WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

Reasons to Keep and Eye on Toronto & Vancouver

Market watchers often find themselves being subjected to mortgage and real estate news that focuses on the exceptional circumstances in Toronto and Vancouver.

However, the attention that is focused on these frenzied markets would seem to be of little concern to the agents, brokers and buyers who are not directly involved in them. Even the Canadian Real Estate Association makes a point of saying – in all of its releases – that “all markets are local” and the best advice is to work with a local expert (i.e. one of its members).  As true as that may be, there are good reasons to keep an eye on Toronto and Vancouver.

Toronto is Canada’s financial capital and the country’s top technology hub.  The Greater Golden Horseshoe area, around the west end of Lake Ontario, accounts for a fifth of the national economy.  Vancouver is a top destination for property investors from around the world and a key landing point for Chinese capital.

Prices in Toronto have risen by 43% in the past three years.  Vancouver has seen a whopping 63% increase.  If the people who work in these centers, keeping key economic sectors running, cannot find or afford places to live it presents a broader, national economic problem.  The head of Canada Mortgage and Housing Corporation, Evan Siddal, has said that his main, long-term, concern about the housing market is the supply of housing in Toronto and Vancouver.

As we know, governments at all three levels have been fighting to rein-in these galloping markets, in some cases with national consequences.  By First National Financial.

Bank of Canada Concerned About Trade Risks

The Bank of Canada held rates steady today, as expected, highlighting “trade policy developments” as an “important and growing source of uncertainty for the global and Canadian outlooks.”

As the seventh round of NAFTA negotiations commenced in Mexico City, President Trump dropped a bombshell late last week, threatening to impose a 25% tariff on imported steel and a 10% tariff on imported aluminum for national security reasons. The news reverberated around the world, causing U.S. trading partners in Europe to announce potential retaliatory actions quickly. The European Union raised the stakes for Trump by aiming levies on the GOP heartland, saying it would slap tariffs on products like Harley-Davidsons, Kentucky bourbon and Levi, bluejeans if President Trump goes ahead with his plan. Paul Ryan, Speaker of the House, is the Republican Representative from Wisconsin, headquarters of Harley-Davidsons. He immediately urged the President to stand down or ‘to be more surgical’ on tariffs. Hardliners such as Secretary of Commerce Wilbur Ross argued that any retribution would be trivial.

Well-known Republican economic advisors to the president warned that the tariff plan would do more harm than good, having adverse effects on consumers and many companies that use imported metals in the production of their products. The number of jobs lost in the auto sector and construction, for example, could be far more significant than the positive impact on the comparatively few jobs in the steel industry mainly in Pennsylvania. Prices of many products would rise including infrastructure costs, energy and food products.

Canada is ground zero in this maelstrom as the number-one exporter of steel and aluminum to the U.S., supplying $7.2 billion of aluminum and $4.3 billion of steel to the United States last year. Trump has often accused China of forcing U.S. steel and aluminum companies to fold by inundating the market with cheaper materials, but Trump thus far has refused to exclude Canada from the tariff proposal, holding Canada hostage to a favourable NAFTA deal.

Canada and the rest of the world are hoping that reasonable voices are going to prevail, but the resignation of Gary Cohen, White House Economic Adviser and formerly President of Goldman Sachs, is a victory for the protectionists (and immigration hawks). A registered Democrat, Cohn was regarded as one the few political moderates close to the president. His absence will amplify voices like Commerce Secretary Wilbur Ross and trade adviser Peter Navarro who back the president’s impulses to buck convention and pick trade fights on a global stage.

Housing Another Factor Postponing Rate Hikes

Even before the escalating trade tensions, the Bank of Canada was concerned about the impact of rising mortgage rates and new mortgage guidelines on housing, a significant contributor to the 3% growth in the economy last year. “Strong housing data in late 2017, and softer data at the beginning of this year, indicate some pulling forward of demand,” according to the Bank of Canada press release. The central bank is monitoring the economy’s sensitivity to higher interest rates, pointing out that “household credit growth has decelerated for three consecutive months.”

Inflation has edged upward to close to the 2% target. Wage growth has firmed, but even with the hike in minimum wages, the rise in compensation remains smaller than usual at full-employment.

The Bank of Canada commented once again that the economic outlook is expected to warrant higher interest rates over time, but some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential with inflation on target. The next scheduled Bank of Canada policy announcement is April 18 when the full economic outlook will be updated in the quarterly Monetary Policy Report.

To be sure, if the Trump administration goes ahead with the tariffs, the Bank will keep rates steady in April as well. Investors have pared bets on rate hikes after weaker-than-expected fourth-quarter growth, turmoil in global equity markets and the sharp decline in the Canadian dollar. Traders are not pricing in another rate hike until July according to Bloomberg News calculation on overnight index swaps. A month ago, expectations pointed to at least one increase by May. By the Bank of Canada’s measure, interest rates are still about two percentage points below what it would consider “neutral” for the economy.  Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres.

Economic Highlights

United States

·        Markets sold off sharply this week, following a somewhat hawkish assessment of the U.S. economy from the Fed’s new chair Jerome Powell and the announcement of steep tariffs on steel and alumimium imports by Donald Trump.

·        Despite the market reaction to Powell’s comments, there was not much in the data this week to indicate that the economy is overheating. Both headline and core PCE inflation remained unchanged in January, coming in at 1.7% y/y and 1.5% y/y, respectively. Real consumer spending fell by 0.1% on the month. Vehicle sales also weakened in February.

·        Both consumption and GDP will start the year on a softer footing but weakness is expected to be short-lived. Tax cuts and tightening labor market will support consumer spending and above-trend growth over the remainder of 2018.

Canada

·        The marquee event this week was the 2018-19 federal budget, which despite an array of new spending measures, contained little in the way of policies intended to address Canada’s newly disadvantaged tax position versus the U.S.

·        Real GDP hit 1.7% (annualized) in the fourth quarter, below the Bank of Canada’s forecast. The monthly figure edged modestly higher in December, up 0.1%, signaling diminished momentum to end the year and a soft hand-off into 2018.

·        A softer-than-expected GDP print coupled with a maintenance-type budget provides the Bank room to be patient on the rate hike front, but data-dependency remains in place.

By TD Economics.  Read the full report Here.

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  5 year fixed rates increased slightly.  Deeper discounts are becoming available for variable rates making adjustable variable rate mortgages more attractive again.

