplified when more than one family owns and shares a home.

“I’ve had ones where two friends bought a place together and thought it’d be a great idea and good for their families, but they didn’t buy a mansion,” said Arruda. “It was a crammed space for two families and four children. With the respective families or events they host, there will be issues that way. They have the best intentions, but when you’re living in a crammed space, function becomes a different story.

“It could be happy when two friends share but when you start bringing in partners—more personalities under one roof could cause a problem.”

Arruda concedes, however, that the arrangement has better likelihood of succeeding if a duplex is the shared abode. Not to say it won’t have its share of problems.

“I find the best option for that is if the home is divided equally into a duplex, each with its own kitchen and bathroom, and maybe they have a shared living space,” he said. “But if one person wants to sell, the other has to sell or buy that person out.”

Manu Singh, a broker with Right At Home Realty, doesn’t recommend co-ownership but nevertheless suggests both parties draw up an exit strategy.

“They should have an agreement in place, an exit strategy,” he said. “Just a simple contract, not a complicated one, that lays out what the exit strategy is should one party decide to move on. If it’s for investment purposes, maybe the appreciation rate reaches such and such level and only then can the partner decide to sell.”

Singh also recommends a minimum hold period of five years “to recoup a lot of costs of the transaction, like the Land Transfer Tax.”

Neil Sharma     REP     25 May 2018

THINK OUTSIDE THE BOX: As Alberta’s economy continues to improve, provincial lender ATB Financial says the pace of growth will be slower than Albertans are used to.

Not that it’s all bad news; the province is seeing some positive signs among non-energy sectors and there is also growth in employment and the housing market.

But the 4.9% pace of growth in 2017, which made Alberta the fastest growing province in Canada, will not be repeated in 2018 with real GDP expected to grow 2.7% this year and 2.3% in 2019.

That growth will be led by non-energy sectors as while oil prices are rising, the energy sector is still lagging on investment and there are the pipeline concerns weighing on the sector.

“Risks with respect to oil prices remain including the ongoing opposition to pipeline expansion,” said Todd Hirsch, ATB Financial’s Chief Economist. “If there is no resolution—or worse, a negative outcome on pipeline projects—the short- and medium-term outlook for the sector will dim.”

Overall, Hirsch says that sentiment and empirical data are telling contrasting stories.

“In considering the latter, it’s clear that our province’s economy is expanding—but in new ways and at a more moderate pace than many Albertans are used to. For those people who are still without jobs and facing financial hardship as a result of the downturn, it continues to be a tough time, despite what the data are telling us,” he says.

Jobs are being created but in low-wage roles
The rise in employment in Alberta is welcome, but many of the new roles being created are in low paying sectors and in part-time roles.

However, there are signs that burgeoning non-energy sectors will mean new opportunities for prosperity ahead.

Steve Randall   REP     23 May 2018

A surge in mortgage renewals, rising interest rates and new stress testing rules are conspiring to make refinancing your mortgage more complicated and more expensive.

Mortgage broker Kelly Wilson, co-owner of the Wilson Team mortgage brokerage in Ottawa, says a majority of Canadians renew with their same lender, but it's still important to check out your options.

"If you can save yourself 30, 40, 50 basis points, it's going to save you thousands of dollars over the next five-year term,'' Wilson says.

Around 47 per cent of all existing mortgages will need to be refinanced this year, according to CIBC estimates, up from the 25 to 35 per cent range in what the bank says is a typical year. It attributes the increase to the unintended consequence of regulatory changes in recent years.

The surge in renewals comes as mortgage rates have started to move higher.

Several of Canada's big banks have raised their posted rates for mortgages in recent days, while special offer rates have been trending higher since last summer.

Offers for five-year fixed mortgage rates have moved north of three per cent in recent weeks compared with under 2.5 per cent a year ago, according to rate-watching website Ratehub.ca.

Wilson says that means if you're renewing at a higher rate than you're currently paying it will mean your mortgage payments rise, assuming the amoritization period remains the same.

Homeowners with uninsured mortgages who stretched themselves to the limit when they bought their home and are looking to renew their mortgage may also face additional challenges.

Under the rules brought in at the start of the year, if they are looking to change their lender when they renew their mortgage they may have to face a new stress test.

That means, for some borrowers, it may not be possible to move their mortgage to a different bank, leaving them with less power to negotiate with their current lender.

