Nest Mortgage Co. Blog

Final 2024 BoC Announcement 🎁🎄| -0.50% Holiday Rate Cut!

info@nestmortgage.co (Nest Mortgage) — Thu, 12 Dec 2024 00:10:57 GMT

BoC (-0.50%) Holiday Rate Cut! ��

The odds of a hefty rate cut leading up to this morning's announcement were nearly 90%, and the Bank did not disappoint! Holiday wishes were granted as the overnight rate was cut by another -0.50%, marking -1.75% of easing over the past 6 months!

�� Effective tomorrow, Canada's Prime Rate will drop to 5.45% ��

However, the Bank’s message (click for the official announcement) struck a more hawkish tone than anticipated. Here’s what stood out:

Future Cuts : The Bank removed any hints of more immediate cuts, signalling a slower pace going forward—think 25 bps increments or even a pause. Markets now expect just two more cuts by mid-2025.
GDP Growth : Governor Macklem noted a "softer outlook" for GDP growth, influenced by immigration reductions for 2025. This, along with slack in the labour market, contributed to today’s 50 bps cut instead of 25.
Housing and Spending : Lower rates are spurring household spending, though the full effect won’t hit until next year. Housing activity is expected to pick up in 2025, but immigration remains a wildcard.
Inflation Forecast : The Bank expects CPI to hover near its 2% target over the next few years, though uncertainty (insert Trump and tariffs here) clouds that projection.

Upcoming Announcement Odds

Bank of Canada (Jan 29): 25 bps cut: 56%, No change: 44%
Federal Reserve (Dec 18): 25 bps cut: 98%, No change: 2%

What does this mean for your Variable Rate Mortgage?

Your mortgage payment has dropped ~$99 per 100k of mortgage since June!
Based on OIS market predictions, if you are considering a 3-year fixed rate today, 4.39% (conservatively) or better is required for it to make sense to select fixed over variable over the same term.

On Deck: 2025 Mortgage Opportunities

Starting next week, some exciting mortgage updates could help you expand your buying options:

Lower Monthly Payments with a 30-Year Amortization

For qualified first-time buyers and anyone purchasing new construction, mortgages can now be amortized over 30 years. This means lower monthly payments and increased buying power—making it easier to afford the home that’s right for you.

Higher Purchase Prices with Smaller Down Payments

Homebuyers with less than 20% down will soon have access to properties priced up to $1.5 million. This opens the door to more opportunities, moving beyond condos and into single-family homes. Keep in mind, Mortgage Default Insurance will be required in these scenarios.

Funding for Secondary Suites

Looking to add a rental suite or a laneway home? Two key updates rolling out in January make it easier:

Refinance Up to 90% of your home’s post-renovation value (up to $2M) with a 30-year amortization option.
Access the Canada Secondary Suite Loan Program for up to $80,000 (which may increase) at just 2% interest over 15 years to help build or renovate a qualified secondary suite.

We’re expecting more details on these programs and additional housing affordability measures in the upcoming Federal Economic Statement (Dec 16th).

If you’ve been thinking about making a move, now’s the time to explore how these updates could work for you. Let’s start with a quick Pre-Approval to see what’s possible with your budget and today’s rates!

BoC Announcement 📢 | -0.50% Rate Cut Materializes

info@nestmortgage.co (Nest Mortgage) — Wed, 23 Oct 2024 23:54:57 GMT

Who Knew? ��

As expected, or easily predicted, the Bank of Canada formally announced a 0.50% cut to the overnight rate earlier this morning. (click for official announcement)

This adjusts Prime Rate down to 5.95%, the lowest level we’ve seen in the past two years, and demonstrates a clear signal that the BoC is doing everything possible to kick-start economic growth.

A Green Light to Borrow

Governor Tiff Macklem’s message is straightforward: borrowing just got cheaper, and more cuts could be coming. With inflation settling back around the 2% target, he’s effectively giving Canadians the go-ahead to take advantage of lower rates, even if average core inflation is still a touch above the goal. "We want to see growth strengthen," Macklem said, and he’s determined to make it happen.

Sluggish Growth and Excess Capacity

The outlook for the economy remains bleak, with growth forecasts looking dim. Capital Economics, among others, sees a rough road ahead, predicting significant excess capacity well into 2025. This means more downward pressure on inflation, making today’s cut unlikely to be a one-off. David Rosenberg echoes this cautious sentiment, pointing out that Canada’s fiscal stimulus is far less robust compared to the U.S., and the impact of past rate hikes is hitting Canadian households harder—especially given the lack of 30-year fixed-rate mortgages.

What This Means for Mortgages

For mortgage holders, today’s big rate cut has immediate implications:

Variable Rates: Those with floating-rate mortgages just got a bit of a break. The typical borrower with a $300,000 floating-rate mortgage will save over $120 a month—enough for some extra breathing room in the budget.
Interest-Only HELOCs: Borrowers will see savings too—about $40 per month for every $100,000 borrowed.
Fixed Rates: Not much change in the near term, and further decreases will likely require a more significant economic downturn.
Rate Predictions: The BoC’s neutral target suggests we might see the policy rate settle between 2.25% to 3.25%, with a floor for Prime Rate potentially around 4.95%. This puts a spotlight on a variable rate mortgage strategy as further cuts materialize.

Looking Ahead

While today’s cut is a boost for those holding variable-rate debt, it’s clear that the Canadian economy isn’t out of the woods yet. The Bank’s cautious optimism suggests further cuts in the pipeline, but for significant relief, both the Canadian and U.S. economies would need to show signs of greater strain. Until then, fixed-rates remain attractive for the risk-averse, while variable-rate borrowers stand to benefit the most from the current easing cycle.

The bottom line: it’s a great time to review your mortgage options, as the landscape is shifting, and staying ahead of rate changes could save you thousands over the life of your loan.

BoC Update | How the Latest BoC Cut Impacts Your Mortgage

info@nestmortgage.co (Nest Mortgage) — Wed, 04 Sep 2024 23:01:55 GMT

BoC Update | How the Latest BoC Cut Impacts Your Mortgage

Let’s unpack what the latest move by the Bank of Canada (BoC) means for you and your mortgage -

The BoC trimmed its key lending rate for the third straight time by another 25 basis points (bpts). With inflation cooling to its lowest in over three years this July, today's cut was widely expected:

BoC’s Overnight Rate : 4.25%
Most Lenders’ Prime Rate : 6.45%

*this rate update mainly impacts those of you with variable or adjustable-rate mortgages and lines of credit.

“If we need to take a bigger step, we’re prepared to take a bigger step.”

Was an interesting share by Governor Tiff Macklem this morning. Translation? More cuts are on the way. Economists are betting on another 25 basis point reduction at both of the remaining meetings this year. Barring an unforeseen macro event, we’re likely in for a steady stream of 25 basis point cuts until the policy rate settles around 2.75%—possibly by next July.

For Variable-Rate Mortgages: Every 25 basis point drop shaves roughly $15 off monthly payments for every $100,000 of mortgage. Three drops since June is welcomed, right?

For Fixed-Rate Mortgages: Your current rate isn’t affected by this announcement, but with variable rates dipping, there is downward pressure on bond yields. It might be worth breaking your mortgage early (yes, there would likely be breakage) to lock in a new, lower rate on all debt. If you’re curious about potential savings, give us a shout, and we’ll crunch the numbers for you.

Planning to Buy? If you’ve got a Fixed-Rate Pre-Approval, today’s news doesn’t change your maximum mortgage amount, but we’re keeping an eye on the market to secure best terms when they pop up.

Renewing Your Mortgage? Don’t leave money on the table. it is crucial to assess your mortgage strategy, specifically determining whether a fixed or variable mortgage product is right for you (insert BoC rate drops through 2025 here). We’re here to help negotiate best terms, whether this means staying with your existing lender or moving to one of 200+ alternatives. And yes, this service is complimentary, no matter where your original mortgage came from.

Stay tuned for more updates, and as always, if you’ve got any questions about how recent cuts impact you specifically, don’t hesitate to reach out!

BoC Update | Less "STRESS" as loosening cycle continues!

info@nestmortgage.co (Nest Mortgage) — Thu, 25 Jul 2024 20:53:12 GMT

Prime Rate will drop from 6.95% to 6.70%.

Given a 90% expectation of a rate drop heading into today's Bank Of Canada announcement , it came as no surprise that a second consecutive drop materialized. The Bank of Canada decreased its Key Interest Rate by 0.25% this morning, emphasizing a cautious approach to managing inflationary pressures and economic stability.

Today's rate drop mainly impacts variable interest products as Prime Rate will drop from 6.95% to 6.70%.

Bond yields, directly correlated to fixed rates, notched down after the announcement. Yields currently sit 35bpts below recent highs, suggesting fixed rates may ease in the near term as well.
Lower fixed and variable rates not only provide welcomed interest savings, but also enhance mortgage qualification (lowering the "Stress Test") for new mortgage applications.

Global Outlook: The global economy is expected to grow at around 3% annually through 2026. US and Europe are experiencing varied growth rates with inflation easing gradually. China's economy is showing modest growth amidst mixed domestic and export conditions.

Canadian Outlook: Canadian GDP growth is estimated at 1.5% in the first half of 2024, below potential due to weak household spending and signs of labor market slack. Economic growth is expected to improve in the latter half of 2024 and into 2025, supported by stronger exports and easing borrowing costs.

Inflation Trends: CPI inflation moderated to 2.7% in June, with core inflation measures below 3%. Shelter costs remain a key driver of inflation, alongside services affected by wage increases. Inflation is expected to approach the 2% target as temporary factors affecting gasoline prices diminish.

Assuming softer GDP and employment reporting in August, and a US Fed rate cut in September (95% chance currently), the 52% market expectation of a September cut should push even higher.

Governor Macklem suggests a cautious "meeting-by-meeting" approach to managing economic stability, hinting that rates will need to move even lower to reignite the economy. Some analysts suggest we may see a 25bpt cut every meeting until the Bank’s neutral range is achieved ( see Policy Rate chart above; forecasting 200bpts in further drops by 2025 ).

The next BoC Announcement is September 4, 2024.

________________________________________________________________________________________________________________________________________________________________________________

Stressed about your upcoming purchase, refinance, or renewal mortgage?

With the height of the recent rate cycle behind us, it is crucial to assess your mortgage strategy, specifically determining whether a fixed or floating mortgage product is right for you.

Let's schedule a call to tailor the perfect product strategy to meet your specific needs!

Bank of Canada Update | A Welcomed Rate Drop!

info@nestmortgage.co (Nest Mortgage) — Thu, 06 Jun 2024 17:41:27 GMT

Specific to variable rate mortgages, the Prime Lending Rate will drop by .25% to 6.95%

The Bank of Canada announced a cut to its key interest rate by 25 basis points this morning, ending 11-months of peak interest rate tightening.

The central bank cited recent data that has bolstered confidence in the trajectory toward disinflation and less restrictive policy. Both of the Bank’s preferred measures of underlying inflation have fallen below the 3% threshold in Q2 and are projected to decline further throughout the year. Additionally, Canada's GDP growth in the first quarter fell short of the Bank's expectations, reinforcing the need for a rate cut.

Whats Next?

For those with variable-rate mortgages, today's rate cut means lower interest payments and reduced monthly costs, providing welcomed financial relief.

Fixed-rate mortgage holders won't see immediate changes, but lower rates may materialize in the near future as bond yields continue to adjust downward.

Rate cuts will almost certainly stimulate the housing market, aiding those looking to buy or sell homes near-term.

Some suggest today's move is just the beginning, with another cut in July highly likely. Governor Tiff Macklem has shrugged off concerns about exchange rate impacts, and further weak economic performance will support further cuts at each of the remaining (4) meetings this year.

What's the best strategy?

If you have a purchase, refinance, or renewal on the horizon, it is imperative to assess your financial goals and risk tolerance before committing to a fixed or floating mortgage product.

We are more than happy to connect and review a savings strategy that suits your specific needs!

BoC Update | Insights on Rate Easing

info@nestmortgage.co (Nest Mortgage) — Fri, 12 Apr 2024 18:58:58 GMT

As anticipated, this week's Bank of Canada announcement kept the overnight rate unchanged. The Bank expects inflation to hover around 3% and drop below 2.50% later this year, aiming to reach the target of 2% by 2025.