Mortgage Update – Mortgage Broker London

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Open Access

•RBC chief warns foreigners using Canadian real estate as piggy banks (BNN)

•7 stats that explain why the GTA housing market was heating up in February (Buzz Buzz News)

•Ontario’s growth plan could be hurting the GTA housing market — here’s how one expert wants to fix it (Buzz Buzz News)

•BlackRock Says Market Being Too Aggressive in Pricing Canadian Hikes (Bloomberg)

•Consumer Confidence Takes a Hit With Canada’s Economy Gearing Down (Bloomberg)

•‘Don’t do it’: Four things to know before buying real estate with bitcoin (BNN)

•Ottawa could be heading into a seller’s market (CBC)

•Toronto Home Sales Remain Depressed as Prices Begin Stabilizing (Bloomberg)

•Toronto home sales plunge 35% in February as new rules rattle buyers (BNN)

•Toronto-area home prices saw year-over-year drop in February, as number of sales plunged (Toronto Star)

•This province’s housing market is starting to take off (Hint: it’s not Ontario) (BuzzBuzz News)

•Will the federal budget help with the GTA’s serious rental shortage? This expert doesn’t think so (BuzzBuzzNews)

•Tumbling Toronto home sales signal a return to normal market, say analysts (Toronto Star)

•Governments bent on cooling home prices could get more than they bargain for (Vancouver Sun)

•One-on-one with Bill Morneau after the budget: Part 1 (BNN)

•Commercial property deals in Canada set record at $43 billion (Toronto Star)

•Laurentian Bank mortgage probe continues, price tag expands (CBC)

•Massive Toronto Project to Lure Amazon Envisions 50,000 Workers (Bloomberg)

•3 charts that show that the Canadian housing market isn’t as cool as it might seem (BuzzBuzzNews)

•Should Canadians be concerned about mortgage fraud? This credit rating agency thinks so (BuzzBuzzNews)

Subscription May Be Required

•‘Risky business’: The Bank of Canada will be patient today, but the loonie may not be (Globe and Mail)

•Foreign buyers using Canadian homes as piggy banks, RBC CEO warns (Financial Post)

•Greater Montreal home sales grow 5% from February 2017, as active listings drop (Financial Post)

•Toronto-area home prices, sales volume in February down from 2017 record highs (Financial Post)

•Forward looking markets aren’t buying bullish takes on the Canadian economy (Financial Post)

•Toronto home prices climb on heels of tougher mortgage rules (Globe and Mail)

•‘Market is being too aggressive’: Bank of Canada will hike rates only once in 2018, BlackRock says (Financial Post)

•RioCan transforming some retail shopping centres into mixed-use communities with rental, condo units (Financial Post)

•Toronto home sales plummet 35% from a year ago as new mortgage rules bite (Financial Post)

•Greater Montreal home sales rise 5 per cent from a year ago (Globe and Mail)

•Toronto housing market takes a February nosedive (The Globe and Mail)

•CIBC’s new rules for foreign clients could squeeze Vancouver market (The Globe and Mail)

•It’s time to kill the federal Home Buyers’ Plan (The Globe and Mail)

•Budget proposes allowing credit unions to use ‘generic bank terms’ (The Globe and Mail)

•Laurentian Bank says progress being made on problematic mortgages (Financial Post)

•Bank of Canada likely to take cautious path with two more rate hikes this year (Financial Post)

•Federal budget 2018: Seven changes that could affect your finances (The Globe and Mail)

•Federal budget 2018: New measures enhance financial security – for some (The Globe and Mail)

Now’s the perfect time of year for a free mortgage check-up. With spring on its way and interest rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

If you are looking to purchase a property and are having frustrations in qualifying, there is a good chance part of the reason lies behind the Trudeau lead Liberal Government’s implemented new mortgage lending rule changes.

The Office of the Superintendent of Financial Institutions (OSFI) has implemented 3 new mortgage rule changes starting January 1, 2018 under the B20 lending guidelines:

Non insured mortgage consumers (buyers with a 20% or greater down payment) must now qualify using a new minimum qualifying rate. The minimum rate will be the greater of the five-year benchmark rate published by the Bank of Canada or the lender contractual mortgage rate +2.0%.

For a high ratio insured mortgage, buyers with a less than 20% down payment) must now qualify using the Bank of Canada Benchmark qualifying rate, currently at 5.14%.

The First set of rule changes affected first time home buyers the most, since most first time home buyers will have less then 20% downpayment available.

The latest set of rule changes impact repeat homebuyers and higher income customers purchasing average and higher priced executive properties most – since those are also the clients that you can expect to have a 20% or more downpayment already.

When it comes to qualifying for a mortgage: A borrowers income, credit score, downpayment amount, and debts/liabilities are they main factors parts used to determine what your maximum price point is, and how much you qualifying for a mortgage.

Any of the following and combination of the following can increase the maximum mortgage loan amount and purchase price:

• Increasing your income.
• Having a clean, strong and thick credit history with a minimum beacon score of 680.
• Having no outstanding debts/liabilities in the form of loans, credit cards, unsecured lines of credit, secured home equity lines of credit and leases.
• Increasing your downpayment amount with owned or immediate family gifted funds, not borrowed funds.
• Purhcase a multi unit owner occupied rental property.
• Obtain a strong family member co-signer.
• Consider a pooled mortgage.

If you have been pre-approved somewhere, and already maxed out your pre-qualification purchase limit with your income, debts and downpayment options as noted before, and your are still short of where you need to be to get into your dream home – contact an experienced mortgage broker.

An experienced Mortgage Broker is still able to get you approved using the old non OSFI-B20 guidelines of the mortgage contract rate to get you qualified for more using select Credit Union lenders.

Here are some other questions you need to ask yourself and auto upon:

Have you been pre-approved and are not totally satisfied with the service and results received?

Have you been pre-approved and are not 100% certain you are getting the best deals and lowest rates?

Take a quick minute to connect with your iMortgageBroker at Dominion Lending Centres.  A second opinion could benefit you immensely!

Our goal is to assist you with approval at a higher price point if needed, and we also strive to provide you with service excellence, better deals and lower rates to ensure your best interest is protected.

WEEKLY RESIDENTIAL  MARKET UPDATE 

Industry & Market Highlights 

The Activist Budget—There Is No Problem This Government Cannot Fix

Patting himself on the back, the Finance Minister opened his speech by reminding us that “a little over two years ago…Canadians had the opportunity to stay the course. They could stick with a Government that favoured cuts and a set of failed policies that produced stubborn unemployment and the worst decade of economic growth since the depths of the Great Depression.” This, of course, was Stephen Harper’s Conservative Government. Never mind that the global financial crisis caused the recession, not the “failed policies” of the previous government. Throughout the budget documents, the message is that austerity was “needless” or “excessive.” Instead, Canadians chose, “a more confident and more ambitious approach…that gave Canadians the tools they needed to succeed. Starting with raising taxes on the wealthiest, so we could lower them for the middle class.”

The Liberals have forgotten their promise to run deficits no larger than $10 billion and to balance the budget by 2019. Instead, they now see sound fiscal management as a declining debt-to-GDP ratio—never mind that double-digit deficits remain as far as the eye can see—to a stunning $12.3 billion deficit at the end of the forecast horizon in fiscal year (FY) 2022-23.

The deficit figures have indeed improved—down more than $2.0 billion in FYs 2017 and 2018–thanks to the stronger-than-expected economy and rapidly reduced unemployment last year. But, initiatives in today’s federal budget add $6.3 billion to the current year’s (ending March 31, 2018) budget deficit, $5.4 billion to next year’s federal red ink and an additional $2.0-to-$3.0 billion annually over the forecast horizon ending in FY 2022-23 (see Table below).