Wilson also says if you have a home equity line of credit, it may cost you a little more if you want to move your mortgage, even if you don't have an outstanding balance on the line of credit.

"You might save on the rate, but because of the fees you might not be able to move around,'' she said.

Grant Rasmussen, CIBC's senior vice-president of mobile advice, recommends you start doing your homework up to six months ahead of your actual renewal date.

He says that means talking not just with your lender, but also with your financial adviser to get an updated look at your expenses and income and how that may have changed since you first obtained your mortgage.

"It's important to make sure you do the math and you feel like you've figured out how can I do the best for my family,'' he said.

He notes that starting early may allow you to lock in a rate, which could save you a few bucks if rates continue to rise this year.

You will also have to weigh the decision of a fixed versus a variable rate mortgage. While the variable-rate offers are lower than the fixed-rate offerings, the Bank of Canada has raised its influential overnight rate target _ which affects variable rate mortgages _ three times since last summer and suggested it is on the path to higher rates.

"How comfortable are you with risk and how much peace of mind do you want? That's a trade off,'' Rasmussen said.

But whatever your situation, he stressed to start early.

"You don't want to end of feeling time pressed and feeling like you have to make these decisions without really mapping out a plan.''

Craig Wong   The Canadian Press     03 May 2018

TD Bank is looking to attract more homebuyers with a hefty discount to its variable mortgage rate as competition among Canada's biggest lenders heats up.

The Toronto-based lender decreased its five-year variable closed rate to 2.45 per cent, or 1.15 per cent lower than its prime rate, for the month of May.

TD's special rate offer comes roughly one week after the Bank of Montreal discounted its variable mortgage rate to 2.45 per cent until the end of May.

Mortgage planner Robert McLister said last week that BMO's special discounted variable rate was the biggest widely advertised discount ever by a Big Six Canadian bank.

TD spokeswoman Julie Bellissimo says its special five-year variable closed rate discount applies to new and renewed mortgages, as well as the variable rate term portion of certain TD home equity lines of credit.

The moves come amid slowing mortgage growth. The Canadian Real Estate Association says national home sales sank to the lowest level in more than five years in April, falling by 13.9 per cent on an annual basis. The national average sale price decreased by 11.3 per cent year-over-year.

The Canadian Press    15 May, 2018

THINK OUTSIDE THE BOX: The spring homebuying season is underway and the intentions of potential homebuyers remains strong.

But a new report says that although buyers are not put off by rising interest rates, most are not taking recent mortgage regulation changes into account when calculating how much they can afford.

The BMO Spring Housing Report reveals that 23% of respondents are planning to buy a primary residence in the next year with an average price of $474,000 nationwide; $580K in Toronto and $603K in Vancouver.

There is no doubt in homebuyers’ minds that interest rates will continue higher (76%) but 53% said they are not stress-testing their mortgages to ensure long-term affordability; although those in Ontario and BC are more likely to do so (53% and 51% respectively).

"For the first time in years, interest rates are beginning to rise – making it increasingly important for Canadians looking to buy a home to stress-test their mortgage against a higher rate to ensure they can afford it over the long term," said Martin Nel, Head, Personal Banking, BMO Bank of Montreal.

He added that mortgage professionals can help buyers navigate the regulations to ensure their budget is accurate.

Mortgage preferences tend to be based on rates

The report also shows that Canadians are generally in favour of fixed rate mortgages – 69% have one – but around half of respondents said their choice is based on rates available when they apply.

"It's encouraging to see that Canadians are thoughtful about weighing their mortgage options based on rate, but it's equally important that they consider how their choice will affect their day-to-day finances," said Mr. Nel. "For example, a customer who likes the certainty of knowing exactly how much of their monthly payment is going to principal versus interest may not be the best fit for a variable mortgage even at a lower starting rate."

Steve Randall       Real Estate Professional         3 May, 2018

THINK OUTSIDE THE BOX: An important number that affects the ability of millions of Canadians to qualify for a mortgage has changed.

The Bank of Canada has raised its conventional five-year mortgage rate from 5.14% to 5.34%.

The rate is the one used for stress tests under the B-20 mortgage lending guideline so any borrower with less than a 20% down payment seeking mortgage insurance must be able to afford payments.