Wednesday marked the sixth consecutive "no change" announcement, although speculation persists that we should see rates, specifically Prime, drop by .75-1.00% by the end of 2024.

Despite no movement being widely anticipated, it is disappointing that further insight into a housing market reset has now been postponed until the next scheduled decision on June 5th. With unemployment at a 26-month high and GDP underperforming, these are two indicators contradicting the notion of rates remaining "higher for longer".

If you’re eagerly awaiting rate cuts and financial relief, Canada's economic landscape is painting a promising picture. The trajectory ahead appears to be downward; it's simply a matter of timing.

Considering a mortgage soon? (Purchase, Refinance, or Renewal?)

As mentioned, some experts still suggest variable and adjustable rates could plummet by up to 1.25% by the conclusion of 2024. In contrast, bond yields and Fixed rates have faced upward pressure as of late, highlighting the importance of connecting with Nest and formalizing a mortgage pre-approval to guard against near-term rate bumps.

Monthly payments getting you down?

In many cases, mortgage interest rates are significantly lower than unsecured rates such as those on credit cards, auto loans, and lines of credit. Consider exploring debt consolidation through a Refinance as a potential solution to create some much-needed monthly payment relief.

Approaching Mortgage Renewal?

If concerns are rising regarding higher rates upon renewal, now is the perfect time to assess your mortgage strategy. Rest assured, we are dedicated to keeping up with the dynamic mortgage market and uncovering opportunities that suit your specific needs.

Bank of Canada Announcement March 2024

info@nestmortgage.co (Nest Mortgage) — Wed, 06 Mar 2024 21:58:27 GMT

In light of theIn the wake of today's Bank of Canada (BoC) announcement maintaining the overnight rate at 5.00%, Nest brings you a comprehensive overview of the current mortgage landscape.

Prime Rates and payments for variable lending products remain unchanged following this non-rate event, leaving borrowers in a familiar position. While the BoC provided limited insight into the potential timing of interest rate cuts, consensus suggests we might witness the first rate cut materializing in June of this year.

Despite the ongoing commitment to restoring price stability for Canadians, a message consistent since July 2023, it is essential to highlight key facets of today's mortgage landscape:

1. GDP: Canada's 4th Quarter (2023) GDP surprised with a 1% annualized growth rate, surpassing expectations. However, beneath the positive headline lies a complex narrative. The growth coincided with a population surge of approximately 430,635 people, equating to a 4% annualized growth rate. On a per capita basis, Canadians appear to be experiencing the intended tightening, a trend persisting in 5 of the last 6 quarters. Per capita GDP adjusted for inflation is now lower than Q4 2014, a noteworthy observation challenging the notion of an economy in need of restraint.

2. Labour: In January, Canada's Labor Force added 37,000 jobs, outperforming expectations, leading to a decline in the unemployment rate to 5.7%. However, a closer examination reveals some finer details. Despite adult population growth of 125,500 people, the labor force expanded by a much smaller 18,200. Additionally, the participation rate for the age group of 15-24 witnessed a concerning decline of 130,000 persons. Without this decline, the unemployment rate would be 0.5% higher.

3. Inflation: Canada's Headline Inflation Number registered below expectations at 2.9%. In the ongoing battle against inflation, there has been significant progress since CPI peaked at 8.1% in June 2022, now comfortably below the 3% threshold. Core measures, though still elevated at 3.4% and 3.3% respectively, are expected to ease further as higher rates prompt more mortgage holders to renew into lower interest rate mortgages.

4. Global Considerations: Economic performance and Bond yields have been influenced by global factors. While global economic growth slowed in the fourth quarter of 2023, U.S. GDP growth remained surprisingly robust and broad-based. Inflation in the U.S. and the Euro area continued to ease, accompanied by a notable rise in equity markets.

What's Next?

The looming question pertains to the BoC's eventual decision to ease interest rates.

The per capita statistics and the intricate state of the Canadian economy are interwoven in unpredictable ways, with the wildcard being the surge in population growth. Inflation, triggered by demand exceeding supply, faces uncertainties on how pent-up demand will respond to rate cuts. The surge in Canada's population, almost double the pre-COVID growth, plays a crucial role in shaping the trajectory of the BoC's decisions.

Since October 2023, significant drops in fixed mortgage rates have been observed, likely to persist gradually as markets anticipate rate cuts by the BoC. Current odds indicate at least one rate cut by this summer, and two more to follow before year-end ( market survey ).

As we approach the Spring Market, optimism and demand gain momentum. If you've adopted a 'wait and see' approach, now is the opportune moment for a conversation. Preparing before the first rate cut is pivotal, as optimism will inevitably transition to confidence, and housing market activity will return to normal levels.

Next BoC Announcement: April 10, 2024.

Final Bank of Canada Announcement of 2023

info@nestmortgage.co (Nest Mortgage) — Fri, 15 Dec 2023 16:06:45 GMT

In light of the softening of the Canadian economy, the Bank of Canada opted to maintain its overnight rate for the fifth consecutive time earlier this month leaving Prime and variable product pricing unchanged.

While "financial conditions have eased," the Bank also highlighted persistent inflationary pressures stemming from ongoing wage growth and robust immigration. This is exacerbated by the housing supply failing to keep pace.

The Bank continues to emphasize the need for restrictive policy to bring inflation back within target, yet “the market” is no longer buying it!

With subdued core inflation pressures, declining GDP and house prices, and a softening labour market, it is inevitable that the Bank will need to reduce rates to avoid severe economic consequences. Market consensus is the rate-tightening cycle has passed and both new and existing mortgage holders can look to much needed rate reprieve in 2024.

Bond yields have dipped more than -100bpts since October, leading to lower fixed rates.
Conventional 5-year fixed rates are offered at 5.69-5.99%,
with a noteworthy offer of 4.99% for default-insured purchases.
As fixed rates have only dropped -50bpts over the same period, expect further discounting in the weeks ahead.

THE (MORGAGE) YEAR THAT WAS, AND WHAT LIES AHEAD?

Reflecting on this past year it is important to highlight the key metrics closely monitored by the Bank of Canada: CPI, GDP, and Unemployment stats mentioned above suggest a favorable trajectory for interest rate relief.

Governor Tiff Macklem has shifted from his previously firm stance and recently indicated that the Bank does not need to wait for inflation to hit the target before easing rates. There is palpable concern regarding the impending wave of mortgage renewals and the potential impact on household budgets. Increased spending on mortgage payments is likely to curtail overall spending, thereby stalling economic growth and further negatively affecting GDP.

Analysts estimate roughly $251 billion in mortgages will come up for renewal in 2024, with another $352 billion renewing in 2025.

Recent remarks from the chair of the U.S. Federal Reserve, Jerome Powell, acknowledge the risk of holding rates too high for too long. The suggestion of three quarter-point cuts (-75bpts) to the US policy rate in 2024 aligns with a broader global trend of central banks reconsidering their stance on fiscal policy.

If previous "loosening cycles" serve as any indication, as seen in the four most recent cycles displayed above, forecasts from numerous experts suggest that the market's current pricing in of a 1% cut might be somewhat conservative:

TD Economics: Predicts a 1.5% cut by the Bank of Canada in 2024, with cuts beginning in April.
CIBC World Markets: Projects a 1.5% cut by the Bank of Canada in 2024, with cuts starting in May or June.
Capital Economics: Anticipates at least a 2% cut by the Bank of Canada in 2024, with cuts commencing in March, and more to follow in 2025.

Historically the Bank has underestimated the depth and speed of rate easing necessary to avoid severe economic outcomes. The Bank is likely to shift rates out of the current restrictive territory (5%) and back to the higher end of the neutral range (2%-3%), with limited room for further decreases due to population growth fueling consumption and housing activity.

MORTGAGE STRATEGY RECOMMENDATION

While Bank of Canada rate cuts are all but inevitable, the precise timing and extent remain uncertain. Weak economic performance may justify aggressive 200bpt rate cuts, or potentially even more. The Bank's ability to implement aggressive cuts will be contingent on market response, especially in the housing sector.

A strong majority of Nest mortgage holders polled shared they would select a variable rate mortgage over fixed if they had to choose today.
Borrowers who recently chose a higher fixed-rate mortgage are now inquiring whether it makes sense to break their mortgage, incurring a small 3-month penalty today as opposed to a larger IRD penalty in 2024.

If you are considering the best course of action for your new or existing mortgage, it is paramount that you consult with your Nest Mortgage Advisor.

We will meticulously analyze your unique financial goals, curate a plan
tailored to your needs, and guide you through a mortgage strategy
designed to succeed over the long term.

We wish you all the best over the holiday season, and we look forward to connecting with you in 2024 or even sooner!

The information provided in this newsletter is for general informational purposes only. The views, opinions, and predictions expressed herein are solely those of the writer. Nest Mortgage encourages its readers to carefully evaluate their personal financial situation and risk tolerance before embarking on mortgage decisions.

Bank of Canada Summary September 2023

info@nestmortgage.co (Nest Mortgage) — Thu, 07 Sep 2023 17:47:49 GMT

Governor Tiff Macklem and the Bank of Canada (BoC) made the expected decision this week: no change to the Overnight Rate [no change to Prime] . While the Bank has surprised markets in the past, this week’s hold was widely anticipated. What makes this instance unique is the growing body of evidence showing that higher interest rates are leaving their mark on the economy...

Unprecedented Data Points:

Second quarter GDP figures fell significantly below expectations, contracting by 0.2% compared to anticipated growth of 1.2% to 1.5%.
Despite substantial population growth, the economy should be thriving, but it's not.

Time Lag of Rate Impact:

Generally, interest rates take over 12 months to exert their full influence. In the last year, we've seen a total increase of 1.25% in Q2 2022 and another 1.75% in rate hikes in Q3 2022.
The July 2023 GDP numbers are showing the impact of these hikes, with sluggish growth.

Consumption and Employment Challenges:

Total retail sales have plateaued, especially when adjusted per capita, reflecting the weight of higher interest rates on consumer spending.
The unemployment rate has climbed by 0.5% in the last three months, further complicating the economic picture.

What does this mean for mortgages and rates?

Inflation is likely to persist at elevated levels for some time, but it won't prompt the BoC to act unless accompanied by a rebound in GDP growth and spending. As disappointing economic data advances expectations of rate cuts, we may experience downward pressure on fixed interest rates sooner than previously forcasted. Experts are nearing a consensus that the BoC has reached its ceiling on rate tightening, with inflation as the last obstacle before easing.

In these uncertain times, we are here to assist. Whether you're considering home buying or refinancing for improved cash flow, we can provide the answers tailored to your needs. Please don't hesitate to reach out to discuss your mortgage needs!

Positive Shift in Bond Yields

info@nestmortgage.co (Nest Mortgage) — Thu, 31 Aug 2023 21:20:32 GMT

Following weeks of surging rates, Canadian bond yields (which directed impact fixed mortgage rates) have retracted below the 4% threshold, shedding 26 basis points from the previous week's 16-year peak — a potentially temporary but welcome development.

In the next two weeks the bond market will be further influenced by the following macroeconomic updates:

Canadian employment figures
Canadian GDP data
U.S. Personal Consumption Expenditures (PCE)
U.S. employment indicators

As reported earlier this month, July's inflation was up from 2.8% the previous month to 3.3%. CPI is still well above target (2%), which has added unwelcome pressure to yields and fixed rates. The BoC’s benchmark rate currently stands at a 22-year high of 5.00% as the battle against inflation continues.

Recent predictions on what the Bank of Canada will announce Sept 6th have been mixed. The near-term options are to either increase or pause, as the consensus is a decrease won’t materialize until late 2024 at the earliest. Most experts agree that a pause is in order for the next rate announcement, but a final increase by year-end is widely expected by the market in general.

Mortgage Rate Forecast

5-year Fixed & Variable (Forecast)

*market predictions based on current data (subject to change).
Higher rates can linger longer despite optimistic predictions.

Next BoC Rate Announcement: September 6, 2023

Market implied chance of (25bpt) hike next BoC meeting: 25%

Market implied chance of (25bpt) hike by year end: 60%

Rate predictions are heavily influenced by Canada's job data. Employment is poised to decline either naturally or through further BoC's rate hikes. Either way, the looming employment decline should temper future demand, therefore pushing bond yields (and fixed rates) lower.

Fixed or Variable?