Fortunately, Canada has by far the lowest debt-to-GDP ratios in the G7, reflective of the austerity programs of the past, beginning in the mid-1990s and continuing until the financial crisis in 2008-09 when counter-cyclical global fiscal policy was essential to assure financial stability and rebounding economic activity by late-2009. While the U.S. and much of the rest of the developed world suffered the longest and deepest recession since the Great Depression, Canada’s was the shortest and mildest recession in the postwar period—contrary to the impression left by the Finance Minister in his opening remarks.

Thanks to this backdrop, the debt-to-GDP ratio in Canada will continue to decline despite continued fiscal stimulus. The ratio is forecast to gradually edge downward from 30.4% this year to 28.4% in 2022-23, assuming the economy continues to grow. Clearly, all bets are off if we hit a pothole, such as the end of NAFTA or a recurrence of plunging oil prices.

Budget 2018 proposes to:

• Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the Canada Workers Benefit, a stronger and more accessible benefit that will replace the Working Income Tax Benefit.

• Make significant progress towards equality of opportunity, by taking leadership to address the gender wage gap, supporting equal parenting, tackling gender-based violence and sexual harassment, and introducing a new entrepreneurship strategy for women.

• Support the next generation of researchers, by providing historic funding to increase opportunities for young researchers and provide them the equipment they need, while strengthening support for entrepreneurs to innovate, scale up and reach global markets.

• Uphold Canada’s shared values and support the health and wellness of Canadians, by partnering with provinces and territories to address the opioid crisis, taking action to advance national pharmacare, and bolstering support for Canada’s official languages.

This list summarizes 367 pages of more than 100 relatively small government initiatives impacting everything from Workers Benefits payments to low-income families, improving access to the Canada Child Benefit to supporting opportunities for women, pay equity for federal workers, strengthening trade, improving worker skills, and cracking down on tax evasion—all of this among the roughly 25 government actions described in Chapter 1 under the heading of Growth. The details of changes in the rules regarding the holding of passive investments inside private corporations as well as closing tax loopholes fall under this Growth rubric.

Chapter 2, called Progress, includes more than 35 initiatives under the headings of Investing in Canadian scientists and researchers, Stronger and more collaborative Federal science, and Innovation and Skills Plan—a more client-focussed Federal partner for business.

Chapter 3, Reconciliation, largely deals with Indigenous Peoples, including roughly 20 actions.

And finally, Chapter 4, called Advancement, covers the environment under Canada’s Natural Legacy, Canada and the World, Upholding Shared Values, and Security and Access to Justice. I lost count here at over 40 initiatives.

And, that’s not all! A bonus section called Equality, goes into detail regarding Canada’s commitment to gender budgeting, which includes $6.7 million over five years for “Statistics Canada to create a new Centre for Gender, Diversity and Inclusion Statistics, a Centre that will act as a Gender Budget Accounting data hub to support future, evidenced-based policy development and decision-making”.

I kid you not. At my rough count, I have been to 34 budget lock-ups, but I can’t remember ever seeing anything like this for sheer magnitude of the number of relatively tiny initiatives, nor can I ever remember leaving a lock-up with such a screaming headache.

Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres

Federal Budget Housing Market Overview

Mortgage Professionals Canada was invited by the Minister of Finance’s office to the attend today’s budget lock-up in Ottawa. As a result of our advocacy efforts, we are pleased that the government has not introduced any new changes to mortgage rules.

However, we are disappointed that the government has not committed to increasing the supply of new homes in Toronto and Vancouver and remain concerned about the economic impact the existing changes are having on the marketplace.

The government did announce support to build more rental units and clarified the rules around taxation for passive investments. More information on the specifics of those measures are outlined below.

Support for Rental Units

The government proposes to increase the amount of loans provided by the Rental Construction Financing Initiative from $2.5 billion to $3.75 billion over the next three years. In total, this measure alone is expected to spur the construction of more than 14,000 new rental units across Canada.

Passive Investments in a Corporation

The government proposes two new measures to passive investment savings in a corporation, which replace the previous announcement made in the summer.

First, Budget 2018 proposes to introduce an additional eligibility mechanism for the small business tax deduction, based on a corporation’s passive investment income.

Under the proposal, if a corporation and its associated corporations earn more than $50,000 of passive investment income in a given year, the amount of income eligible for the small business tax rate would be gradually reduced.

The small business deduction limit would be reduced by $5 for every $1 of investment income above the $50,000 threshold (equivalent to $1 million in passive investment assets at a 5-per-cent return), such that the business limit would be reduced to zero at $150,000 of investment income (equivalent to $3 million in passive investment assets at a 5-per-cent return).

Existing savings will not be subject to any additional tax upon withdrawal and capital gains, realized from the sale of active investments or investment income incidental to the business, will not be considered passive investments under this proposal.

Second, Budget 2018 proposes that corporations no longer be eligible to obtain refunds of taxes paid on investment income while distributing dividends from income taxed at the general corporate rate. Refunds will continue to be available when investment income is paid out.

The two measures will apply to taxation years after 2018.

We will continue to advocate for common-sense changes to the existing mortgage rules to improve choice and competition for Canadian consumers.  By Mortgage Professionals Canada.

New CMHC study sheds light on rising house prices

In June 2016, CMHC launched a study to better understand the causes of rapidly rising home prices in major metropolitan centers across Canada. The report represents one of the most thorough examinations of house price patterns ever completed in Canada and is the result of advanced, data-driven analyses and engagement with stakeholders and government partners.

Why undertake this kind of study in the first place?

Housing affordability challenges exist in many centres throughout Canada. Rapidly rising house prices in high priced markets have benefited existing homeowners, but have also created challenges for first-time buyers. However, this is not just an issue for first-time homebuyers. Rapidly rising house prices also tend to drive rents higher and increase the cost of rental assistance and non-market housing solutions.

What were the study’s findings?

In conducting this study, it was important to look at both supply and demand. Very briefly, we found that:

•Strong economic and population growth, together with low mortgage rates, have been important drivers of house price growth in Canada

•The increase in average house prices in Vancouver and Toronto is also attributable to rising income inequality in these centres — price increases have tended to be greater for more expensive single-detached housing, rather than for condominium apartments

•Supply response to rising house prices has been weaker in Toronto and Vancouver, than in other Canadian metropolitan areas

What are the next steps?

The report represents an important step towards stimulating discussion across all levels of government, housing advocates, industry, academia, and the general public — with the full recognition that this is the beginning of a process of improving the functioning of Canadian housing market.

Read the full report by CMHC Here.

Canadians Have $230 Billion In Home Equity Loans – Raising Red Flags In Ottawa

Canadians are borrowing money against their homes in record amounts – a situation that is raising red flags among politicians and policy setters in Ottawa.

Balances on Home Equity Lines of Credit (HELOCs) rose 7.2% in December 2017 from a year earlier, the fastest annual growth rate since 2012, and hitting a record amount of $230 billion, according to data released by the Office of the Superintendent of Financial Institutions (OSFI).

All other types of consumer debt such as personal loans, credit cards, car loans and overdraft limits climbed just 3.2% over the same period, less than half the pace of HELOC growth, the same data showed.

