Clarifications on Canada Mortgage Changes

Finally!  Here are some clarifications on mortgage changes The Bank of Canada announced almost a month ago!

Effective April 19^th, all terms less than 5 years that are high ratio insured mortgages (anything less than 80% Loan to Value) will be qualified using the greater of the chartered bank 5-year posted rate (5.39% currently), or the term rate (some banks have fixed rates on 5 – 10 year terms that are higher than 5.39%).  Currently most banks are qualifying right around 4% on variables and will only qualify higher on fixed terms less than 3 years.  So what does this mean?  Until CMHC changes its mind again, 5 year fixed rates are the only rates that you won’t have to qualify on the highest rate.    

The posted qualifying rate will be published by the Bank of Canada each Monday.  Here’s the link:  Posted Mortgage Rate  (Look for series V121764.)

More not-so-good news for Canadians – Fixed rates look like they will be going up right away!  How do we know?  Because Canada’s 5 year government bond jumped up 18 points last week, the most in almost five months.  (Bond yields guide fixed-rate mortgage pricing.)  Yes, you may have heard that the Bank of Canada has kept the prime rate the same, but variable rates and fixed rates are usually influenced by different factors. 

Some reasons why fixed rates may be rising very shortly:

·         stronger-than-forecasted U.S. employment data

·         new June maturity as the 5-year benchmark, asset rotation into stocks

·         20% increase in debt issuance announced in last week’s budget

·         Increased consumer confidence

·         More people spending money

A reason why rates might hold off a bit:

·         Canadian employment data that usually comes out the same day as U.S. data has been held off until this week.  If jobs are up, then we’ll be seeing interest rates jump up once again. 

Here are some more changes happening in the industry because of the 2010 Federal Budget.

• Pre-payment Penalties: The Government will attempt to “bring forward regulations” to standardize the calculation and disclosure of mortgage pre-payment penalties. (This applies to federally regulated lenders.)  This is mainly to help inform the average Canadian about clauses in their mortgages papers like Interest Rate Differential (IRD) penalties. 

• Credit Unions:  The Canadian government will begin “legislative framework to enable credit unions to incorporate and continue federally.”  This could help Credit Unions have more of a chance to compete with big banks so that they could do other provinces then just the ones they are located in. 

Dec 02, 2009 New Real-Estate Stats

Bank of Canada Interest Rate

September 10, 2009	0.25%
October 20, 2009	0.25%*
December 8, 2009	Next meeting date

Source: Bank of Canada
*Bank of Canada statement included reference to hold rate to end of second quarter 2010

 

Bank Prime Lending Rate

September 11, 2009	2.25%
October 21, 2009	2.25%
December 9, 2009	Next meeting date

Source: Bank of Canada

 

US Federal Reserve Board Discount Rate

September 22, 2009	0.00% – 0.25%
November 4, 2009	0.00% – 0.25%
December 15, 2009	Next meeting date

Source: US Federal Reserve

 

Exchange Rate $CDN($US)

October 30, 2009	.9243
November 13, 2009	.9519
November 27, 2009	.9421

Source: Bank of Canada

 

Government of Canada Bonds

Bond Type	October 28, 2009	November 12, 2009	November 25, 2009
1 year Treasury Bill	0.60%	0.54%	0.48%
3 year Benchmark Bond Yield	1.90%	1.87%	1.62%
5 year Benchmark Bond Yield	2.70%	2.70%	2.41%
10 year Benchmark Bond Yield	3.45%	3.51%	3.25%

Source: Bank of Canada

 

Total New Housing Starts (Seasonable adjusted and annualized)

Province	August 2009	August 2008	September 2009	September 2008	October  2009	October 2008
Newfoundland/Labrador	2,400	3,100	2,800	3,200	2,900	3,100
PEI	1,000	700	700	500	1,200	600
Nova Scotia	4,200	3,300	4,500	4,400	4,000	4,300
New Brunswick	3,700	3,800	2,900	4,500	3,600	5,000
Quebec	47,300	43,300	41,300	70,100	37,200	48,400
Ontario	44,200	89,800	50,200	84,200	57,600	82,600
Manitoba	5,000	5,400	4,400	5,600	4,200	5,800
Saskatchewan	5,100	5,300	3,700	6,400	3,600	4,900
Alberta	18,400	22,900	22,600	57,300	25,000	24,700
British Columbia	19,200	33,500	16,200	43,900	18,200	32,300
Canada	150,500	211,100	149,300	281,300	157,400	211,800

Source: CMHC Housing Now – November 2009 and November 2008.
This seasonally adjusted data goes through stages of revision at different times of the year.