Note the fixed and variable rate predictions above. Based on the recent surge in fixed rates, watch for variable to outperform fixed as economic data further confirms a peaking rate cycle in Q4.

*except for products offered from select Nest Credit Unions, there are few lenders offering < 6% for conventional fixed terms.

If you are considering a new mortgage, would like to review your locking-in options, or simply have questions regarding your ongoing mortgage strategy, we would love to connect!

Bank of Canada Summary July 2023

info@nestmortgage.co (Nest Mortgage) — Thu, 13 Jul 2023 00:31:26 GMT

The Bank of Canada (BoC) raised its overnight rate for the 10th time since March of last year, resulting in Prime rate to increase to 7.20%.

Recent hikes are becoming increasingly challenging for Canadian borrowers as financial stress persists. Both inflation data and labor markets indicate signs of weakening, with higher borrowing costs being the main contributor to the Consumer Price Index (CPI).

Although inflation has dropped from 8.1% to 3.4% over the past year, the BoC suggests “underlying price pressures appear to be more persistent than anticipated,” pointing to the three-month average of core inflation running between 3.5% and 4%.

[BoC takeaway] “If new information suggests we need to do more, we are prepared to increase our policy rate further, but we don’t want to do more than we have to.”

Nest Summary & Recommendation

In terms of interest rates, the Bank of Canada considers a neutral policy rate to be between 2% and 3%. Currently, the policy rate stands at 5%, twice the midpoint of the neutral range. This places us in a restrictive territory, and the full impact of previous rate increases is yet to be felt. Consequently, an economic slowdown is expected, and the likelihood of a recession is high.

These observations are not meant to be pessimistic but rather to highlight that a recession would lead to a reduction in the overnight rate, potentially returning it to a neutral or even stimulative level. While a significant drop below the lower end of neutral is not expected, it is reasonable to anticipate a decrease of approximately 2% in the Overnight Rate and Prime lending rates in the coming months and years. The timing and pace of these changes, however, remains uncertain.

The most frequently asked question is: What should existing borrowers do with their variable rate mortgages?

5-year (high-ratio) fixed 5.09 - 5.19%*

5-year (conventional) fixed 5.79 - 5.89%*

*rates subject to change.

While switching to a fixed rate will provide interest rate relief today and guard from future rate hikes, it will not offer savings opportunities from future rate reductions.

*It is worth noting that post the BoC announcement of a rate increase, bond yields (which predict fixed mortgage rates) actually dropped, indicating a possible turning point and the peak of higher interest rates.

While it is difficult to imagine further rate increases, it remains a possibility. Nevertheless, the market is undecided on pricing in additional rate hikes.

For potential homebuyers, the decision between shorter-term fixed rates and discounted variable rates is being weighed. While some trust issues and concerns about variable rates persist, objectively speaking, they are becoming viable options in certain situations. It may be prudent to wait and gather more data to gain a clearer understanding of the direction interest rates are heading. Consequently, longer-term fixed rates (4 and 5 years) are being ruled out in favour of shorter-term (1 to 3 years) or variable rates.

Please note that every borrower’s risk tolerance and financial situation is unique. We encourage you to reach out to a Nest Mortgage Specialist to discuss a tailored mortgage strategy specific to your needs!

Bank of Canada Summary June 2023

info@nestmortgage.co (Nest Mortgage) — Thu, 08 Jun 2023 18:12:08 GMT

Expect the Unexpected!

There was considerable debate leading up to the Bank of Canada’s latest interest rate announcement . Some economists felt Canada’s central bank would have no choice but to raise rates after the economy grew well above expectations in the first quarter. Most bet the Bank would hold rates steady, at least until later this summer or fall:

24 of 28 economists expected no change for Wednesday's BoC meeting.
Two-thirds expected no further overnight rate changes at all this year.
The market had priced in a 59% chance of no hike

Unfortunately, the market and leading economists were WRONG .

The Bank of Canada raised its overnight interest rate +0.25%. This will directly impact the Prime lending rate and variable rate products specifically.

Variable rate mortgage payments will increase ~$15/month per $100k of mortgage on average.
Bond yields, which directly impact fixed rate mortgages, are up considerably in recent weeks indicating markets believe rates will remain higher for longer.

Further takeaways from today’s BoC Announcement

"...Underlying inflation remains stubbornly high."
Three-month measures of core inflation running in the 3.50%-4% range for several months and excess demand persisting, concerns have increased that CPI inflation could get stuck materially above the 2% target

"Consumption growth was surprisingly strong and broad-based..."
Canada’s economy was stronger than expected, with GDP growth of 3.1% in Q1 2023
"...Housing market activity has picked up..."
"The labour market remains tight."
Higher immigration and participation rates are expanding the supply of workers but new workers have been quickly hired, reflecting continued strong demand for labour
"CPI inflation ticked up in April to 4.4%..."
The Bank continues to expect CPI inflation to ease to around 3% in the summer, as lower energy prices “feed through” and last year’s large price gains “fall out” of the yearly data

Where do we go from here?

Tiff Macklem and company have expressed dissatisfaction with the prevailing conditions. The economy exhibits higher-than-anticipated growth, accompanied by a resurgence in inflation and a stronger-than-expected labor market. While resilience is generally regarded as positive, it does not align with the objectives of the BoC. Consequently, the decision was made to raise interest rates further.

Notable inflection points in the chart align with significant events such as the collapse of Silicon Valley Bank in March, stronger-than-anticipated American inflation and employment in February, and the BoC's conditional pause announcement in January.

The chart above depicts the 5-year Canadian Government Bond's trajectory over the past year, serving as an indicator of future fixed rates. It shows fluctuations corresponding to turning points in market expectations, with the current trend pointing towards a peak due to increased inflation and GDP figures. The recent rate hike has further elevated this peak.

The upcoming BoC meeting, scheduled in five weeks, will be influenced by further data, including employment and inflation figures, as well as preliminary assessments of April's GDP. While it is unlikely to be a solitary rate increase, the decision will be influenced by this data, potentially leading to additional hikes in July or September.

The desired outcome is a consistent and sustainable decline in inflation, growth, and employment trends, which would result in a more stable decline in bond yields instead of the current roller coaster pattern.

New Paragraph

Capital Economics provides the chart above indicating their expectations for future BoC actions, and their accurate prediction of the recent rate hike grants them credibility. They anticipate a cumulative 1.25% reduction in the overnight rate over the next year, starting in January. Following this hike, shorter-term fixed rates are projected to hover around 5.5% with minor fluctuations, offering a relatively stable path for those seeking stability amidst market volatility.

Despite the current market turbulence and elevated stress levels, it is widely accepted that economic data will eventually align with the goals of central banks in the latter half of the year. This alignment is expected to lead to decreased bond yields, and therefore reduced mortgage rates.

It should be noted that the BoC continues with its mantra “remaining resolute in its commitment to restoring price stability for Canadians.”

If you have any questions or concerns with regards to mortgage rates, payments, or cashflow strategies, we are here to help! Reach out to your Nest Mortgage Specialist and review your options today!

July 12, 2023 is the Bank’s next scheduled policy interest rate announcement.

Contributors: Scott Gingles, Ray Macklem, www.capitaleconomics.comNew Paragraph

The Short Term Strategy: A Homebuyer's Guide to Navigating Current Interest Rates

info@nestmortgage.co (Nest Mortgage) — Tue, 16 May 2023 16:31:02 GMT

Inflation in Canada has been high for over a year now, and as it stays up so do mortgage rates (and payments) which, in turn, contributes back to inflation. When it comes to mortgages right now, there seems to be more questions than answers – even for the experts. In this current rate environment, what can homebuyers and homeowners do to reduce the pain of this inflation cycle? We asked Scott Gingles, Mortgage Broker and Owner of Nest Mortgage , for his insights and expert recommendations on a short-term strategy that will best mitigate the impacts of the current rates.

Q: Scott, can you provide a high-level overview of the current rate environment and the forecast for rates?

Scott Gingles: There is some consensus within the industry on the mid- to long-term outcome, but more uncertainty and questions than ever on what will happen over the remainder of the year. The focus remains unwavering on inflation. Over the past year, the US Federal Reserve and Bank of Canada have increased rates, 500 and 425 basis point respective, at the fastest pace we’ve seen in over 20 years. However, as recently as last week, it was indicated that we are nearing the peak of interest rate hikes – a hopeful indicator for Real Estate and mortgages alike.

Q: What’s the greatest risk right now to those looking to renew or refinance their mortgage within the next 6-12 months?

SG: The greatest risk lies in qualification and potentially locking in too high, for too long. At mortgage maturity, you typically have the freedom to have a mortgage broker shop the best rates and options. However, many renewing borrowers may not qualify after the ‘mortgage stress test’ was introduced in 2018, and only have their existing lender’s renewal terms available. A household income of $150,000 annually that qualified for about $750,000 in mortgage prior to March 2022, would now qualify for around $635,000, or approximately 15% less borrowing power.

Quantitative tightening has resulted in an elevated rate environment. At this point, it’s not a matter of if rates will come down, but when, but unfortunately no one has a crystal ball. Should you secure a long-term fixed rate today, there will likely be a high (IRD) penalty and cost to source a lower rate prior to maturity.

Q: What’s the greatest risk right now to those looking to renew or refinance their mortgage within the next 6-12 months?

SG: One strategy is debt consolidation, which involves refinancing to pay out higher interest rate cards, lines, and loans. Another is re-amortizing or extending one’s amortization out to 30 years to lower the overall mortgage payment. Lastly, securing a lower rate on a three- to four-year term can also help.

Q: What strategy are you currently recommending to homebuyers looking to secure a mortgage in this current rate environment?

SG: For new and existing mortgages alike, historically longer five-year terms, both fixed and variable, were the strongest and best rate options available. However, given the inverted yield curve environment, we are recommending a 'near-term strategy' for most of our borrowers. This involves securing the lowest rate possible on a shorter fixed term during near-term uncertainty.

“Given the uncertainties and risks of the current environment, we are recommending a three-year fixed term as a near-term strategy for most of our borrowers.”

Q: What are the advantages of going with this short-term rate strategy?

SG: Securing a three-year fixed term allows us to source a better rate than what is currently offered on a variable and provides a safeguard against payment or interest fluctuation. Yet it also allows for flexibility to source, ideally, a lower rate in the not-so-distant future, versus being locked into a higher five-year term and rate for longer. It’s the first time in my twenty-year career in the industry where the focus on five-year terms has shifted. Rates are poor for the one-year terms, and five years is too long to carry a current elevated fixed rate. A three-year term is the happy medium here.

Q: Can you provide a homebuyer scenario based off the average home price in Metro Vancouver?

SG: Let's consider an average purchase price of a condo in the Greater Vancouver Area, which is around $750,000. Assuming an 80% loan to value, we would consider a $600,000 mortgage with a 25-year amortization. Prime rate in Canada was as low as 2.45% prior to March 2, 2022, with variable rate mortgages widely available at 1.45%. The payment on a $600,000 mortgage at 1.45% would be $2,384 per month. However, in less than a year, Prime has increased to 6.70%, and the same variable rate mortgage is now offered at 5.70%. A similar $600,000 mortgage at 5.70% today would be $3,733 per month. That’s a 57% increase in the monthly payment.

“Securing a three-year fixed term allows for a better rate and provides a safeguard against interest fluctuation while allowing for the flexibility to source a lower rate in the near future.”

Q: The Bank of Canada has said that getting inflation back to the 2% target may be challenging due to slowly decreasing inflation expectations, high service price inflation and wage growth, and abnormal corporate pricing behaviour. What’s your outlook on rates for the remainder of 2023?

SG: The Bank of Canada is prioritizing disinflation and arguably there is a long way to go before getting back to the 2% to 3% range. Despite long-term inflation expectations being anchored, core inflation is temporarily stuck in a rut, and non-housing services inflation hasn't risen as much as most have hoped. This situation, combined with the uncertainty surrounding the potential for a Canadian recession, makes the future of interest rates even more complex. A looming recession, unprecedented labour numbers, turmoil with banking (especially in US), sticky inflation, global conflict – there is just too much uncertainty and too many questions to predict beyond the near term.

“With sustainable decreasing mortgage rates, demand mounting, and supply tightening, we may see another run in real estate that is unaffected by rates.”