Canadians can tap HELOCs for up to 65% of the value of their homes, and the funds are most commonly used for renovations, investing and consolidating other forms of debt, according to a June 2017 report by the Financial Consumer Agency of Canada.

“Houses are becoming piggy banks,” said Paul Gulberg, a Bloomberg Intelligence analyst following the release of the data from OSFI. “It’s either greed based or need based,” he added.

The growth in the use of HELOCs raises red flags for policy makers in Ottawa. It’s a type of borrowing that may contribute to increased household vulnerabilities because it typically doesn’t require the principal to be repaid on a fixed schedule, the Bank of Canada said in its most recent financial system review. About 40% of HELOC borrowers don’t regularly pay down the principal on the debt. Of total loans secured to individuals for non-business purposes, those secured by residential property represent about 46%, the OSFI data shows.

Compared to other loan types, such as car loans and credit cards, rates on HELOCs are typically cheaper, making them more attractive to consumers. They also tend to be more sensitive to fluctuations in borrowing costs, because they’re usually tied to prime interest rates.

“It’s a rising risk factor because it’s something that re-prices more rapidly than a typical mortgage pool,” said Mr. Gulberg, adding the risk is rising “in conjunction with the fact that it’s fuelling overall consumer credit, which is considered to be an issue.”

Canadians have about three million HELOC accounts and the average outstanding balance on them is $70,000, which makes borrowers vulnerable to rising interest rates and a housing market correction.

By Joel Baglole.

Economic Highlights

U.S. Highlights

A holiday-shortened trading week light in economic data left markets to focus on communications from the Federal Reserve.

U.S. existing home sales slumped in January, beleaguered by low inventories and deteriorating affordability.

The FOMC minutes revealed a Fed busy revising up economic projections, suggesting that further gradual policy firming is warranted.

Canadian Highlights

The December 2017 data continued to disappoint, with declines in retail and wholesale trade joining earlier softness in trade and manufacturing.

Real GDP in 2017 as a whole likely saw a robust 2.9% expansion, with a respectable 2.0% pace of growth expected for Q4. The December softness and weaker housing market activity in January suggest a further deceleration is likely, leaving 2018 to start-off on a softer note.

Noise can mask the trend, which can hardly be defined by a few months’ data. Prudence in the face of domestic and external risks suggests that the Bank of Canada is likely to stand pat until mid-year, when it is better able to assess the underlying Canadian growth trend.

By TD Economics.  Read the full report Here.

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  Slight increase in fixed rates.  Deeper discounts are becoming available for variable rates making adjustable variable rate mortgages more attractive again.

Mortgage Update – Mortgage Broker London

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Open Access

•Tighter tax rules for small businesses and passive income in Liberal budget (BNN)

•Federal budget’s simpler plan to tax passive income likely to calm small business outcry (National Post)

•National Bank first-quarter profit rises 11%, beating estimates (BNN)

•How is the Fair Housing Plan affecting the Ontario housing market in 2018? Experts weigh in (BuzzBuzzNews)

•These BC real estate boards think new property taxes will have little impact on housing markets (BuzzBuzzNews)

•More evidence of fraud in Canadian mortgages, warns ratings agency S&P (CBC)

•Scotiabank Looks Abroad for Earnings as Profit Beats Estimates (Bloomberg)

•How much is a lack of supply driving up GTA home prices? More than you think, according to this expert (BuzzBuzzNews) 

•Toronto new-home sales down 48% from January 2017 (Toronto Star)

•Royal Bank’s Mortgage Juggernaut Shows Little Sign of Slowing (Bloomberg)

•Expansion of foreign buyers tax to Okanagan, Vancouver Island questioned (Vancouver Sun)

•B.C. housing taxes could put recent buyers underwater on mortgages (Vancouver Sun)

•The Canadian housing market hasn’t been this affordable in 3 years (BuzzBuzzNews)

•RBC tops first-quarter profit expectations, raises dividend (BNN)

Subscription May Be Required  

•Small businesses with large passive investment income to be taxed more (Globe and Mail)

•Laurentian Bank continues to review problem mortgages (Globe and Mail)

•Ontario regulator probes cryptocurrency use in real estate (Globe and Mail)

•Evidence of mortgage fraud in Canada raises red flag at credit rating giant (Financial Post)

•RBC boosts dividend as earnings beat market expectations (Globe and Mail)

Now’s the perfect time of year for a free mortgage check-up. With spring on its way and interest rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

Industry & Market Highlights

New CMHC study sheds light on rising house prices

In June 2016, CMHC launched a study to better understand the causes of rapidly rising home prices in major metropolitan centers across Canada. The report represents one of the most thorough examinations of house price patterns ever completed in Canada and is the result of advanced, data-driven analyses and engagement with stakeholders and government partners.

Why undertake this kind of study in the first place?

Housing affordability challenges exist in many centres throughout Canada. Rapidly rising house prices in high priced markets have benefited existing homeowners, but have also created challenges for first-time buyers. However, this is not just an issue for first-time homebuyers. Rapidly rising house prices also tend to drive rents higher and increase the cost of rental assistance and non-market housing solutions.

What were the study’s findings?

In conducting this study, it was important to look at both supply and demand. Very briefly, we found that:

• Strong economic and population growth, together with low mortgage rates, have been important drivers of house price growth in Canada
• The increase in average house prices in Vancouver and Toronto is also attributable to rising income inequality in these centres — price increases have tended to be greater for more expensive single-detached housing, rather than for condominium apartments
• Supply response to rising house prices has been weaker in Toronto and Vancouver, than in other Canadian metropolitan areas

What are the next steps?

The report represents an important step towards stimulating discussion across all levels of government, housing advocates, industry, academia, and the general public — with the full recognition that this is the beginning of a process of improving the functioning of Canadian housing market.

In Summary: Markets are, generally, behaving in accordance with fundamental economic rules like supply and demand (point 1).  However supply in the two hottest markets is not keeping up (point 3).  Point 2 speaks to the tendency of major urban centres to attract high wage jobs.

Toronto appears to be a contradiction though.  Prices there rose by 40% between 2010 and 2016.  CMHC says only about 40% of that increase can be attributed to economic fundamentals.  On the other hand Vancouver saw a 48% increase in prices, but three-quarters of that can be explained by fundamental factors such as increased population, higher wages and low mortgage rates. By First National Financial.

Read the Full Report Here.

Toronto homeowners facing nearly 3% property tax hike

Toronto homeowners are in for a nearly three per cent property tax hike, as city council approved the 2018 budget on Monday.

Councillors voted 31 to 11 in favour of the budget, which included the 2.1 per cent property tax hike.

However, residents will have to pay an extra 0.5 per cent for the city’s build fund, which supports transit and housing projects, as well as an increase of 0.31 per cent as part of the city’s business climate and reassessment impact strategy. This brings the total residential property tax hike to 2.9 per cent.

For example, a homeowner whose home is assessed by the city at $624,418 will have to pay an extra $82 in municipal property taxes for a total of $2,907 for 2018.

Since taking office Mayor John Tory has been steadfast in his refusal to raise property taxes above the rate of inflation every year, which is what city council has done again this year.