 

Average MLS resale price for local markets

City	October 2008	October 2009
Halifax	$224,607	$235,465
Saint John, NB	$151,709	$178,632
Quebec	$198,357	$219,719
Montreal	$257,242	$284,024
Ottawa	$280,870	$320,561
Toronto	$353,018	$403,507
Hamilton/Burlington	$254,004	$296,253
Winnipeg	$190,374	$210,618
Saskatoon	$285,310	$274,759
Calgary	$388,565	$399,679
Edmonton	$317,744	$318,969
Vancouver	$556,682	$638,948
Victoria	$469,243	$481,500

Source: Canadian Real Estate Association

 

Housing Affordability Index

Standard Two-Storey

	Average Price		Qualifying Income($)	Affordability Measure
Region	Q3 2009 ($)	Y/Y % ch.	Q3 2009	Q3 2009 (%)	Q/Q Ppt. ch.	Y/Y Ppt. ch.	Avg. since ‘85 (%)
Canada	344,100	-0.3	79,100	45.8	1.2	-5.8	43.3
British Columbia	557,400	-1.2	113,600	67.6	2.9	-8.5	53.7
Alberta	368,200	-4.9	82,200	37.9	1.3	-7.5	38.5
Saskatchewan	305,500	-0.8	73,200	44.0	1.0	-4.6	37.6
Manitoba	244,900	3.5	61,300	37.5	0.3	-3.4	37.5
Ontario	362,100	-0.3	85,300	45.2	1.0	-5.8	44.0
Quebec	240,100	2.8	59,000	40.4	1.2	-3.7	39.0
Atlantic	210,000	1.3	55,000	35.9	0.4	-4.7	38.7
Toronto	522,600	0.2	115,300	57.8	1.9	-7.5	53.7
Montreal	305,800	0.7	71,300	47.4	0.8	-5.5	41.3
Vancouver	678,900	-1.9	135,500	74.2	4.3	-10.2	61.7
Ottawa	320,800	1.0	81,000	40.5	0.4	-4.4	39.5
Calgary	414,600	-4.7	88,100	38.5	2.0	-8.1	40.0
Edmonton	365,300	-2.6	83,100	38.9	0.9	-6.7	36.8

 

Standard Condominium

	Average Price		Qualifying Income($)	Affordability Measure
Region	Q3 2009 ($)	Y/Y % ch.	Q3 2009	Q3 2009 (%)	Q/Q Ppt. ch.	Y/Y Ppt. ch.	Avg. since ‘85 (%)
Canada	205,700	-1.0	47,600	27.6	0.5	-3.6	26.9
British Columbia	275,600	-0.3	57,100	34.0	1.2	-3.9	28.0
Alberta	219,300	-7.9	48,700	22.4	0.5	-5.2	22.1
Saskatchewan	186,200	-8.7	44,600	26.8	0.8	-4.7	24.1
Manitoba	130,100	4.8	33,400	20.5	0.3	-1.6	20.9
Ontario	217,200	-0.9	51,800	27.4	0.5	-3.6	27.9
Quebec	170,300	1.2	40,700	27.8	0.1	-3.0	27.0
Atlantic	149,800	4.8	37,700	24.6	0.3	-2.5	24.7
Toronto	292,700	-1.5	65,400	32.8	1.0	-4.7	31.2
Montreal	204,500	3.9	47,100	31.3	0.9	-2.8	29.0
Vancouver	351,500	0.4	70,600	38.7	1.7	-4.4	31.4
Ottawa	209,000	1.3	51,600	25.8	0.3	-2.8	23.6
Calgary	249,500	-7.3	52,700	23.0	0.3	-5.5	22.8
Edmonton	206,000	-6.8	46,800	21.9	0.5	-4.7	18.1

 

Alberta Real-estate coming back with a BOOM

Alberta real-estate

Alberta Real-estate coming back with a BOOM!

 

Is Alberta, or maybe even Canada, in for another Real-estate Boom?  With less and less on the market many Albertans are turning towards new builds.  Some reports are stating developers scramble to respond to a supply shortage that has prices steadily increasing for existing homes.

 

But any increase in construction of new homes will likely not surface fast enough to feed the demand for housing still pumped up by record low interest rates.  By the time these new homes are built I doubt it if the current interest rates will still be so low. 

 

Canada Mortgage and Housing Corp. said yesterday 157,300 units were built last month on a seasonally adjusted annualized basis, a 5.4% increase from a month earlier. Annualized starts dropped as low as 118,500 in April.

 

“There is not a lot of inventory around,” said Gary Friend, president of the Canadian Home Builders’ Association, adding his industry has been careful not to speculate. “We have to watch our Ps and Qs, as we try to meet this demand.”

 

Any increase in supply would be welcomed as a shortage of new listings has caused a spike in prices. The Canadian Real Estate Association said last month existing home prices across the country were up 13.6% in September from a year ago as supply was short in almost every city.

 

“The existing-homes market is in short supply so we’ve gone from a buyers’ market to sellers’ market,” said Bob Dugan, CMHC’s chief economist. “The way it gets linked is you get some spillover into the new-homes market and that’s starting to happen.”  Where early this year you were hard pressed to get an offer on a house selling.  Talking with Realtors in many cities around Alberta many are finding that a well priced homes is now coming in contact with multiple offers!  Some even selling for over list prices.  

 

Here is a warning about financing.  Pre-approvals mean nothing.  Just because you are pre-approved don’t think you can go in with no financing conditions no matter what anyone tells you.  You have to make sure that whoever you are dealing with has all your documentation and it has been reviewed.  Remember that everything might be great with you but the mortgage will be secured against the property, so the property has to be approved.  Approving the property may not just be the value, it could be square footage, location, age restrictions, foundation, and hundreds of other things.  We saw a lot of this happening in 2005 and 2006 but very careful and consult with your mortgage broker before just signing on the dotted line. 

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