The current rate environment presents challenges but also opportunities for savvy homebuyers. The real estate supply in Canada is limited, and fear of missing an opportunity to buy at the dip is mounting. By considering strategies such as near-term mortgages, homebuyers can successfully navigate this terrain. As always, it's important to consult with a mortgage professional such as Scott and his team at Nest Mortgage to understand the best strategy for an individual scenario.

Reach out to info@nestmortgage.co as we would be happy to review your mortgage needs!

Bank of Canada Summary January 2023

info@nestmortgage.co (Nest Mortgage) — Wed, 25 Jan 2023 22:32:32 GMT

As the market predicted, the Bank of Canada has continued their quantitative tightening increasing the overnight rate by 25 basis points. While this is not good news for variable products, the silver lining is that the market is predicting a pause to further hikes in the near-term.

Specific to Variable and Adjustable-Rate Mortgages, Prime will increase to 6.70%.

Inflation in Canada remains an ongoing concern, despite having decreased from its peak. As interest rates continue to impact the economy, there are signs of improvement on the horizon. For example, declining energy prices and more efficient supply chains are projected to bring inflation down to around 3% by the middle of 2023. This trend is expected to continue, with inflation reaching the target rate of 2% in 2024.

Further summary of today’s announcement ( click full announcement here ) :

Global inflation remains high, but is coming down in many countries due to lower energy prices and improvements in global supply chains.
The Canadian economy has grown stronger than expected and remains in excess demand, with tight labor markets and businesses reporting difficulty finding workers.
Restrictive monetary policy is slowing activity in Canada, especially in household spending and housing market activity.
The Bank of Canada expects inflation to come down significantly this year, and is prepared to increase interest rates further if needed to return inflation to the 2% target.

In today's mortgage landscape, it is important to review all available options and opportunities:

Payment Concerns?

One potential solution is to refinance your existing mortgage , as this will provide equity to apply to higher interest unsecured debt. Reducing payments can free up cash flow, allowing for extra payments to be made towards mortgage principal, increasing interest savings.

Another option with a refinance is to extend your existing amortization , reducing your overall monthly outlay.

Mortgage Renewing?

For those with mortgages set to renew in 2023, it is recommended to review and evaluate one's options with a mortgage Broker. As all banks are aggressively competing for new mortgage business, contact a Nest Mortgage Broker with access to over 200+ lenders and thousands of mortgage products to help source the absolute best mortgage available (at no cost to the borrower!).

Purchasing or Investing?

As the housing market slows and home prices adjust, you may consider purchasing a property at a lower price with a flexible term ( variable or 1-2 year term). Leaving your options open to capture a lower rate 12-18 months from now may be a viable strategy.

Reach out to info@nestmortgage.co as we would be happy to review your mortgage needs!

Bank of Canada Summary December 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 07 Dec 2022 22:12:16 GMT

Latest from the Bank of Canada: Prime Increases to the Highest Level in 15 Years

The Bank of Canada has increased its overnight rate by 50 basis points.

Prime Rate for the majority of Banks and other financial institutions will increase to 6.45% (from 5.95% previously) .

BoC Announcement Highlights:

Inflation

CPI inflation remained at 6.9% in October, with many of the goods and services Canadians regularly buy showing large price increases.
Measures of core inflation “remain around 5%”, above the 2-3% target range.
Three-month rates of change in core inflation have come down, “an early indicator that price pressures may be losing momentum.”

Canadian Economy & Housing

GDP growth in the third quarter was stronger than expected, and the economy continued to operate “in excess demand.”
The labour market remains “tight” with unemployment near historic lows.
Housing market activity continues to decline.
The Bank’s outlook: growth will essentially stall through the end of this year and the first half of 2023.

Global

Inflation around the world remains high and broadly based.
The US economy is weakening but consumption continues to be solid and the labour market remains “overheated.”
Gradual easing of global supply bottlenecks continues, although progress could be disrupted by geopolitical events.

What does this mean for your (Variable) Mortgage?

Analysts will seek to interpret today’s announcement for signs that the Bank has reached the end of its current rate-hike cycle. To the dismay of borrowers with products tied to Prime, the Bank continues to state that inflation is “still too high” and that short-term “inflation expectations remain elevated.”

Variable Rate Mortgage Holders (VRMs) with Static Payments:

Your payment amount will not change unless you’ve reached your trigger rate - when your payment no longer covers your interest. Your lender will communicate any increase and the effective payment date.

Adjustable Rates Mortgage Holders (ARMs):

For traditional ARMs, there will be an increase to the mortgage payment: ~ $26 per $100,000 mortgage. Your lender will communicate your new payment amount and the effective payment date.

Over the past 30 days bond yields have dipped and we are seeing fixed rates trending below variable: (HR) 5-year Fixed, 4.77%

If you are considering locking into a fixed rate, please book a call , and we will review all factors to consider before making the change.

The potential “silver lining" for those looking to buy a house in the near future, is that as rates push higher, and home prices soften, the overall cost to the borrower may decrease (less down payment required, and lower mortgage amount/payments).

Download the  Nest Mortgage App   to review your mortgage qualification, rates & payments, and all calculators.

January 25th, 2023 is the next scheduled announcement, and Nest will continue to provide in-depth summaries. Want to learn more? For everything mortgage, please reach out!

Bank of Canada Summary October 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 26 Oct 2022 20:47:32 GMT

Latest from the Bank of Canada: Yet another rate hike, but the end may be near

Expectedly, the Bank of Canada increased its overnight rate this morning by another 50 basis points to combat inflation. This is the sixth time this year that the Bank has tightened money supply to quell inflation, so far with limited results.

Specific to existing Variable Rate Mortgage holders, Prime will increase from 5.45%. to 5.95%

BoC Announcement Highlights:

Global inflation remains high and as economies begin to slow down and disruptions in supply chains ease, inflation is expected to follow suit.
The Canadian economy continues to operate in excess demand and labour markets remain tight, with a projected GDP growth from 3.25% in 2022 to just under 1% in 2023.
Due to recent rate increases, housing activity in Canada has sharply declined, and household spending has softened.
The strength of the US dollar is putting additional pressure on inflation in many countries around the globe and the Bank expects no growth in their economy through most of 2023.
CPI inflation has declined from 8.1% to 6.9%. Price pressures remain broadly based, yet the Bank’s “preferred measures of core inflation are not yet showing meaningful evidence that underlying price pressures are easing.”

Nest Summary

“We are getting closer to the end of this tightening phase. But we're not there yet." – Tiff Macklem

The Bank reiterated its “resolute commitment” to restore price stability for Canadians and said it will continue to take action as required to achieve its 2% inflation target. Achieving this target will take time, and more monetary tightening, such as a 25bpt hike in December, is expected.

The Bank has offered the observation that CPI inflation is projected to move down to ~3% by the end of 2023, and then return to its ~2% target by the end of 2024.

Although no crystal ball exists, we are likely nearing the end of the rate increase cycle, and we may see rates flatten in 2023. Should a recession ensue in the near-term, this would apply downward pressure on rates late next year and beyond.

For variable rate holders specifically –

Watch for the BoC to judge further increases based on economic performance between now and the final announcement of the year on December 7 ^th , 2022.
We will issue further options and recommendations for existing variable rate holders in the coming days.

For more information on upcoming announcements, follow us on Instagram .

When Good News Falls Short

Fri, 21 Oct 2022 21:01:14 GMT

Inflation numbers for September were released on Wednesday by Statistics Canada. And while headline inflation continued to trend downwards, the 0.1% drop from August was smaller than what was expected. With core inflation ticking upwards ever so slightly, the disappointment in these numbers is only compounded.

This leads us to next week where the Bank of Canada (BoC) will meet on Wednesday, October 26th. At their September meeting, The BoC was explicit in their messaging: rates are going to have to increase further as they battle both inflation and expectations around it. Nothing that has happened since that last meeting will have them soften their stance. Come next Wednesday, the market is planning for a further 0.5% - 0.75% increase to the overnight rate.

Note: BoC rate increase will have an immediate impact on Prime and variable rates, not specifically current fixed rates.

It could be argued that the BoC is now walking a fine line of overshooting their policy rate and throwing us into a worse-than-needed recession. Interest rate increases take time to bear out their full effect – around 12-18 months. We are 7 months out from the beginning of the rate hike cycle and only 3 to 4 months since the overnight rate really started accelerating upwards. Inflation looks to have peaked and it’s fair to expect that as these rate increases are given more time, they will only exert more downward pressure on inflation.

If it feels like we’re in the worst of it, it’s because we’re not far off. Rates have increased rather dramatically and inflation, though trending downward, is still well above the BoC’s target rate of 2 - 3%. Expect the messaging to stay the same until inflation figures reflect the BoC desired rate. For most of us, that can’t happen soon enough and although we’re not quite there yet, we’re getting closer.

If you have any questions about how this affects you, contact one of our experienced Mortgage Specialists today. The Nest Mortgage team is here to help you have a Simply Better Mortgage.

Written by Ray Macklem, Nest Mortgage

Bank of Canada Summary September 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 07 Sep 2022 23:31:29 GMT

Latest from the Bank of Canada: Further quantitative tightening with another 75-basis point increase.

The Bank of Canada increased its overnight rate this morning by another 75 basis points, continuing to combat inflation.

Specific to existing Variable Rate Mortgage holders, Prime will increase from 4.70% to 5.45%.

Inflation in Canada is higher and more persistent than the Bank expected. The annual rate of inflation hit 7.6% in August and is expected to average 7.2% in 2022. The Bank’s forward-looking commentary on further increases is what will capture headlines in the days ahead.

BoC Announcement Highlights:

Global inflation remains high and is increasing in most countries. Banks continue to tighten monetary policy as a response.
A drop in gas prices led to CPI inflation easing to 7.6% in July. However, the broadening of prices for other commodities and services are widespread due to inflation.
The effects of the war in the Ukraine, ongoing supply disruptions, and COVID-19 outbreaks have dampened growth and put upward pressure on prices globally.
The Canadian economy is operating in excess demand, the labour market remains tight, and Canadian GDP grew by 3.3% by the end of June.
With higher mortgage rates, the housing market is pulling back “as anticipated” following “unsustainable growth during the pandemic”

The Bank expects the Canadian economy to moderate for the remainder of the year as demand across the globe begins to weaken and tighter monetary policies close the gap between supply and demand.

“The Governing Council remains resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.”

The BoC will continue to judge further increases based on economic performance between now and the next announcement on October 26 ^th , 2022 .

Rate Landscape & Recommendations

If there is good news to draw from today’s update, it is that we are likely not far from the end of additional rate hikes. The economy is beginning to slow, inflation is easing, and in less than 2 months rates have increased 175 basis points putting downward pressure on growth. Rate increases take time to take effect, and the BoC is determined to bring inflation in line, even at the expense of a recession.

If you are sourcing a new mortgage, or considering the best strategy with regards to your existing mortgage, here are some recommendations:

Argument for Variable Rates: Prime will be moving to 5.45% after today's increase. Assuming an average discount of ~Prime-0.75%, your new contract rate will be ~4.7%. 5-year fixed rate mortgages by comparison are ~5.34% for those are considering locking in. Variable rates are still discounted/cheaper, and with each successive rate hike, the likelihood of a recession increases. A recession could potentially force rates down in the coming years. It's also important to note that fixed rates have edged downwards since July's rate hike and there is little to no upward pressure at present. Racing to source a fixed rate hold is not a current concern. As we’ve stated previously, variable products allow for maximum flexibility with regards to interest savings and (low) breakage should you adjust your mortgage for any reason mid-term.

Argument for Converting to Fixed:  The BoC has indicated they will continue to raise rates to combat inflation. As there are many inflationary factors beyond the BoC’s control, Governor Macklem may decide to hold rates at current or higher levels until inflation falls back in range. Moving to a fixed rate will secure a ‘set it and forget it’ payment, but there is exposure to high (IRD) penalties and fees should you wish to source a lower rate or make changes prior to maturity.

Argument for Refinancing: Prices and general costs have risen. Many borrowers have accumulated debts, and thankfully there is likely some recent appreciation and equity available to help. A refinance can re-set your amortization (lower your payment), consolidate high interest debt, and free up monthly cashflow. There are currently 1-year fixed rates available between 4.04 to 4.69% as of today that may appeal to those looking to avoid further variable rate increases in the near-term.

Risk tolerance differs between households, and if today's announcement has you considering your options, please don't hesitate to reach out. We'll be happy to review your specific situation and provide guidance on the best options going forward.