However, some councillors are critical of the mayor and his unwillingness to hike taxes a little more.

“This is an election budget, it’s a band-aid budget, but more important, it’s an unsustainable budget,” Coun. Sarah Doucette said.

Coun. Mike Layton also believes the rate needs to be higher, in order to pay for what the city needs.

“We’ve decided to build this straw house, to build the unsustainable house, to go halfway on some of these measures to investigating in a really strong city,” Layton said.

There were some motions brought forth for the property tax hike to be greater, but they were voted down.

Aside from property taxes, the city will also be making a record high investment in transit this year, with $1.98 billion in the budget allocated for the TTC — that makes TTC funding about one-fifth of the city’s operating budget this year.

Budget details

Toronto city council approved a 2018 tax supported operating budget of $11.12 billion and a 10-year capital budget and plan of $25.98 billion. Some of the details, provided by the city, are below. Click here for more information on the budget.

The 2018 operating budget includes funding for new and enhanced services including:

• Additional 1,515 childcare subsidies, and support for the new Child and Family Centres Program
• 700 winter respite shelter beds
• Operation of three new permanent shelter sites
• Implementing TTC’s recommended two-hour time-based transfer policy on Presto
• $3 million to relieve overcrowding on TTC bus routes
• $1.3 million to implement congestion-fighting measures such as Traffic Enforcement Officers

Some of the new investments in the 10-year capital plan include:

• $279 million in interim capital funding to address the TCHC state-of-good-repair backlog and current revitalization projects to avoid permanent closure of its units
• $485.8 million for the George Street Revitalization project
• $178.6 million to acquire and construct nine shelter sites and renovate two leased sites over a three-year period that will add 1,000 new permanent shelter beds
• $6.4 million for a feasibility study of the Rail Deck Park, $3 million for the design and development phase of determining future uses of Old City Hall and $3.5 million to complete design work for the new Etobicoke Community Centre
• $46.7 million for critical state-of-good-repair projects such as the St. Lawrence Centre Roof project, Toronto Strong Neighbourhoods Strategy project and the Multi-Branch Renovation project of the Toronto Public Library
• $2 million to address critical waterfront rehabilitation due to high lake-effect flooding

City council also approved a 2018-2027 tax supported capital budget and plan of $26 billion, 72 per cent of which will be allocated to transit and transportation projects such buying buses and streetcars, expanding the subway, and fixing the Gardiner Expressway.  By Toronto CityNews.

Real Estate Investment Trends to Watch Out for 2018

The latest wide-ranging market outlook released by Morguard Corporation painted a confident picture of the Canadian real estate investment segment’s robust activity this year, a trend fuelled by a healthy demand for quality assets.

“Investors remain enthusiastic about the Canadian commercial real estate market after a record volume of transactions in 2017,” Morguard director of research Keith Reading said during the release of the 2018 Canadian Economic Outlook and Market Fundamentals Research Report.

“There is a high supply of capital ready to be invested and Canadian commercial real estate is a proven performer. We are predicting another very busy and competitive market environment across the country in the coming year.”

The downtown areas of Vancouver and Toronto are projected to remain the most desired investment destinations in 2018. Suburban Toronto, Ottawa, and Montreal are also predicted to enjoy strong activity levels. And even Alberta, which had previously pulled down nationwide averages, is showing signs of renewed life.

“Intense bidding for a limited pool of downtown properties will force investors to look elsewhere for opportunity,” Reading stated. “Class A properties in suburban markets, particularly those near transit nodes, will be in high demand. Edmonton and Calgary will also see increased activity as investors look for high-quality assets in a recovering market and economy.”

“Long term, market-dominant retail centres should be able to alleviate immediate pressure on vacancy by providing prime space to new, high-growth traditional retailers and service retailers,” Reading added. “The fact remains that Canada is a country of shoppers, and recent positive economic and employment trends should drive healthy spending growth for the foreseeable future.”  By Ephraim Vecina. The full report can be accessed here.

CHMC Says Policy Should Tackle Supply, Not Demand

The Canada Mortgage and Housing Corporation has published a new report on housing affordability in Canada’s biggest cities but admits it doesn’t have all the answers.

The agency found that escalating house prices are mainly driven by strong economic and population growth, and low mortgage rates; with Toronto and Vancouver lagging on the supply side.

While the two hottest markets showed large and persistent price increases during the analysis period of 2010-2016, Montreal saw only modest growth and the oil-dependent Calgary and Edmonton markets gained slightly.

Vancouver led the gains over the 6 year period with a 48% rise in house prices with population and disposable income rises, and low mortgage rates, accounting for almost 75% of that rise.

House prices increased by 40% in Toronto over the same time period with 40% of the rise being explained by conventional economic factors.

These price increases have tended to be for single-family homes rather than condo apartments. Supply of condos has been proportionately greater than for single-family homes.

“Large Canadian centres like Toronto and Vancouver are increasingly behaving like world-class cities,” said Aled ab Iorwerth, CMHC’s deputy chief economist. “Their strong local economies and historically low interest rates make them attractive to both people and industry which drives up demand for housing. When you have weak supply responses, as you do in these markets, prices have nowhere to go but up.

Although investor demand for condos has increased the rental supply, CMHC says that they tend to be more expensive than purpose-built rentals.

The report also highlights that measures to address the supply challenges are “more likely to have positive impacts than measures focused on the demand side.”

“While it is true that the supply response in Toronto and Vancouver has been significantly weaker than in other Canadian metropolitan areas, we do not fully know why this is the case,” said Evan Siddall, CMHC’s president and CEO. There continues to be data gaps and we need to work more closely with jurisdictions at all levels to fully understand what is happening.” By Steve Randall.

Is This The Crash? Gold, Silver & Bitcoin Update from Mike Maloney

Is this the beginning of a major crash? Join Mike Maloney for his latest update where he analyzes the stock market, gold & silver, and bitcoin.  Watch the video here.

Are you a GoldSilver Insider? Mike released an earlier, Insider-only version of this video that reviews his latest investment moves and changes in his personal holdings. If you’re not an Insider, here are the details of this exclusive program.

The articles Mike references in this video:

• What Happens to Gold & Silver If the Stock Market Crashes?, by Jeff Clark, Senior Analyst, GoldSilver
• “Things to Come” Video, by Mike Maloney
• Technical Analyst Clive Maund’s Gold Update

Jobs Decline In January Following Blockbuster Year

Canada shed 88,000 jobs in January, the most significant drop in nine years, driven by a record 137,000 plunge in part-time work. Full-time employment was up 49,000 while the unemployment rate increased a tick to 5.9%–only slightly above the lowest jobless rate since 1976. January’s sharp decline brings to an end a stunning 17-month streak of gains. While the top-line loss of 88,000 jobs is striking, it still only retraced about 60% of the 146,000 jump in the past two months.

The disappointing employment report will no doubt keep the Bank of Canada on the sidelines for a while, but it follows the most robust job market in 15 years. More than 400,000 net new jobs were created in 2017. Expectations are now that the Bank will hike interest rates cautiously, taking a pass at the March meeting.

