Vancouver Real Estate Blog

Federal Budget - Good News For Home Owners And Realtors Alike

Federal Finance Minister Jim Flaherty tabled the 2012 Federal Budget on March 29, 2012. Eliminating the deficit by 2015 is a key goal and the government plans to do this by cutting spending by $1.4 billion in 2012/13 and by $3.9 billion in 2013/14 for a total of $5.3 billion. With unemployment steady at 7.5% and record household debt, property buyers and owners were looking for any glimmer of good news. The government did offer some hope.

Bank Of Canada January 2012 Announcement

As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 9:00 am EST, January 17^th, 2012, the Bank of Canada again did what we expected
them to do… they maintained their overnight rate. What this means to you
is that the prime rate on your mortgage or line of credit will not change and
remains at 3.00%. This is great news as you still have a great low rate
and so continue to make the most of the low payments you will still have and
maybe chat with a financial advisor about a Tax Free Savings Account or
some RRSP contributions to trigger a potential income tax refund next year!
If you don’t have a financial advisor, let me know and I’d be happy to
recommend one to you.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“the outlook for the global economy has deteriorated and uncertainty has
increased… The Bank continues to assume that European authorities will
implement sufficient measures to contain the crisis, although this assumption
is clearly subject to downside risks. The Bank expects the U.S. recovery will
proceed at a more modest pace going forward. For Canada, net exports are
expected to contribute little to growth, reflecting moderate foreign demand and
ongoing competitiveness challenges, including the persistent strength of the
Canadian dollar. In contrast, very favourable financing conditions are
expected to buttress consumer spending and housing activity.”

The outlook hasn’t really changed since the last announcement... they expect that growth will slowly continue but it is anticipated that prime rate might not actually increase until into 2013. When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally. Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

We have seen fixed rates remain very low at around 3.29% to 3.49% for a five year
fixed term. Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product (if you are on a variable rate) as the
interest is very much lower than a fixed term rate right now. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is March 8th, 2012 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are so
low right now and so it is a great time to buy a property or consider
refinancing especially as my mortgage specialist can hold rates for up to six months, if you know of someone that is looking for advice on their home or mortgage options, with no
obligation, would you mind passing my contact information on to them – this is very much appreciated.

Bank Of Canada Announcement of December 6th 2011 Regarding The Overnight Rate

As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

At 9:00 am EST, December 6^th, 2011, the Bank of Canada again did what we expected them to do… they maintained their overnight rate.  What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%.  This is great news as you still have a great low rate and so continue to make the most of the low payments you will still have and maybe chat with a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund next year!  If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“Uncertainty around the global economic outlook has increased.  The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October.  Recent economic data suggest that growth in the US has been slightly more robust than anticipated… Nonetheless, household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth.  On balance, recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar”.

The outlook hasn’t really changed that much since the last announcement... they expect that growth will slowly continue but will be impacted by global economic conditions.   Based on this repeated message, it is anticipated that prime rate might not actually increase until well into 2012 maybe even 2013.  When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally.  Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

We have only seen some minor fluctuations to the fixed term rates since the last announcement and are still very low at around 3.49% to 3.79% for a five year fixed term. 

Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is very much lower than a fixed term rate right now. 

Bank of Canada Holds Firm on The Overnight Rate

As you know, your variable rate mortgage, lines of credit and/or student loans are all based on the Prime Rate and as promised, here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

 At 9:00 am EST, October 25^th, 2011, the Bank of Canada did what we expected them to do… they maintained their overnight rate.  What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%.  This is great news as you still have a great low rate and so continue to make the most of the low payments you will still have and maybe chat with a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund next year! If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.

 Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“The global economy has slowed markedly as several downside risks to the projection outlined in the Bank’s July Monetary Policy Report have been realized. Financial market volatility has increased and there has been a generalized retrenchment from risk-taking across global markets. The outlook for the Canadian economy has weakened since July, with the significantly less favourable external environment affecting Canada through financial, confidence and trade channels.  Although Canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year.”

The outlook has not changed since the last announcement.... the Canadian economic growth stalled in the second quarter but the Bank continues to expect that growth will resume in the later part of this year.   Based on this repeated message and economic conditions it is anticipated that prime rate might not actually increase until well into 2012 maybe even 2013.  When it does start to increase, it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally.  Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

We have seen the fixed term rates fluctuate slightly since the last announcement and are still very low at around 3.39% to 3.79% for a five year fixed term. 

Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is very much lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me and I will have one of my mortgage brokers help you. The next announcement on any change to the prime rate is December 6^th, 2011 at which time I’ll be in touch again.