Follow us on  Instagram  for more updates as more information becomes available.

What the Latest Bank of Canada Announcement Really Means for Your Mortgage

Wed, 20 Jul 2022 21:36:25 GMT

L ast week, Canadians were left shocked by the raise of the overnight rate by 100 basis points, 25 more points than anticipated by industry leaders and specialists alike. Although it was not what was expected, it was what we were dealt. This has left most of us wondering, “Why?”

Why did the Bank of Canada drastically increase its overnight rate?

What experts believe is that this extreme rate hike was due to the expectations of inflation over the next few years among Canadian consumers and business owners. Consumers believe that within the next year, inflation will reach around 7%, then moderate slightly to 5% in two years’ time. Businesses believe that inflation will reach just shy of 5% in two years’ time. And finally, economists predict that inflation will reach only 2.5% in two years’ time. What this indicates is that consumers and businesses expect inflation to be much higher than what the BoC predicts. This poses problems for the Central Bank as history shows that this creates a cycle:

Consumers expect prices to skyrocket
Consumers demand a wage increase to counteract the higher cost of living
Businesses begin to pay employees a higher wage to address demand but must raise their costs to make up for the lost revenue in wages
Prices increase across the board and the cycle repeats

The Bank of Canada is attempting to battle these expectations through strategic overnight rate increases. Although economists do not seem as unsettled by inflation, both consumers and businesses are. The Bank of Canada must act now or else we will likely see higher policy rates down the road. Therefore, we are seeing an aggressive 1% hike as a strong attempt to temper consumer expectations.

In simpler terms: the rate goes up, spending goes down, supply matches demand, and inflation stabilizes.

How did we get here?

There are several factors that have caused inflation to be on the rise over the past year. Some of the most prominent being firstly, the prices of oil and commodities, which accounts for 40% of forecasting errors. The price increase in oil is due to Russia’s invasion of the Ukraine as well as several weather events that have affected agricultural commodities. Secondly, there was a major shift in buying patterns during the pandemic towards goods and low-contact services. This caused major issues to the supply chain as manufacturers couldn’t keep up with the excessive demand for goods. Thirdly, Canada recovered at a quicker rate than expected resulting from strong government intervention at the start of the pandemic. This had a large impact on the turnaround of the Canadian economy. And lastly, there were several references in the MPR around global factors accounting for over 60% of current inflation numbers, although the Bank of Canada only controls what is within our borders.

What does this mean for me, the borrower?

You might be wondering what all this information means and how it relates to you, the borrower. Despite negative headlines, the Bank of Canada is committed to bringing inflation down to the target range (2%-3%). This is not to say there won’t be more hurdles to jump through before we make it to that point. Fundamentally, Canada is and will continue to be in a strong position comparatively to other developed countries in terms of quantitative tightening.

If you are not already in a fixed rate mortgage, here are three option to consider moving forward:

S tatus quo , stick with the variable rate you currently have
Pro: Variable rates are still 1% cheaper on average than fixed rates currently. This provides you with more flexibility and your rate may move lower if we enter a recession.
Con: Uncertainty around adjustable payments and trigger rates is stressful for those who seek security.
Refinance or adjust
Pro: There’s a chance you have some flexibility in your mortgage to extend the amortization, source a lower discount, move to a product with a capped payment, or even roll in additional debt payments to free up monthly cash flow.
Con: There are added closing costs associated with refinancing in the form of registration fees and/or penalties.
Convert to a fixed rate mortgage
Pro: You can have peace of mind knowing what your rate and payments will be going forward.
Con: There is the possibility that fixed rate mortgages are near the ceiling for the short-medium term. As the likelihood of a recession increases, the probability of fixed rates rising further decreases.

If you require further information or are unclear of what your options are as a borrower, reach out to one of our experienced Mortgage Specialist at Nest Mortgage Co . today.

Bank of Canada Summary July 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 13 Jul 2022 20:18:04 GMT

Latest from the Bank of Canada: A 100 basis point increase, the largest single-day move since 1998.

The Bank of Canada increased its overnight rate target by a staggering 100 basis points today, 25bpts higher than anticipated, unabating its policy of quantitative tightening.

Specific to Variable Rate Mortgage holders, Prime will increase from 3.70% to 4.70%.

Inflation in Canada is higher and more persistent than the Bank expected. The annual rate of inflation hit 7.7% in May and is expected to average 7.2% in 2022.

BoC Announcement Highlights:

Global inflation is higher, reflecting the impact of the Russian invasion of Ukraine, ongoing supply constraints, oil prices remaining high/volatile, and strong consumer demand.
Central banks across the globe are tightening monetary policy to combat inflation, resulting in tighter financial conditions in attempts to moderate economic growth.
The Canadian economy sees further build up in excess demand. We continue to see record low employment rates, widespread labour shortages, and increased wage pressure. Costs are being raised as businesses pass on higher input and labour costs due to strong demand.
Housing market activity is slowing following record highs over the past 2 years, and will “pull back following unsustainable strength during the pandemic”.
CPI inflation of 7.7% is well above the Bank’s target and is likely to move even higher before easing off. Inflation continues to broaden with core measures of inflation ranging between 3.9% and 5.4%.

A Look Ahead

The July outlook has inflation starting to come back down later this year, easing to about 3% by the end of 2023, and returning to the 2% target by the end of 2024.

The economy continues to operate in excess demand, inflation persists high and above target, and the expectation from consumers is that inflation will continue this path for longer. These expectations led the Governing Council to front-load the path to higher interest rates.

“ The Governing Council is resolute in its commitment to price stability and will continue to act as required to achieve the 2% inflation target.”

The BoC will continue to judge further increases based on economic performance between now and the next announcement September 7th, 2022.

Rate Landscape & Recommendations

Best fixed-rate mortgages available today are 4.79 (high ratio) – 5.34% (conventional).
Fixed-Rate Mortgages are not affected by today’s announcement, however, if your mortgage is up for renewal, it would be wise to reach out to Nest and secure a rate hold as early as possible.

By comparison, variable-rate mortgages are offered at 3.70% (high ratio) - 4.20% (conventional).
If you have an Adjustable-Rate mortgage, your payment will increase by roughly $52 per $100,000 owed. Your lender will be in touch with the new payment amount and date. 
If you have a Variable Rate mortgage with static payments, it may be time to look at voluntarily increasing your mortgage payment to stay ahead of a forced payment change if/when your payment no longer covers the interest.

What we have experienced as of late is the most aggressive rate tightening cycle in more than 20 years. Since March 2022, we've seen a 2.25% increase to the overnight rate. Variable rates continue to outperform fixed (by ~100bpts+ on average).
If you are considering a mortgage this year: buying, selling, renovating, investing, or other, please reach out to Nest to get pre-approved ASAP. We will quickly determine how much you will qualify for, lock in the best rate for 90-120 days.

Despite today’s 100-basis point hike, and further increases anticipated over the upcoming months, Variable over Fixed, as we have shared previously remains the recommendation.

Uncertainty can be challenging, and we are here to help! If you would like to discuss your specific mortgage details further, reach out to Nest Mortgage today !

RSP vs. RRSP

Tue, 14 Jun 2022 18:36:56 GMT

Not long after you start working, you may start considering the ‘end-game’ and how you should start saving money for retirement!

When considering savings and investments, you will likely come across the term RSP. At one point or another you’ll start saving money for your retirement and this is where RSP’s and RRSP’s come in. But what does this mean and how should you approach getting one?

What is the difference between an RSP and RRSP?

An RSP is a Retirement Savings Plan and can refer to several different financial products that help you save for your retirement. You may be aware of a tax-free savings account (TFSA) or The Canadian Pension Plan (CPP), yet the most common of them all is a Registered Retirement Savings Plan (RRSP).

An RRSP is the most widely used RSP in Canada as it has several tax benefits including:

The total amount of your annual contribution can be deducted from your gross income when you file your taxes, reducing the amount you pay in income tax that year.
The income you earn from your RRSP will not be taxed until it is withdrawn.
By the time you withdraw the money, you will likely be in a lower tax bracket, meaning you will benefit from the lower rate.

One thing to note about an RRSP is that regardless of the financial institution you are with, you do not need to pay income tax on the money you earn from your investments while they are on the plan. You will only be taxed on that money when the funds are withdrawn down the road.

RRSP contributions

With an RRSP you can make regular or lump sum contributions to your account, that of which are set by the Canadian government and are dependent on your annual income. If you do not make the maximum contribution amount for that year, the unused amount will roll over indefinitely until you are able to maximize the contribution room.

Currently in Canada, you can contribute up to 18% of your earned income in the previous year with an annual limit of $27, 830; the higher your income, the larger contributions you can make each year. If your bank doesn’t allow you to make RRSP contributions from your savings account, but through your home equity instead, there are several other viable options for you. Contact one of our experienced mortgage specialists to strategize retirement savings goals and tax efficiencies by way of equity take out for investments.

When and how can I use the funds?

Just because your funds are in an RRSP, does not necessarily mean they need to be used for retirement. They can also be used to support other financial aspects of your life such helping you purchase your first home or pay for education for your spouse or common-law partner. These two circumstances are referred to as the Home Buyers’ Plan and the Lifelong Learning Plan.

The Home Buyers’ Plan (HBP) is a program that is set in place by the Canadian Government to allow you to withdraw funds from your RRSP to build or buy a home for yourself or a relative with a disability. The HBP allows you to withdraw a maximum of $35,000 per RRSP account, with a 15-year window to pay back the funds.

The Lifelong Learning Plan is another project through which you can access up to $10,000 per calendar year of RRSP funds to pay for training or education for yourself or a common law/marital partner. The funds cannot be used for your children or the children of your partner.

Watch for future developments with regards to Registered Retirement Savings Plan’s and other products/tools suggested in the 2022 budget .

Have any questions or concerns? Contact our team of experienced Mortgages Specialists today!

Bank of Canada Summary June 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 01 Jun 2022 22:00:46 GMT

Latest from the Bank of Canada: Another 50-basis Point Increase

As anticipated, The Bank of Canada increased its overnight rate target by 50 basis points today, continuing its policy of quantitative tightening.

Specific to Variable Rate Mortgage holders, Prime will increase from 3.20% to 3.70%.

The risk of elevated inflation becoming ingrained has increased. The Bank of Canada will use its monetary policy tools to return inflation to target and keep inflation expectations well established.

BoC Announcement Highlights:

Russia’s ongoing invasion of Ukraine, lockdowns in China related to COVID-19, and continuous disruptions in the supply chain have driven inflation upward. There is intense pressure on agricultural and energy commodities due to uncertainty surrounding the war. Prices in the United States remain robust despite the contracting economy we saw in early 2022. Markets are volatile and financial conditions continue to tighten around the globe.
The Canadian economy is strong and operating in excess demand. Job vacancies are elevated, companies are reporting widespread labour shortages, and wage growth has been picking up and broadening across sectors. Housing market activity remains strong but is starting to moderate from extraordinarily high levels.
CPI inflation has reached 6.8%, well above the Bank’s target, and is likely to move even higher before easing off. Inflation continues to broaden with core measures of inflation ranging between 3.2% and 5.1%.

A Look Ahead:

With the economy operating in access demand and inflation persisting well above target, the Governing Council judges that interest rates will need to rise further. The policy interest rate is the Bank’s primary monetary policy instrument, and quantitative tightening will complement increases in the policy rate. The Bank’s commitment to achieving the 2% inflation target will be guided by ongoing assessments of the economy.

Fixed or Variable?

Some of the best fixed-rate mortgages available today are 3.69-3.99%.
By comparison, variable-rate mortgages are offered at a discount of 2.60%–2.75%.
Fixed mortgage rates (conventional fixed rates averaging ~4.49% today) have priced in the expectation of the overnight rate reaching 2.75%. As of today, we're sitting at 1.5%. This means fixed rates are likely at or near the high of where they will be for the near future. Unless expectations for the overnight rate push to 3% or beyond, there is no urgency to convert to a fixed rate today. Your variable rate is still significantly lower (by 1.5% to 2%) than what you can ‘fix’ today.
What we have experienced as of late is the most aggressive rate tightening cycle in more than 20 years. Since March 2022, we've seen a 1.25% increase to the overnight rate. Economic conditions are in constant flux, and it is incredibly difficult to predict the future. One thing is for certain, inflation will be reined in overtime and upward pressure on rates will then ease – the timing is the unknown piece of this puzzle.