Average hourly wages jumped 3.3% year-over-year, the strongest gain since March 2016. This was boosted by the rise in the minimum wage to $14.00 an hour in Ontario at the start of this year. Ontario now has the highest minimum wage in the country.

The largest employment losses were in Ontario and Quebec. There were also decreases in New Brunswick and Manitoba. Declines were spread across some industries including educational services; finance, insurance, real estate rental and leasing; professional, scientific and technical services; construction; and healthcare and social assistance. Employment increased in business, building, and other support services.

Canada’s economy has still seen employment increase by 288,700 jobs over the past 12 months — 146,000 of which came in November and December. Full-time employment is up 558,900 over the past 18 months, which is unprecedented.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Ontario Ministry of Financing Updates to Land Transfer Tax

Land Transfer Tax -New tax statements about the Non-Resident Speculation Tax (NRST), solicitor obligations, and transferee recordkeeping requirements are required for the registration of Instruments requiring land transfer tax statements or land transfer tax affidavit. Ministry of Finance forms and Teraview, Ontario’s electronic land registration system, have been updated.

Also, a new form is available for NRST refund or rebate applications.

The above changes are outlined on the following webpages:

Land Transfer Tax

Non-Resident Speculation Tax

A Guide for Real Estate Practitioners – Land Transfer Tax and the Electronic Registration of Conveyances of Land in Ontario

Refunds and Rebates of Land Transfer Tax

Economic Highlights

Canadian Data Release: Existing home sales slump in January as B20 rules bite

• Canadian existing home sales slumped 14.5% m/m in January, ending a five month streak of increases and erasing all the gains seen during this time.
• Only five of the twenty-six main markets experienced increases, with the group consisting of: Newfoundland & Labrador, Saguenay, Gatineau, Sudbury and Regina. On the other hand, fifteen markets experienced double digit percent declines. Ottawa (-32.6%), GTA (-26.6%) and Hamilton (-31.7%) led the pull-back with sharp declines also seen across the rest of the Greater Golden Horseshoe (GGH). Most B.C. markets also experienced significant decreases with Victoria (-17.1%), Fraser Valley (-14.8%) and GVA (-10.5%). Alberta and Manitoba markets also dipped lower, with Calgary (-15.3%), Edmonton (-14.9%) and Winnipeg (-10.8%) all down in double digits. Remaining Canadian markets were moderately lower.
• New listings were not to be outdone, slumping an even greater 21.6% nationally. Ontario and B.C. markets led the pullback with London (-44.8%), GTA (-39.3%), Fraser Valley (-38.8%) and GVA (-33.0%) topping the list. Only four markets experienced an uptick in listings – mostly markets that have also experienced an increase in sales.
• The outsized decline in listings led to a tightening of market conditions, with the sales to listings ratio up 5.3 points to 63.6% nationally. Most acute tightening was experienced in several GGH markets. The ratio surged in Kitchener-Waterloo (up 32.3 to 102.8%) and London (up 23.2 to 94.6%), with the GTA also up a healthy 9.7pp to 45.7%. Fraser Valley (up 26.3 to 93.6%) and GVA (up 19 to 75.7%) also tightened up sharply.
• The average home price declined 2.4% m/m, buckling the five month trend. It was a mixed bag across markets, half the provinces experiencing declines led by N.S. (-3.9%) while P.E.I. (+9.8%) and N.B. (+6.1%) lead the gains. Prices ticked down by 1.6% in Ontario and B.C. with values 4.2% lower in the GVA, while GTA prices were slightly softer, down 0.9%.
• The price decline was entirely due to the change in composition of properties sold, with GTA and GVA sales accounting for just 23.4% of national sales – down from 25.8% in the previous month. After seasonal adjustment, the national HPI rose 0.5%, with gains of 1.1% and 0.4% for GVA and GTA. On a year-over-year basis the national index decelerated from 9.2% to 7.7%. The trend was mirrored by the GTA HPI, which slowed to 5.3% from 7.3%, while the GVA HPI accelerated from 16% to 16.8%.

Key Implications

• This morning’s report was a highly anticipated oneas it gave us a glimpse of how the implementation of updated B20 rules impacted the Canadian housing market and how the market is faring in light of higher interest rates.
• On the whole, the numbers confirmed our expectations that B20 rules would pull-forward activity into late-2017, with sales slumping in January on the give-back. The pull-forward was further corroborated by the dynamics of new listings, which also increased ahead of the new rules, before properties being pulled-off. While it is too early to precisely estimate how much of the rise in late-2017 is related to the pull-forward, the report suggests that this dynamic accounted for much of it.
• The notion that pull-forward was central to the rise in late-2017 is further confirmed by the regional dynamics. The give-back was most apparent in Ontario and (to a lesser extent) B.C. – the two markets most affected by the B20 rules owing to their high prices and relatively large share of federally-regulated lending (particularly in Ontario).
• We expect some near-term volatility to persist in the market, as the fallout from the new rules and rising rates is absorbed by buyers and sellers, before some stabilization by mid-year. Thereafter we expect activity to remain weighed down byrising interest rates, but with markets largely in balanced territory prices should remain well supported. For our detailed forecast please click here.

By Michael Dolega, TD Economics Senior Economist

United States

• Major U.S. stock indices entered correction territory on Thursday but remain elevated relative to where they were a year ago. The sell-off was spurred by fears of higher interest rates, as the 10-year government bond yield hit a four-year high.
• The $300 billion increase in the spending cap over two years, laid out in the federal budget deal, could add to inflationary pressures at a time when the economy is already operating at close to full capacity, pressuring yields up further.
• Next week, investors will turn their attention to hard data, with advanced January retail sales providing an indication of whether or not first quarter growth will be affected by the residual seasonality.

Canada

• It was a sea of red in Canadian financial markets this week, with the S&P TSX, oil prices and the Canadian dollar all losing ground.
• Canada’s trade deficit widened in December, suggesting that net trade will be a drag on growth in the fourth quarter.
• Employment started the year off on a soft note, shedding 88k jobs in January. Losses were concentrated in part-time positions. The unemployment rate ticked up a point to 5.9%.
• Housing starts topped 200k units for an 8th straight month in January, despite some unfavourable weather conditions

Mortgage Interest Rates

No change to Prime lending rate currently at 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.14%.  No change in fixed rates.  No change in adjustable variable rates.