 I wonder if I can ask a favour – rates are so low right now and so it is a great time to buy or invest in a Vancouver property, if you know of someone that is looking for advice on their housing  options,(moving up, lifestyle changes, job promotion,  being transferred, divorse, wanting a better location,etc) with no obligation, would you mind passing my contact information on to them(mitchellmingie@remax.net  or cell 604-551-5487 in Vancouver BC Canada) – this is very much appreciated.

Canada Renews The Energy Retrofit Home Program

The federal government extended its poplar ecoENERGY Retrofit – Homes program. One in 20 homeowners took advantage of the original program, which ran from April 2007 to March 2010. Now renewed until March 21, 2012, the program provides grants of up to $5,000 to help homeowners make their homes more energy efficient.

The grants apply to upgrades for a variety of projects, including heating and/or cooling systems, ventilation systems, domestic hot water equipment, insulation, air sealing, windows/doors/skylights and water conservation.

To become part of the program, residents must register with the program. Those who have received grants in the past are still eligible to get more money if they didn't receive the maximum $5,000 grant.

Next homeowners must contact a local service organization that's licensed by Natural Resources Canada to arrange a pre-retrofit energy evaluation. The homeowner receives a full report and an EnerGuide label, which rates the energy efficiency of the home. Based on the report and the government's grant table homeowners then choose the best upgrades to improve their rating.

The Bank of Montreal Economics predicts that across Canada, about $45 billion will be spent on home renovations like kitchens, bathrooms, landscaping and exterior renovations for example.

CMHC says that the average renovation job cost $12,972. Vancouver had the priciest average cost at $15,709 and Winnipeg had the lowest a $10,339.

 

Canadian Immigration Rules Change

On June 24, the federal government instituted rule changes related to new applications under the Federal Immigrant Investor Program (IIP), the Federal Skilled Worker Program (FSW) and the Federal Entrepreneur Program. The changes are as follows:

• Federal Entrepreneur Program: A temporary moratorium on new applications.

• Federal Immigrant Investor Program (IIP): A cap of 700 new IIP applications will be considered for processing each year.

• Federal Skilled Worker Program (FSW): A cap of 10,000 new FSW applications, without an offer of arranged employment, will be considered for processing each year. Within the 10,000 cap, a maximum of 500 new applications per occupation will be considered each year.

BC, and Vancouver in particular, has been one of the primary recipients of immigrants under the IIP, accounting for half of total Canadian investor class immigration. From 2005 to 2010, over 30,000 investor class immigrants have located in BC, an average of about 5,000 per year. This number relates to roughly 2,000 households per year.

Bank Of Canada Rate Stays The Same

At 9:00 am EST, July 19th, 2011 the Bank of Canada did what we expected them to do… they maintained their overnight rate.  What this means to you is that the prime rate on your mortgage or line of credit will not change and remains at 3.00%.  This is great news as you still have a great low rate and so continue to make the most of the low payments you will still have and maybe chat with a financial adviser about a Tax Free Savings Account!  If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.

 

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“The global economic expansion is proceeding broadly as with modest growth in major advanced economies and robust expansions in emerging economies.  The U.S. economy has grown at a slower pace than expected and continues to be restrained by the consolidation of household balance sheets and slow growth in employment. In contrast, growth in emerging-market economies, particularly China, remains very strong.   Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets.  In Canada, the economic expansion is proceeding largely as projected, although the expected rotation of demand is somewhat slower than had been anticipated.  Net exports remain weak, reflecting modest U.S. demand and ongoing competitiveness challenges, particularly the persistent strength of the Canadian dollar. Despite increased global risk aversion, financial conditions in Canada remain very stimulative and private credit growth is strong.

The Bank expects an anticipated slowdown in the first half of 2011 however, for it to catch up to their earlier expectations of full economic recovery by the end of 2012.   We are going to see the prime rate increase maybe at the next announcement date or even later this year.  Remember, prime rate is very likely to increase this year but it is expected to be gradual and controlled in line with economic recovery, both in Canada and globally.  Remember any change to the prime rate since 1992 has only been by 0.25% at any ONE time.

We have seen the fixed term rates fluctuate slightly since the last announcement and are still very low at around 3.79% to 3.99% for a five year fixed term. 

Based on this recent announcement, and the anticipation that the prime rate will still remain low for the coming months, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is very much lower than a fixed term rate right now. The next announcement on any change to the prime rate is September 7th, 2011.

Gary Mauris President of Dominion Lending Centres is Critical of Mortgage Changes that Finance Minister Jim Flaherty Adopted.