Recommendation:

Despite today’s 50-basis point hike, and further increases expected, we still recommend Variable over Fixed as most variable mortgage holders are at ~3% (or lower).

If you have a variable rate mortgage or HELOC, your lender may contact you directly with an offer to ‘lock in’ or ‘convert’ your mortgage, if they haven’t already.

Here Are a Few Things to Consider Before Converting to Fixed:

If you lock in, you’ll be getting a new mortgage with a fixed rate and new terms. 

Locking in does not secure your existing rate. You will be offered a new ( higher ) fixed rate with a term equal or longer than your existing mortgage term.

Penalties: Fixed-rate mortgages come with a much higher penalty should you break your mortgage early (up to 900% higher)! 

Variable rates continue to be the lowest rates available.

Historical prime rate changes over the last 14 years have fluctuated as high as 4.50% and as low as 2.25%. While rates may fluctuate over the mortgage term, you will likely pay less interest overall. 

Are interest rate increases keeping you up at night?

Statistically, most Canadians prefer fixed-rate products and are willing to pay more for the security of consistent payments. Before you lock into a fixed rate product, please contact us today to review your current lender’s offer. 

Final Tips:

If you owe a considerable amount to your HELOC, it may be a good time to consider converting a portion of the balance into an amortized variable or fixed mortgage. 

If you're thinking about purchasing a new home, contact one of our Mortgage Specialists today to secure a pre-approval ASAP. This way you are protected from potential rate increases while you consider your options. 

If you have any questions or would like to discuss your specific mortgage details further, reach out to Nest Mortgage today!

Top Ways to Add Value to Your Home

Mon, 16 May 2022 20:27:58 GMT

O wning a home means having a place to grow old and make memories with your loved ones. It is also one of the largest financial investments you will make in your lifetime that will grow over the years. The market value of your home will appreciate naturally on its own, yet there are many simple and cost-effective ways that you can increase the overall value of your home by yourself.

Make Your Home Energy Efficient

As technology advances, people are finding new ways to conserve natural resources and implement more energy efficient changes in their homes. Whether you are planning small or large projects, you will instantly add value to your home. Start off by making changes to smaller appliances and light bulbs, then move onto larger undertakings like installing insulated windows and solar panels when the timing is right for you.

By making energy efficiency changes to your home, you will lower your overall consumption and energy bills, as well as add value to your home. An added bonus – the more you save on energy consumption, the more money you will have to pay off your mortgage!

Upgrade Main Areas of the Home

Renovating an outdated kitchen or bathroom is a sure-easy way to add value to your home. It is however, much more costly and time consuming. That is why it is important to consult with a real estate agent or interior designer before embarking on a renovation project. It is their job to be able to give you advice on what features and changes will best increase the selling price of your home. Make sure to use quality materials when embarking on remodels as it will be something prospective buyers will be looking for if you ever decide to sell your home in the future.

Looking to save a dollar? There are numerous DIY fixes you can do around the house without consulting with a professional that won’t burn a hole through your wallet. Try adding a new coat of paint to the walls, replacing faucets in the kitchen and bathrooms, installing new cabinets and countertops, or upgrading old appliances.

Increase Square Footage

The number one quick-fix to increasing the visual square footage of your home is by reducing clutter. This can be done by removing unnecessary furniture and utilizing your storage space. If you don’t have a lot storage, consider purchasing furniture that can double as storage space. You can also replace heavy drapery with light shutters or blinds. The goal is to make every room feel larger and cleaner.

If you have the time and money, finish any space in the home that has been neglected such as the basement or attic. Another option would be to add a bathroom, bedroom, or home office if the space allows it. It is important to pay attention to market trends and consult with a professional on best practices on where and how you can add value to each room.

For example, COVID-19 forced people into working from home, increasing the need for a home office or designated work space. By adding an office to your home, you are staying on-trend and making your home more attractive to prospective buyers.

While these changes can increase the value of your home, it is important to make them within the means of your budget. The goal is to add value to your home, while also seeing a return on your investment. Strapped on funds? Consider refinancing your mortgage to receive a cash to put directly towards home improvements and renovations. If you are unsure or require guidance, consult a professional. Nest Mortgage is always available to help discuss your home financial resources and solutions.

Contact Scott Gingles for more information.

What You Should Consider When Purchasing a Second Property

Mon, 09 May 2022 18:53:35 GMT

Purchasing a second property is a large financial investment and should be thought through carefully. While owning a second piece of property to call your own can act as a reliable source of income over the long term, it also comes with certain risks. Here are a few things you should consider when purchasing a second property.

Purchase an investment property

Investment property is a wonderful way to make a profit. Whether you are choosing to flip the property and sell it for a higher price, rent it out, or hold it until its value increases, at one point or another you will see a return on your investment.

And while investment properties can be an excellent source of income, there are also a few risks involved. Before deciding on a property, you should consider the area it is in – is it easily accessible if you need to get there quickly? Have you reached out to a Nest Mortgage Professional to complete a cashflow analysis? Does the property require any renovations, and if so, how long will it take and how much will it cost?

An investment property can help supplement other areas of your life but depending on the type of investment property you have; it can come with added responsibilities. For example, if you choose to invest in a rental property, you will be the landlord to your renters. This means you are the first point of contact and source of income if anything goes wrong with the property. Your rental property should be treated as a business, so ensure you have a good accountant who can help you through the process and find renters you can trust with your home. If you don’t want to manage the property yourself, consider property manager services, such as MLA Complete , who can help you.

Purchase a vacation home

Investing in a vacation home might be right for you if you are looking for an escape from everyday life or thinking about retiring somewhere relaxing.

Vacation homes are a luxury, so finding one that suits your future needs is essential. Try narrowing down your search to properties that fit within your means and are close enough to home so that you can get there in a timely manner and do not spend unnecessarily on transportation.

Whether you are living there or not, your vacation home will cost you money. To help support some of the added costs such as property taxes, maintenance, and mortgage payments; try renting it out for short periods of time that you do not plan on spending there. If your property allows it, consider short- and long-term rentals through VRBO or Airbnb. Are you unsure if your mortgage providers support nightly rental zoning? These are all things to consider and discuss with Nest.

Secure funding

As a second time homebuyer, you have more options to secure funding for your second home. Unlike first-time homebuyers , you have the option to tap into your home equity to help pay for your new home. This may make it easier to secure the shortfall, or new mortgage, depending on how much equity you have.

Another option would be to secure a tax-efficient mortgage on your second home (i.e.. Home equity line of credit). The advantages include mortgage interest tax deductions, readvanceable credit, and lowest interest only payments.

If you are unsure if a second property is an option and what financial considerations are available, contact one of our experienced mortgage professionals today.

Applying for a Mortgage: What You’ll Need to Know to Secure Financing for a New Home

Mon, 25 Apr 2022 18:51:19 GMT

Qualifying for a mortgage involves much more than simply having good credit. When you inquire about a mortgage, your mortgage broker will need to know all the details around your income and personal finances along with information on the property you’re seeking to buy. If you’re considering securing a mortgage to purchase a home, ensure you consider and understand the facets below.

Ensure you can demonstrate a steady income

While you might feel comfortable with your current employment status, a lender may have a different opinion on what constitutes a reliable income. You’ll be asked to show proof of income and employment. Are you still in your probationary period? Do you intend to take parental leave? Are you on a term contract? All these considerations and more will be considered by your lender. Make sure you have associated documentation on hand, such as your two most recent paystubs and a signed and verified Letter of Employment that confirms you are still employed by the employer identified on those paystubs. Your broker will request additional financial documentation to demonstrate longevity, such as your T1 tax forms and your Notice of Assessment from the Canada Revenue Agency which showcases your debt-to-income ratio and helps establish your risk level. You’ll need to provide your T4 or T4A forms so your lender can break down your annual pay, tax, pension, and other government program deductions. If you are self-employed or have a registered corporation, any additional information you provide such as Articles of Incorporation or a business license are a huge help to determining your lend-worthiness.

Document your personal financial position

Once you have effectively proven your income, the next step in the process is to itemize your personal finances. Your lender will likely request access to your bank account information, partially so they can deposit the mortgage into your account if you are successful in securing it. Beyond your income, owning and showing proof of other assets and investments are a great way to establish your net worth and lend-a bility. Of course, it’s beneficial (and in some cases, essential) to have a good understanding of your credit and a high credit score, as demonstrated by your credit report. It’s best practice to get pre-approved for a mortgage by your bank prior to starting the application process, so make sure you obtain a pre-approval letter from your bank to keep things moving smoothly.

Determine your down payment

Providing a down payment is a vital step in the mortgage application process as it demonstrates financial stability, showing you are committed to the purchase and to the mortgage loan. The down payment also secures a small portion of equity in your new home immediately. There are many ways you can secure a down payment . Savings and investments are an obvious source. More and more first-time buyers are using RRSPs and TFSAs to save up their down payment dollars. Existing properties might be sold or re-financed for an injection of capital. A certified letter outlining that the down payment has been provided to you as a gift can also support your mortgage application.

Summarize your existing properties and select your next home

Being able to demonstrate a history of mortgage payments on other properties will help achieve a lower interest rate. Providing proof of other owned properties through rent or lease agreements, recent mortgage statements, and property tax bills is one of the final steps in the mortgage application process. To show your commitment to the mortgage application process, you will cap off your application by providing details of the property you wish to purchase or are interested in. This helps your broker see that you understand your financial commitments and limitations.

The more information you can readily provide your mortgage broker, the more efficient your application process will be. Gather all your personal financial, employment and investment information so it’s ready to submit to your lender when you find the home you’re looking for.

3 Ways to Consolidate Consumer Debt

Tue, 19 Apr 2022 19:40:53 GMT

Finding ways to pay off credit card debt can be daunting and stressful, and often we don’t know where to start. Making your minimum payment month after month is not a good long-term strategy. This is where debt consolidation can be helpful. Debt consolidation is the act of paying off your credit card debt (or similar) by combining all debt under one single loan at the lowest interest rate possible. There are several ways this can be done, but here are our most effective recommendations for consolidating your pesky unwanted debt:

Take Out a Personal Loan

A personal loan is an unsecured loan with a fixed rate that helps you pay off your credit card faster. A fixed rate means that your monthly installments will always be the same, unlike credit cards that have variable rates that change over time. The goal of getting a personal loan is to obtain an interest rate that is lower than your credit card.

Taking out a personal loan is attractive to many people because it can improve your credit score as it is considered an installment loan, meaning you pay back the loan over time with a set number of scheduled payments. If these payments are made on time, it can improve your credit. It is important to note however, that to qualify for a personal loan you must have good credit (+680). Read here to find out how you can improve your credit score .

Get a 0% APR Credit Card

0% APR credit cards are a great way to consolidate debt as you will pay no interest for a specified period, typically anywhere from six months to two years. During this time, you will not get charged interest on new purchases, balance transfers, and depending on your card, both. The less interest you pay, the more you have to pay off your debts.

To qualify for a 0% APR credit card, you typically need a good to excellent credit score. If your credit score is poor to fair, you will have difficulties getting approved for a no interest credit card. If your credit score is lower but you still qualify, then the no-interest period will be shorter to reduce risk for the lender. If you fall into this category, it would be beneficial to consider other options for paying off debt such as a personal loan.

Tap Into Home Equity

Home equity is often the most valuable financial tool for homeowners. Your home equity is the current value of your home less what you owe on your mortgage. Home equity can be sourced to pay for other expenses such as home repairs, renovations, and paying off unsecured debt.

There are several ways you can tap into your home equity such as conventional mortgage refinancing, reverse mortgages, a home equity line of credit (HELOC), or a second mortgage. Read here for more information on 4 ways to access your home equity.

At the end of the day, the best way to consolidate debt will depend on several factors that are specific to your financial situation, like how much debt you have and your current credit score. To find the best and most effective way to consolidate your debt, contact one of our experienced team members today.

Bank of Canada Summary April 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 13 Apr 2022 19:10:07 GMT

BREAKING: Bank of Canada Announces First 50 Point Increase in Over Two Decades

As anticipated, The Bank of Canada increased its overnight rate target by 50 basis points today, initiating the start of quantitative tightening. Specific to Variable Rate Mortgage holders, Prime will increase from 2.70% to 3.20%.