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

Open Access

• What’s Driving Canadian Homebuyers?(Canadian Mortgage Trends)
• Canadian home prices rise as Toronto sees first gain in 6 months(CBC)
• Home Capital Q4 profit sinks 40%, CEO says lender ‘turned the corner’(BNN)
• Andy Yan, the analyst who exposed Vancouver’s real estate disaster(Maclean’s)
• Toronto home prices climb for first time in six months: Teranet(BNN)
• Here’s what homebuyers can purchase with $500,000 in these major Canadian cities (BuzzBuzzNews)
• Yes the Canadian housing market is cooling, but it hasn’t been “too badly hit”: BMO(BuzzBuzzNews)
• ‘Mission accomplished’ on cooling markets, but affordability gap aiding ‘unequal society’: CMHC CEO(BNN)
• Gap between housing supply and demand largest in Toronto and Vancouver: CMHC(CBC)
• Bank of America Is Said to Explore Canada’s Uninsured MBS Market(Bloomberg)

Subscription May Be Required

• Supply shortages in Toronto, Vancouver left house prices ‘nowhere to go but up’(Financial Post)
• Mortgage rules ‘better than hoped’ but housing remains out of balance: CMHC CEO(BNN)
• Canada’s new home prices stall for first time since 2015(BNN)
• Canada January housing starts dip slightly, December new home prices stall(Reuters)
• Mortgages issued to non-permanent residents on the rise in Canada’s largest cities(BuzzBuzzNews)
• These Ontario housing markets have seen huge price spikes in the last decade (BuzzBuzzNews)
• How new mortgage rules hammer indebted households(Globe and Mail)
• Millennials’ prolonged stay at Parents Inn is having a profound impact on housing markets(Financial Post)
• Dividing the real estate market into ‘us and them’ would be a costly mistake for our economy(Financial Post)
• Pre-sale regulations in spotlight as hot GTA condo market leaves buyers out in the cold(Globe and Mail)

Now’s the perfect time of year for a free mortgage check-up. With spring on its way and interest rates on the rise, it makes sense for us to revisit your mortgage and ensure it still meets your needs. Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.

AffordabilityChart_2018_Adriaan

Change Of Space January 2018

AffordabilityChart_2018

Update to the OSFI New Mortgage Rule Changes Effective January 1, 2018

The Qualifying Rate for all Conventional/ Uninsured Mortgages:
 
•The Highest contract rate + 2%
Or
•The Bank of Canada benchmark rate
 
For all High Ratio Applications, qualification will remains unchanged, the greater of the Contract Rate or Bank of Canada Benchmark Rate currently at 4.99%.
 
Purchases approved prior to January 1, 2018 will be honoured based on the old rules provided there is no change in the property and/or borrowers
If there is a legally binding Purchase and Sale Agreement that is dated prior to January 1, 2018, regardless of closing date, the customer will qualify under the old lending rules

Pre-approvals:  if they are not converted into property specific deal before January 1, 2018, they will no longer be valid under old rules and need to be re-qualified under the new lending rules.

Refinances approved before January 1, 2018 must close within 120 days of the application dateto qualify under the old rules.

Market Commentary
London LSTAR stats released for October 2017.  The London and St. Thomas Association of REALTORS® (LSTAR) announced 757 homes exchanged hands last month, slightly down 10.2% from the same time a year ago. Year-to-date sales are up 10.6%, with a total of 10,111 homes sold, marking the second consecutive year residential sales have surpassed 10,000 across the region.

In October, the average sales price across London and St. Thomas was $325,331 up 14.2% from the same time a year ago. The average year-to-date sales price was $330,497 up 18.3% from October 2016.

“When looking at the region, home sales in London East, London South and London North have posted healthy gains in year-to-date activity,” Smith said. “In London East, home sales are up 21.2% compared to a year ago, while in London South, sales are up 13.9% and in London North, sales are up 6.5% compared to this time last year.”

In October, there were 847 listings, down 17% from the same time in 2016. St. Thomas saw a total of 67 homes sold, down 21.2% from the same time last year. The average home price in St. Thomas was $284,344 up 25.7% from October 2016.
Complete details can be found here: http://www.lstar.ca/market-updates .

While Vancouver and Toronto produce home sales and price numbers that seem to show they are shrugging-off government attempts to cool them, Montreal has quietly become one to watch.
Home sales in Montreal jumped 7% in October led by a 13% increase in condo sales.  Single-family detached homes saw a 3% increase.  Prices rose 9.2%.  Homes in the region remain a relative bargain though, with an average price of $387,000.  Toronto saw a 2.3% increase to $780,000.  Vancouver climbed 12.4% to $1.1 million.
Homes are selling more quickly in Montreal.  Singles were on the market for an average of 78 days, almost two weeks shorter than a year ago.  “Plexs” (2 to 5 units) spent an average of 81 days on the market, three days shorter than last October.  Condos continue to have the longest hang time, 103 days.  But that is 17 days faster than last year.
Strong job creation, consumer confidence and immigration get the credit, but upcoming changes in mortgage qualification rules have likely played a role in moving buyers off the sidelines. By First National Financial.

Market Showing Signs of Rebounding
October sales indicate the housing market is bouncing back, and the Greater Toronto and Vancouver areas are leading the way.

Sales last month were up 0.9% over September, even though listings declined 0.8%, which is in stark contrast to the August-to-September increase of 5%.

The Canadian Real Estate Association compiled the data, and another key finding was that October’s sales-to-new-listings ratio of 56.7% was up 1% from September, indicating the market is balancing.

Year-over-year sales in October decreased 4.3%, but the national average sale price of $505,937 was up 5%. However, the average sale price dropped to $383,000 when the GTA and GVA were removed from the equation.

REMAX Integra CEO Pamela Alexander says inventory is still tight in Canada’s two largest housing markets, but that signifies a return to a stable and predictable market. Fortunately, she says, it will be nothing like the beginning of 2016, when there was unusually high activity and homes sold well over value.

“It looks like it’s heading back to a normal market, like the one we’ve been experiencing for the last 10 years,” she said. “The market is trying to find its balance across the country, especially in its two biggest markets.”

Looking ahead through the remainder of 2017 and into next year’s first quarter, Alexander expects stable and healthy price growth, which she pegs in the five to 10% range, in accordance with robust market fundamentals, like immigration, strong employment and end-user consumer mentality.

However, inventory is below normal levels and will stay that way for the foreseeable future.

“Inventory is tightening up a little bit, but there’s still a bit more inventory than there was through the beginning of 2016,” she said. “We believe inventory will remain pretty tight. Right now we’re at two month’s supply, approximately, which is pretty tight by international standards. Inventory will continue to be in demand, and many markets are going to be driven by demand.”

Alexander doesn’t expect the B20 rule changes to have a major impact on the market, either. She believes consumers will adjust to the new rules, as they always do, and that the market always finds a way to adjust to the needs of supply and demand. As an example, she cited the land transfer tax, which is largely considered the price of doing business now in Toronto.

“There is still going to be price appreciation at the beginning of 2018, even with the mortgage rules,” said Alexander. “People are going to have to adjust to the new rules, but I think they’re going to do so. The stress test is giving people opportunities also to extend amortization periods, to offer variable rate mortgages—there are a lot of products out there and the banks don’t seem overly concerned. It will be a little bit different, but I believe that consumers will find a way to make it work.”  By The Canadian Press.

Economic Highlights:
United States
·         With little to digest on the data front, significant attention was devoted to political developments this week. Stock mar­kets remained upbeat through Wednesday, given optimistic expectations on tax reform, supportive earnings reports and gains among energy stocks.
·         However, market sentiment turned down thereafter, as developments on tax reform failed to meet expectations, given key differences between the House bill and the newly-released Senate bill.
·         While tax reform will remain top of mind in the days ahead, a number of important data releases next week will help tilt the narrative back toward economic fundamentals, with emphasis placed on the upcoming CPI report.
Canada
·         The WTI crude oil benchmark jumped to over $57 per barrel, reaching the highest level seen since mid-2015.
·         In a speech this week, Governor Poloz maintained a dovish tone, focusing on the softness in inflation. Further rate hikes remain highly data dependent.
·         Housing starts increased in October, erasing some of September’s decline. However, with higher interest rates and new B20 measures weighing on demand, starts are likely to gradually slide in the coming quarters.