Gary Mauris, president of Dominion Lending Centres, had his say about concerns within the Canadian mortgage brokering industry to Finance Minister Jim Flaherty during the Regina Pre-Budget Consultation recently. Here is just a bit of what he had to say.

“Although we support and encourage household fiscal responsibility, we think a sweeping policy change like the one we saw wasn’t necessary,” Mauris said. “Mortgage default in Canada is the lowest in the world. Rather than pairing back the maximum amortization from 35 years to 30, they should have made the borrower qualify based on the payments for a 30-year amortization and kept the maximum amortization at 35. Qualification and purchasing power just dropped significantly, especially affecting first-time homebuyers, making it more difficult for our most valuable assets – young adults and young families – to experience homeownership and participate in our real estate sector.”

He said the reduction of the refinancing maximum to 85 per cent from 90 per cent loan-to-value (LTV) was not necessary. “One of the most effective ways that mortgage professionals can eliminate high-interest, unsecured consumer debt and over-extension is to refinance at today’s low interest rates – often saving the consumer hundreds of dollars per month in excessive interest. This policy is going to force many homeowners who are experiencing job loss, illness, separation, divorce or urgent unforeseen family crisis into having to sell their homes to gain access to their very own equity.”

He also said that government needs to take a hard look at unsecured debt and, specifically, credit card issuers. “Canadians’ biggest financial struggles, over-extension and record debt levels are not due to their mortgages (again, we have the lowest mortgage default rate in the world). They are due to easy access to high-interest credit cards and other unsecured debt. We have very strict qualifications for mortgages, including TDS and GDS ratios to ensure that consumers have the financial wherewithal to make the payments and similar qualifications based on the credit card limits should apply.”

Mortgage Penalties in Canada

"Well it's about time" says Mitchell Mingie. The Quebec Federation of Real Estate Boards (QFREB) is taking the Canadian Federal Government to task, requesting legislation be established surrounding mortgage penalties imposed on households that prepay the full balance of their mortgage.

The problem that exists is when borrows try to pre-pay their remaining balance the banks in Canada say sure but your penalty for doing so is either three months of interest or an amount based on the differential between rate A, the rate in effect at the signing of the mortgage, and rate B, the rate in effect at the prepayment date. So the banks have two option to cover their hefty profits yet the little home owner has no way out. What usually happens is the home owner decides not to pay the penalty thus stopping a whole cycle of selling their Real Estate. This action has repercussions throughout the market place.  The individual home owner  has to stop in their tracks to wait for the expiry of their mortgage, which slows down the economy. In other words this home owner could be missing out in an opportunist time in the market to sell, miss out on the home of their dreams etc. 

The second scenario above allows the lender to cover the financial loss incurred by their mortgage investment in the event that interest rates decrease. So no matter what happens to interest rates, the bank's have their backs covered. Mitchell Mingie says "this is not fair as some banks will impose the mortgage rate differential which costs the home owner more money than the  three month penalty and this only deepens the profits of the banks at the cost of the homeowner". When is enough enough? So he is very pleased to see the Quebec Real Estate Board tackle this huge indifference.

The QFREB is asking the government to enact legislation that will eliminate and prevent abuse from Canadian mortgage lenders, as it pledged to do when its budget was tabled in March 2010. The QFREB proposes four possible solutions:

1) Eliminate mortgage penalties in Canada;

2) Set limits (e.g., a minimum of three months of interest and a maximum of six months of interest);

3) Use the negotiated rate (rate A) and the rate that the financial institution is willing to offer for the remaining period (rate B);

4) Use a curve of negotiated rates established periodically by an independent organization (such as the Bank of Canada) that reflects the prevailing market conditions.

Bank of Canada surprised everyone with it's January 18th announcement

In a surprise move on January 18, 2011, the Bank of Canada chose not to raise interest rates. Instead, it will maintain its target for the overnight rate at one per cent. The Bank Rate is correspondingly 1.25 per cent and the deposit rate is 0.75 per cent.

The Bank of Canada site the following reasons for their decision:

1) A global economic recovery that is proceeding at a faster pace than the Bank had anticipated and a need to keep rates down to reinforce this stronger growth.

2) A need to ensure there are no added restraints on the pace of growth and residential investment, particularly at a time when four years of federal government spending on infrastructure is about to wind down and Canadians have limited household disposable income available.

The Bank expects business investment will likely continue to rebound strongly and projects the economy will expand by 2.4 per cent in 2011 and 2.8 per cent in 2012, and return to full capacity by 2012 – a much more optimistic outlook than its forecast in October 2010.

The Bank of Canada’s next scheduled date for announcing the overnight rate target is March 1, 2011.

For more information, visit: www.bankofcanada.ca.