The Bank is also ending reinvestment and will begin quantitative tightening (QT), effective April 25. Maturing Government of Canada bonds on the Bank’s balance sheet will no longer be replaced and, as a result, the size of the balance sheet will decline over time.

BoC Announcement Highlights:

Russia ’s ongoing invasion of Ukraine is causing unimaginable human suffering and new economic uncertainty. The Bank continues to monitor the situation closely as price spikes in oil, natural gas, and other commodities add to inflation across the globe. The Bank’s outlook for inflation in Canada and the substantial upward revision is a direct cause of these factors.
The war in Ukraine is disrupting global recovery from COVID-19. China’s economy is facing new outbreaks and an ongoing correction in its property market. Demand remains strong in the United States, with indication of the us e of its monetary policy tools to control inflation.
Housing activity remains strong in Canada with an excess of demand. Overall, growth in the first quarter was stronger than projected but is expected to moderate over the course of the next quarter.
CPI inflation is currently at 5.7%, well above the January forecast. Inflation is being driven by rising energy, food process, and supply disruptions. Inflation is expected to average 6% in the first half of 2022 and remain well above the control range for the year.
There is an increasing risk that expectations of elevated inflation could become entrenched. The Bank will use its monetary policy tools to return inflation to target and keep inflation expectations well-anchored.

A Look Ahead:

With the economy moving into excess demand and inflation persisting well above target, the Governing Council judges that interest rates will need to rise further. The policy interest rate is the Bank’s primary monetary policy instrument, and quantitative tightening will complement increases in the policy rate. Inflation is now expected to ease to about 2½% in the second half of 2023 and return to the 2% target in 2024. The Bank’s commitment to achieving the 2% inflation target will be guided by ongoing assessments of the economy.

What does this mean for your mortgage?

We haven’t seen a 50 basis point increase since the year 2000. As the price of bond yields rise, lenders are decreasing the variable rate discount from prime. Homebuyers and existing homeowners looking to secure a new mortgage will have to qualify under the stress test guidelines: the greater of 5.25% or the contract rate + 2%. The higher the mortgage rate, the lower the qualifying mortgage amount will be.

Fixed or Variable?

Some of the best fixed-rate mortgages available today are 3.29-3.49%.
By comparison, variable-rate mortgages are offered at a discount of 2.05%–2.65%.

Recommendation:

Despite the 50 basis point spike, we still recommend Variable over Fixed.

Savings : The spread (or savings advantage) is ~125 basis points if you select a variable product over fixed today.
Flexibility : as the average life of a mortgage is 3.5 years or less, if you need to break your mortgage, the penalty on a variable (3 months’ interest) is considerably less than what you will be charged on a Fixed-rate mortgage (IRD).
Setting payments higher : If you are concerned with ‘payment shock’, we recommend setting your payments at today’s Fixed rate level. You will absorb the impact of short-term payment increases while benefitting from lower interest savings.
Locking-in : you always have the option to lock-in to a fixed rate mortgage at any time with no fee or penalty. With inflation potentially peaking, locking in today’s fixed rate may prove costly if lower fixed rates are available on the horizon.
Hybrid : An option that many homebuyers are not aware of is a hybrid strategy, meaning there are products that allow the borrower to split their mortgage between fixed and variable components (and even a HELOC component) in order to hedge the risk of rising rates.

Reach out to Nest for today for a SIMPLY BETTER MORTGAGE!

Bank of Canada Summary March 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 02 Mar 2022 21:12:32 GMT

BREAKING: Bank of Canada Raises Rates

As expected, The Bank of Canada increased its overnight rate target by 25 basis points today. This is the first rate hike since October 2018.

Banks and other financial institutions are expected to raise their prime rate by the same 0.25% in the coming days, which will impact variable-rate mortgage holders specifically.

The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds on its balance sheet roughly constant until such time as it becomes appropriate to allow the size of its balance sheet to decline.

Major Highlights:

The bank is closely monitoring the unprovoked invasion of Ukraine by Russia is a major new source of uncertainty causing prices for oil and other commodities to rise. With the situation remaining fluid, the Bank has noted they are following events closely.
Economies are emerging from the impact of the Omicron variant of COVID-19 more quickly than expected. Demand is robust, particularly in the United States, and while global supply bottlenecks remain challenging, there are indications that some constraints have eased.
Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected.
CPI inflation is currently at 5.1%, as expected in January, and remains well above the Bank’s target range. Price increases have become more pervasive, and measures of core inflation have all risen.
Persistently elevated inflation is increasing the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored.

A Look A head:

As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink.

What does this mean for your mortgage?

The Bank has made a clear statement regarding the outlook for a normalization of interest rates. We expect another 25 basis point increase following the next meeting on April 13. The increased uncertainty and volatility arising from the war in Ukraine is front of mind worldwide. Still, it will not deter central banks from tightening monetary policy to temper inflation.

Fixed or Variable?

Some of the best fixed-rate mortgages available today are 2.79 - 3.04%.
By comparison, variable-rate mortgages are offered at a discount of 1.35 - 1.55%.

Recommendation :

Considering another 25 basis point increase in April, we still recommend Variable over Fixed.

Savings: The interest savings are just too great to ignore (currently). The spread (or savings advantage) is ~150 b asis points, if you select a variable product over fixed today.
Flexibility: G iven the average li f e of a mortgage is 3.5 years or less, if you need to break your mortgage, the prepayment penalty on a variable (typically three months’ interest) is considerably less than what you will be charged on Fixed-rate mortgages.
Setting payments higher: If you are concerned with ‘payment shock’, we recommend setting your payments as if it was at today’s Fixed rate. You will absorb the impact of short-term payment increases and still receive the interest savings benefit.
Locking-in: You always have the ability to lock-in to a fixed rate mortgage at any time with no fees or penalties. As we qualify Variable-rate mortgages at the benchmark (5.25%), this suggests that you as a borrower should be able to weather increases to Prime and your mortgage payment increasing. If your situation changes, and you want to ‘set it, and forget it’, fixing your rate and payment is available at any time.

Reach out to us Nest today for a SIMPLY BETTER MORTGAGE!

Bank of Canada Summary January 2022

scott@themortgagehub.ca (Scott Gingles) — Wed, 26 Jan 2022 22:47:26 GMT

The Bank Of Canada’s first announcement of 2022 confirmed that rates are to stay the same, at least for now - with the benchmark remaining at 0.25%, and the Prime Lending Rate remaining unchanged . 

The bank acknowledges that interest rates “will need to increase,” and is continuing its reinvestment phase.

A Strong But Uneven Recovery

Much of the Bank's decision this morning stems from its concern of high inflation as the world gradually recovers from the pandemic. In a statement following the announcement the Bank noted: “As supply shortages diminish, inflation is expected to decline reasonably quickly to about 3% by the end of this year and then gradually ease towards the target over the projection period. Near-term inflation expectations have moved up, but longer-run expectations remain anchored on the 2% target.”

While recovery is strong, the Bank highlights the road to economic growth is also uneven, and therefore is cautious of the affects increasing rates will have as countries feel surmounting pressure to normalize sooner than they may be ready.

Additional Highlights From Today’s BoC Announcement:

The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed
With strong employment growth, the labour market has tightened significantly with elevated job vacancies, strong hiring intentions, and a pick-up in wage gains
Elevated housing market activity continues to put upward pressure on house prices
Omicron is “weighing on activity in the first quarter” but is expected to be less severe than previous waves
The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation
After GDP growth of 4.5% in 2021, the Bank expects Canada’s economy to grow by 4% in 2022 and about 3.5% in 2023

A Look Ahead

Contrary to recent predictions calling for a hike this week, the BoC remains committed to its conservative approach with respect to rate increases. Acknowledging that the variant continues to affect economic activity unevenly across sectors, the Governing Council believes that overall slack in the economy is now absorbed, and the stage is set for increases in 2022.

The question most commonly asked: Variable or Fixed? And when should we lock-in?

Our recommendation is to continue to take advantage of the Variable-rate mortgage for the following reasons:

Variable-rate mortgages offered at ~1.50% or lower.
Lock-in fixed-rates are ~2.79% or higher.

Flexibility: given the average live of a mortgage is 3.5 years or less, if you ever have to break your mortgage, the prepayment penalty on a variable (typically three months’ interest) is considerably less than what you will be charged on fixed-rate mortgages.
The interest savings spread (125bpts+) are too great to ignore with a variable-rate mortgage today.
If you are concerned with ‘payment shock’, we recommend setting your payments as if you it was at today’s fixed rate. You will absorb the impact of short-term rate hikes and still receive interest savings benefit.

If you require further assistance with your mortgage strategy, reach out to Nest today!

An Overview of the Home Buying Process

Tue, 21 Dec 2021 16:00:03 GMT

If you’re in the early stages of planning to buy either your first home or your next home, you’ve come to the right place! Even if you’ve been through it before, the home buying process can be daunting, but it doesn’t have to be when you have the right people on your side!

The purpose of this article is to share a high-level view of the home buying process. Obviously, the finer details can be addressed once you’ve submitted an application for pre-approval. But for now, here are some of the answers to general questions you may have as you work through your early preparations.

Are you credit-worthy?

Having an established credit profile is essential when applying for a mortgage. For your credit to be considered established, you’ll want to have a minimum of two trade lines (credit cards, loans, or lines of credit) with a minimum limit of $2500, reporting for a period of at least two years.

From there, you’ll want to make sure that your debt repayment is as close to flawless as possible. Think of it this way: Why would a lender want to lend you money if you don’t have a history of timely repayment on the loans you already have? Making your payments on time, as agreed, is crucial.

We all know, however, that mistakes can happen and payments might get missed. If that's the case, it’s best to catch up as quickly as possible! Late payments only register on your credit report if you're past due by 30 days.

How will you make your mortgage payments?

When providing you with a mortgage, lenders are trusting you with a lot of money. They'll want to feel really good about your ability to pay that money back, over an agreed period of time, with interest.

The more stable your employment, the better chances you have of securing mortgage financing. Typically, you’ll want to be employed in a permanent position or have your income averaged over a period of two years. If you’re self-employed, expect to provide a lot more documentation to substantiate your income.

How much skin do you have in the game?

If you're borrowing money to buy a home, you’re going to have to bring some money to the table. The best down payment comes from accumulating your own funds supported by documents proving a 90-day history in your bank account. Other down payment sources, such as a gift from a family member or proceeds from another property sale, are completely acceptable.

In Canada, 5% down is the minimum requirement. However, depending on the purchase price, it might be more. Also, you need to be aware that you will likely have to prove access to at least 1.5% of the purchase price to be allocated for closing costs.

How much can you afford?

Here’s the thing. What you can afford on paper and what you can afford in real life are often very different amounts. Just because you feel you can afford the proposed mortgage payments, know that you will have to substantiate everything through documentation.

The amount you actually qualify to borrow is based on many factors, certainly too many to list in an article designed to provide you with an overview of the home buying process. However, with that said, it’s never too early in the home buying process to seek professional advice. Our services come at no cost to you; it would be our pleasure to help.

Working with an independent mortgage professional will allow you to assess your credit-worthiness, provide insight on how a lender will view your income, help you plan for a down payment, and nail down exactly how much you can afford to borrow. And if you need help putting together a plan to improve your financial situation, we can do that too.

If you’d like to discuss your financial situation and put together a plan to secure mortgage financing, please get in touch!

Bank of Canada Summary December 2021

scott@themortgagehub.ca (Scott Gingles) — Fri, 10 Dec 2021 19:24:27 GMT

NEST NEWS AT A GLANCE

BoC Announcement: 0.25%, No Change
Prime Rate: 2.45%, No Change
Rate forecast: Rates are anticipated to change in Q2 or Q3 of 2022
Economy: Inflation will continue to be elevated easing back to 2% by late 2022. The Bank will maintain the policy interest rate at the lower bound until this 2% inflation target is met.
BoC's Full Statement: Click here

BANK OF CANADA SUMMARY

Bank of Canada maintains support for economic recovery. No significant impact on rates in the near-term.

At this time, the BoC has announced the benchmark rate remains at 0.25% - and the Prime Lending Rate remains unchanged . It anticipates any changes for policy interest rates to occur in Q2 or Q3 of 2022. This is in response to maintaining support for the economy as Canada continues a track of recovery during its reinvestment stages. The BoC will continue to monitor the monetary policy stimulus to support recovery and achieve Canada’s inflation target of 2%

Growing Economy led by rebound in consumption, including housing activity.