Rates
We have seen a some lenders come out with more competitive high ratio insured 4 and 5 year fixed rates int the past week.  We pride ourselves in originating the best available deals and lowest rates for our clients for any term or rate type.

Other Newsworthy

Housing is No Longer a Canadian Growth Leader
OSFI has announced steps to reduce risks in the uninsured mortgage space. Siddall pointed out that these measures apply only to the federally-regulated financial institutions. He is concerned about the increasing levels of riskier mortgage activity by non-federally-regulated financial institutions.
The measures introduced by the federal government in October of last year to tighten insured mortgage lending qualifications mainly by stress-testing applicants at the 5-year posted mortgage rate, rather than the contract rate, has slowed insured mortgage lending volumes by 25%, which is in line with CMHC expectations. Average property selling prices have fallen commensurately as well.
But with so much attention paid to the imprudent borrower, I think it is important to note that the vast majority of Canadians manage their finances in a responsible manner. For example, roughly 40% of homeowners are mortgage-free and one-third of all households are totally debt-free. Another 25% of households have less than $25,000 in debt, so 58% of Canadian households are nearly debt free. Hence, mortgage delinquency rates are extremely low. In addition, two-thirds of outstanding mortgages are fixed rate, which mitigates the risk of rising mortgage rates over the near term.
So here we are in the lead-up to the January 1, 2018 implementation of the new OSFI B-20 regulations requiring that uninsured borrowers be stress-tested at a mortgage rate 200 basis points above the contract rate. It has been widely expected that home sales would jump before yearend in advance of the new ruling and indeed they have. Even so, activity remains well below peak levels earlier this year and prices continue to fall in the Greater Toronto Area (GTA) for the sixth consecutive month. Indeed, national home sales were down 8.6% year-over-year in October, led by a whopping 18.4% plunge in Ontario (see chart below).

Toronto single-family house prices were down 10.7% over the past six months ending October 31 (see chart below). GTA condo prices have fared better, up 2.6% since late April, but the rise is minuscule in comparison to the booming price gains evidenced before the Ontario government’s ‘Fair Housing Plan’ that introduced, among other things, a 15% tax on non-resident foreign purchases of homes.

According to statistics released today by the Canadian Real Estate Association (CREA), national home sales rose 0.9% from September to October–the third such monthly uptick–but remained almost 11% below the record set in March. Activity in October was up from the previous month in about half of all local markets, led by the Greater Toronto Area (GTA) and the Fraser Valley, together with some housing markets in the Greater Golden Horseshoe region.
On a year-over-year basis, sales were down 4.3% last month, extending the year-over-year declines to seven consecutive months. The decrease in sales from year-ago levels occurred in slightly more than half of all local markets, led overwhelmingly by the GTA and nearby cities.
“Newly introduced mortgage regulations mean that starting January 1st, all home buyers applying for a new mortgage will need to pass a stress test to qualify for mortgage financing,” said CREA President Andrew Peck. “This will likely influence some home buyers to purchase before the stress test comes into effect, especially in Canada’s pricier housing markets.”
“National sales momentum is positive heading toward year-end,” said Gregory Klump, CREA’s Chief Economist. “It remains to be seen whether that momentum can continue once the recently announced stress test takes effect beginning on New Year’s day. The stress test is designed to curtail growth in mortgage debt. If it works as intended, Canadian economic growth may slow by more than currently expected.”
Balanced Markets Though New Listings Fall
The number of newly listed homes eased by 0.8% in October following a jump of more than 5% in September. The national result was influenced most by declines in new supply in London-St. Thomas, Calgary and Greater Vancouver.
With sales up slightly and new listings having eased, the national sales-to-new listings ratio rose to 56.7% in October from 55.7% in September. A national sales-to-new listings ratio of between 40% and 60% is consistent with a balanced national housing market, with readings below and above this range indicating buyers’ and sellers’ markets respectively. According to the sales-to-new listings measure, housing markets in both Toronto and Vancouver remain balanced. As the charts below show, the Toronto market shifted dramatically from a seller’s market following the April provincial housing measures.
The number of months of inventory is another measure of the balance between housing market supply and demand, representing how long it would take to liquidate current stocks of unsold homes at the current rate of sales activity. There were five months of inventory on a national basis at the end of October, unchanged from the previous two months and roughly at par with the long-term average.
In the Greater Golden Horseshoe region including and surrounding Toronto, the number of months of inventory was 2.5 months, up sharply from the all-time low of 0.8 months in February and March. However, it remains below the region’s long-term average of 3.1 months.

Price Gains Diminish Nationally
Price appreciation continued to moderate year-over-year. The Aggregate Composite MLS® Home Price Index (HPI) rose by 9.7% year-over-year (y-o-y) in October 2017, representing a further deceleration in y-o-y gains since April and the smallest increase since March 2016. The slowdown in price gains mainly reflects softening price trends in Greater Golden Horseshoe housing markets tracked by the index. Price appreciation was strongest in condos and weakest in single-family benchmark homes, which continues the trend in place since May 2017.
In October, apartment units again posted the most substantial y-o-y gains (+19.7%), followed by townhouse/row units (+13.2%), one-storey single family homes (+6.3%), and two-storey single family homes (+5.8%). The price appreciation in single-family homes was at its lowest level since March 2015.
The MLS® Home Price Index provides the best way of gauging price trends because average price trends are prone to be strongly distorted by changes in the mix of sales activity from one month to the next.

By Dr. Sherry Cooper. Chief Economist. Dominion Lending Centres.

Adriaan Driessen Dominion Lending Centres Forest City Funding Phone: 519-777-9374 Cell: 519-777-9374 Email: adriessen@dominionlending.ca http://www.iMortgageBroker.ca M08003142 10671

Terms Posted Rates Payment Per $100k Our Rates Payment Per $100k Savings 6 Months 3.14% $480.46 3.10% $478.39 $2.07 1 Year 3.04% $475.30 2.89% $467.62 $7.68 2 Years 3.24% $485.65 2.54% $449.96 $35.68 3 Years 3.44% $496.11 2.89% $467.62 $28.49 4 Years 3.89% $520.07 2.89% $467.62 $52.45 5 Years 4.99% $581.04 2.94% $470.17 $110.86 7 Years 5.30% $598.80 3.69% $509.35 $89.45 10 Years 6.10% $645.76 3.74% $512.02 $133.74  Variable   2.70% $457.99 2.21% $433.65 $24.33 Prime Rate 3.20%

Please Note: Payment per $100K and possible savings shown above are based on a 25-year ammortization. Rates are subject to change without notice and the rate you receive may vary depending on your personal financial situation. *OAC E&OE. Please reply to this email and I will be happy to provide you with greater detail and determine the best rate available for you.

This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.

Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca

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