For those who do not require mortgage insurance, the rate is one of the two stress test benchmarks used, the other being the contractual mortgage rate plus two percentage points.

The Canadian Press says that the rate increase coincides with an estimated 47% of mortgages that are due for refinancing in 2018, based on a CIBC Capital Markets report.

The big five banks have also recently increased their 5-year FRM rates. When Toronto Dominion increased its rate is was called the “biggest move in years”.

Steve Randall   Real Estate Professional   10 May 2018

THINK OUTSIDE THE BOX: Scotiabank has joined its Big Five banking peers in raising its benchmark fixed-rate mortgage rate.

Canada's third-biggest lender raised the posted rate for a five-year fixed-rate mortgage from 5.14 per cent to 5.34 per cent, effective Tuesday, while also increasing the posted rates for other terms.

Late last month, TD Bank was the first of the Big Five lenders to raise the benchmark rate, increasing it to 5.59 per cent, due to factors including the competitive landscape, the cost of lending and management of risk.

Royal Bank later raised its benchmark rate to 5.34 per cent, followed by CIBC which raised its posted rate for five-year fixed term mortgages from 4.99 per cent to 5.14.

The Bank of Montreal earlier this month upped the benchmark rate slightly to 5.19 per cent.

The mortgage rate increases from Canada's biggest lenders come as government bond yields rise, signalling higher borrowing costs for corporations.

The Canadian Press 08 May 2018

THINK OUTSIDE THE BOX: Canadians have amassed a $2-trillion mountain of household debt that's casting a big shadow over the timing of the Bank of Canada's next interest rate hike, governor Stephen Poloz said in a speech Tuesday in Yellowknife.

To Poloz, the “sheer size” of debt burden also means its associated risks to endure for a while, although he's optimistic the economy can navigate them.

The debt pile, he said, has been growing for three decades in both absolute terms and when compared to the size of the economy _ and about $1.5 trillion of it currently consists of mortgage debt.

The central bank has concerns about the ability of households to keep paying down their high levels of debt when interest rates continue their rise, as is widely expected over the coming months.

“This debt has increasing implications for monetary policy,” he said in his address to the Yellowknife Chamber of Commerce.

Poloz has introduced three rate hikes since last July following an impressive economic run for Canada that began in late 2016.

But the central bank stuck with its benchmark rate of 1.25 per cent last month as it continued its careful process of determining the best juncture for its next hike. The bank's next announcement is May 30, but many experts only expect Poloz's next increase to come at July's meeting.

Poloz said Tuesday that the volume of what Canadians owe is one of the key reasons why the bank has been taking a cautious approach to raising its trend-setting rate. He called it an important vulnerability for individuals and leaves the entire economy exposed to shocks.

“This debt still poses risks to the economy and financial stability, and its sheer size means that its risks will be with us for some time,” Poloz said.

“But there is good reason to think that we can continue to manage these risks successfully. The economic progress we have seen makes us more confident that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed.”

Poloz said debt is a natural consequence of several factors, including the combination of a strong demand for housing and the prolonged period of low interest rates maintained in recent years to stimulate the economy.

The governor also provided detail on issues the bank is examining as it considers the timing of its next rate increase.

If it raises rates too quickly, the bank risks choking off economic growth, falling short of its ideal inflation target of two per cent and could lead to the type of financial stability risk it's trying to avoid, he said.

But if the governing council lifts the rate too slowly, Poloz said it could intensify inflationary pressures to the point it overshoots the bank's bull's-eye. Poloz added that moving too gradually could also entice Canadians to add even more debt and further boost vulnerabilities.

In his speech, he also noted several other areas of concern the bank is monitoring closely as it considers future hikes. They include the economic impacts of stricter mortgage rules, the ongoing uncertainty about U.S. trade policy, the renegotiation of the North American Free Trade Agreement and a number of competitiveness challenges faced by Canadian exporters.

“These forces will not last forever,” Poloz said.

“As they fade, the need for continued monetary stimulus will also diminish and interest rates will naturally move higher.”

The Canadian Press

Andy Blatchford        Real Estate Professional    02 May 2018

THINK OUTSIDE THE BOX: Home prices are steady in the Calgary housing market despite challenges of rising inventory and slower sales.

The Calgary Real Estate Board says that supply levels have not adjusted to weaker market conditions which is moderating the recovery of prices.

“While the rising inventories are being monitored, prices have remained relatively flat as gains in some areas of the city have been offset by declines in other areas,” commented CREB chief economist Anne-Marie Lurie.

She added that slower sales are to be expected as the provincial economy has yet to improve enough to offset the impact of changes in the mortgage lending industry.

Sales were down 20% year-over-year to 1,518 units in April; 25% below the long-term average.

Year-to-date sales of detached homes are 27% below the 10-year average with 2,991 units sold since the start of 2018.

Meanwhile, inventory is up 32% at 7,324 units but prices have held relatively stable at $436,500 citywide, up 0.21% year-over-year.

“The reality is that there’s selection heading into the active spring market,” said CREB president Tom Westcott.

“For many sellers, they have to decide what price they are willing to accept for a lifestyle change. At the same time, buyers need to understand the supply dynamics and price movements in the specific area, as they may not align with their expectations,” he added.

Steve Randall   Real Estate Professional   02 May 2018

THINK OUTSIDE THE BOX: The Canadian Imperial Bank of Commerce says it will raise its five-year fixed-rate mortgage rate Tuesday by 15 basis points.

Spokesman Tom Wallis says in an email that the rate will change from 4.99 per cent to 5.14 per cent.

Wallis says seven-year and 10-year fixed-rate mortgage rates will also rise 15 basis points, whereas one- and two-year rates will go up 10 basis points.

The Royal Bank of Canada and Toronto Dominion Bank announced last week that they would raise their benchmark mortgage rates.

The increases come as government bond yields rise. Fixed-rate mortgages tend to move with government bond yields of a similar term, reflecting the change in borrowing costs.

The Canadian Press    1 May, 2018

THINK OUTSIDE THE BOX: Two of Canada's biggest banks are raising their benchmark rates for five-year, fixed-rate mortgages.

TD says as of Wednesday it increased its posted rate for five-year fixed mortgages to 5.59 per cent from 5.14 per cent.

Mortgage planner and rate comparison website founder Robert McLister says the increase is "unusual" as the benchmark rate hasn't seen a jump of 45 basis points or more since March 2010.

TD spokeswoman Julie Bellissimo says a number of factors are considered when determining rates including the competitive landscape, the cost of lending and managing risk.

Meanwhile, Royal Bank spokesman AJ Goodman says the lender plans to raise its posted rate for a five-year fixed mortgage on Monday to 5.34 per cent compared with the 5.14 per cent currently posted.

McLister says the actual rates banks offer to borrowers are not seeing an increase but notes the Bank of Canada uses the posted rates at the big banks to calculate the rate used in stress tests to determine whether homebuyers qualify for loans.

The Canadian Press      27 April, 2018

THINK OUTSIDE THE BOX:  The dream of owning a home is still very much alive among Canadian millennials, but when it comes to saving for it they are lagging.

A new poll of 18-37 year-olds by CIBC has found that 46% intend to buy a home in the next five years but 76% have yet to start saving or have saved less than a quarter of their down payment.

"Our survey reveals that few millennials are taking the necessary steps to make the move to homeownership," says Grant Rasmussen, Senior Vice President, Mobile Advice, CIBC. "You can't buy a home with intent and desire alone. It's important to have a financial plan to make the most of your income and set yourself up with the right savings plan to achieve your goals now and in the years ahead."

Four in 10 Canadian millennials currently rent and almost a quarter live with their parents with 94% of those intending to become homebuyers. However, 45% say they don’t believe it is realistic or desirable anymore.

More than a third are already homebuyers but 58% are concerned that rising interest rates will impact their ability to manage current household expenses.

"While most still dream of owning a home one day, higher house prices, the prospect of higher rates, and new qualifying rules are prompting some millennials to pause and question whether being a homeowner is realistic or even desirable for them," says Mr. Rasmussen. "The key is to understand your total housing costs and start planning early so you can consider your rent versus buy options in the context of your overall financial plan and desired lifestyle."

Although many respondents to the poll say that renting can be as expensive as homeownership, they are concerned about the costs of ownership.

But millennial homeowners manage to save more each month ($566 on average) than renters ($368) or live-at-homers ($360), and homeowners have amassed an average nest-egg of just over $60,600 - more than double that of their peers who rent or live at home.

Steve Randall    Real Estate Professional     26 Apr 2018