With a 5.5% increase in economic growth, Canada is gaining similar speed to pre-pandemic activity as restrictions continue to lift and vaccination numbers increase. As for housing activity, the BoC reported that it has seen it regain market speed, particularly in resale homes.

CPI Inflation expected to remain elevated with easing later in 2022. Buy now or wait?

In its statement, the BoC announces that inflation will stay elevated in the first half of 2022, with some easing anticipated of approximately 2% towards the latter half of next year. With supply shortages and gasoline prices still adding economic pressure, the BoC states it will continue to monitor their influence on market prices.

CREA has predicted national home prices to rise by 5.6% in 2022. With incredibly attractive variable and fixed rates available, and so many economic variables to consider, we would be happy to help you determine the best strategy and review your new or existing mortgage going forward.

Reach out to our team at Nest Mortgage today! 

Bank of Canada Rate Announcement Dec 8th, 2021

Thu, 09 Dec 2021 16:24:01 GMT

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank’s extraordinary forward guidance on the path for the overnight rate is being maintained. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant.

The global economy continues to recover from the effects of the COVID-19 pandemic. Economic growth in the United States has accelerated, led by consumption, while growth in some other regions is moderating after a strong third quarter. Inflation has increased further in many countries, reflecting strong demand for goods amid ongoing supply disruptions. The new Omicron COVID-19 variant has prompted a tightening of travel restrictions in many countries and a decline in oil prices, and has injected renewed uncertainty. Accommodative financial conditions are still supporting economic activity.

Canada’s economy grew by about 5½ percent in the third quarter, as expected. Together with a downward revision to the second quarter, this brings the level of GDP to about 1½ percent below its level in the last quarter of 2019, before the pandemic began. Third-quarter growth was led by a rebound in consumption, particularly services, as restrictions were further eased and higher vaccination rates improved confidence. Persistent supply bottlenecks continued to inhibit growth in other components of GDP, including non-commodity exports and business investment.

Recent economic indicators suggest the economy had considerable momentum into the fourth quarter. This includes broad-based job gains in recent months that have brought the employment rate essentially back to its pre-pandemic level. Job vacancies remain elevated and wage growth has also picked up. Housing activity had been moderating, but appears to be regaining strength, notably in resales. The devastating floods in British Columbia and uncertainties arising from the Omicron variant could weigh on growth by compounding supply chain disruptions and reducing demand for some services.

CPI inflation is elevated and the impact of global supply constraints is feeding through to a broader range of goods prices. The effects of these constraints on prices will likely take some time to work their way through, given existing supply backlogs. Gasoline prices, which had been a major factor pushing up CPI inflation, have recently declined. Meanwhile, core measures of inflation are little changed since September. The Bank continues to expect CPI inflation to remain elevated in the first half of 2022 and ease back towards 2 percent in the second half of the year. The Bank is closely watching inflation expectations and labour costs to ensure that the forces pushing up prices do not become embedded in ongoing inflation.

The Governing Council judges that in view of ongoing excess capacity, the economy continues to require considerable monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s October projection, this happens sometime in the middle quarters of 2022. We will provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation target.

Information notes

The next scheduled date for announcing the overnight rate target is January 26, 2022. The Bank will publish its full outlook for the economy and inflation, including risks to the projection, in the Monetary Policy Report at the same time.

Content Type(s): Press , Press releases

What Banks Won’t Tell You About Mortgage Financing

Tue, 07 Dec 2021 16:00:02 GMT

If you’re looking to buy a property or have a mortgage up for renewal, and you’re thinking about connecting with your bank directly, save yourself a lot of money and regret by reading this article first.

Here are four things that your bank won’t tell you, accompanied by four reasons that explain why working with an independent mortgage professional is in your best interest.

Banks have Limited Access to Mortgage Products.

Now, while this one may seem pretty straightforward, if you’re dealing with a single institution, they can only offer mortgages from their product catalogue. This means that you’ll be restricted to their qualifications which are usually very narrow. Working with a single institution significantly limits your options, especially if your financial situation isn’t straightforward.

In contrast, dealing with an independent mortgage professional, you will have access to products from over 200 lenders, including banks, monoline lenders, credit unions, finance companies, alternative lenders, institutional B lenders, Mortgage Investment Corporations, and private funds. Working with an independent mortgage professional will give you considerably more options to secure a better mortgage.

Banks Employ Salespeople, not Mortgage Experts.

Banks don’t employ mortgage experts; they employ salespeople. Banks pay and incentivize salespeople to sell their products. There is a fundamental misalignment of values here. If the bank incentivizes a banker to make a profit for the bank, how can they at the same time advocate for you and your best interest? They can’t.

Banks don’t have your best interest in mind. In fact, the more money they make off of you, the better it is for their bottom line.

However, when you work with an independent mortgage professional, you get the experience of someone who understands the intricacies of mortgage financing and will advocate on your behalf to get you the best mortgage. It’s actually in our best interest to assist you in finding the mortgage with the best terms for you.

Once your mortgage completes, we get paid a standardized finder’s fee by the lender for arranging the financing. So although we get paid by the lender, that lender has had to compete with other lenders to earn your business.

When you work with an independent mortgage professional, everyone wins. You get the best mortgage available, we get paid a standardized finder’s fee, and the lender gets a new borrower.

Banks Rarely Offer You Their Best Terms Upfront.

Banks are in the business of making money, and they’re usually pretty good at it. As such, banks will rarely offer you their best terms at the outset of your negotiation.

This is especially true if you’re looking to refinance your existing mortgage. With over half of Canadians simply accepting the renewal offer they get sent in the mail without question, banks don’t have to put their best rate forward. Instead, they rely on you to be ignorant of the process and will take advantage of your trust in them.

When you work with an independent mortgage professional, we don’t play games with rates and terms. Our goal is always to seek out the lender who has the best mortgage for you from the start of the process, and if there are any negotiations to be had, we handle them for you. There is no reason for us to do otherwise. In fact, the better we do our job, the more likely it is that you’ll be happy with our services and refer your friends and family.

Banks Promote Restrictive Mortgage Products.

As if it’s not bad enough that banks don’t offer their best terms upfront, they actually promote mortgage products that are restrictive in nature. The fine print in your mortgage contract matters; understanding it is challenging. Banks do what they can to make it hard for you to leave.

Now, if you’ve ever heard stories of outrageous penalties being charged, this is what’s called an Interest Rate Differential penalty (IRD). Each lender has its own way of calculating the IRD. Chartered banks are known for their restrictive mortgages and high IRD penalties.

When you work with an independent mortgage professional, we take the time to listen to your goals and assess your mortgage needs based on your life circumstances.

The best mortgage is the one that lowers your overall cost of borrowing. So not only will we walk through the cost of the mortgage financing, but we’ll also clearly outline the costs incurred should you need to break your mortgage before the end of your term. This might be the deciding factor in choosing the right lender and mortgage for you.

Working with an Independent Mortgage Professional is in Your Best Interest.

Banks have limitations to the mortgage products they offer. Working with an independent mortgage professional gives you mortgage options!

Bankers work for the bank; they are incentivized to make money for the bank. An independent mortgage professional advocates on your behalf to get you the best mortgage available.

Banks rarely offer their best terms upfront; they leave negotiations up to you. An independent mortgage professional outlines the best terms from multiple lenders at the start of the process.

Banks promote restrictive mortgage products that make it difficult to leave them. An independent mortgage broker will outline all the costs associated with different mortgage products and recommend the mortgage best suited for your needs.

So if you’d like to talk about the best mortgage product for you, you’ve come to the right place. Please connect anytime. It would be a pleasure to work with you.

What is a “No-Frills” Mortgage?

Tue, 23 Nov 2021 16:00:03 GMT

A no-frills service or product is where non-essential features have been removed from the product or service to keep the price as low as possible.

And while keeping costs low at the expense of non-essential features might be okay when choosing something like which grocery store to shop at, which economy car to purchase, or which budget hotel to spend the night, it’s not a good idea when considering which lender to secure mortgage financing. Here’s why.

When securing mortgage financing, your goal should be to pay the least amount of money over the term. Your plan should include having provisions for unexpected life changes.

Unlike the inconvenience of shopping at a store that doesn’t provide free bags, or driving a car without power windows, or staying at a hotel without any amenities, the so-called “frills” that are stripped away to provide you with the lowest rate mortgage are the very things that could significantly impact your overall cost of borrowing.

Depending on the lender, a “no-frills” mortgage rate might be up to 0.20% lower than a fully-featured mortgage. And while this could potentially save you a few hundreds of dollars over a 5-year term, please understand that it could also potentially cost you thousands (if not tens of thousands) of dollars should you need to break your mortgage early.

So if you’re considering a “no-frills” mortgage, here are a few of the drawbacks to think through:

You'll pay a significantly higher penalty if you need to break your mortgage.
You'll have limited pre-payment privileges.
Potential limitations if you want to port your mortgage to a different property.
You might be limited in your ability to refinance your mortgage (without incurring a considerable penalty).

Simply put, a “no-frills” mortgage is an entirely restrictive mortgage that leaves you without any flexibility. There are many reasons you might need to keep your options open. You might need to break your term because of a job loss or marital breakdown, or maybe you decide to take a new job across the country, or you need to buy a property to accommodate your growing family. Life is unpredictable; flexibility matters.

So why do banks offer a no-frills mortgage anyway? Well, when you deal with a single bank or financial institution, it’s the banker’s job to make as much money from you as possible, even if that means locking you into a very restrictive mortgage product by offering a rock bottom rate. Banks know that 2 out of 3 people break their mortgage within three years (33 months).

However, when you seek the expert advice of an independent mortgage professional, you can expect to see mortgage options from several institutions showcasing mortgage products best suited for your needs. We have your best interest in mind and will help you through the entire process. A mortgage is so much more than just the lowest rate.

If you have any questions about this, or if you’d like to discuss anything else mortgage-related, please get in touch. Working with you would be a pleasure!

How to Save Money for a Downpayment

Tue, 09 Nov 2021 16:00:02 GMT

Whether you want to set aside money to buy a car or take a vacation, save up for a down payment on a property, or plan for your retirement, the principles are the same.

However, as you’re reading this article on a website dedicated to helping you secure mortgage financing, we’ll assume you want tips on how to save for a down payment!

The key to saving money is getting clarity - clarity around your income and your expenses, developing and following a clear plan, and seeking help from professionals who can help you see the big picture as well as the details. Although this might seem fundamental, sometimes going back to basics is the best place to start.

Assess your income.

If your goal is to save money, you’ll need to identify just how much money you’ve got to work with! The best way to do this is to write everything down. This could be with paper and a pen or on a spreadsheet; whichever way works best for you is fine. The goal is to have all your income in front of you!

If you’re on a fixed income or receive a salary for work, your calculations might be pretty simple. Use the income you actually take home, not your gross income. Include an average of your variable income sources like tips, overtime, bonuses, or shift differentials. You should also include other income sources like an annual tax return, and child tax or other government benefits.

Spend time to make an exhaustive list of all your income sources.

Track your expenses.

Once you’ve identified what you have to work with on the income side, the next step is to figure out just how much you actually spend to maintain your current lifestyle.

Start by identifying regular bills, then look at your discretionary spending. If you have a budget already in place, you should be able to identify these numbers easily. If not, you can expect that getting clarity around your expenses will be very enlightening. It will be helpful to look through a few months’ worth of bank statements to see just how much money you actually spend.

Information is the key to finding clarity. The more information you have, the more equipped you will be to save money. Just like your income, write down all your expenses. This will allow you to assess and reprioritize where you spend your money.

Develop and follow a plan.

Once you have a clear picture of your income and expenses, you need to figure out how to make more money than you spend. Although that sounds so simple, it really isn’t. The majority of Canadians incur debt because they spend more money than they make. This is why saving money can be so hard.

But if we’re going back to basics, remember this: if you’re spending more money than you're making, you need to either increase your income or decrease your expenses to start saving money. There are countless money-saving strategies on the internet; consider following a few financial bloggers, and have fun learning about what works best for you!

Seek help from professionals.

You’re probably here to learn about how to save money for a down payment because you want to buy a home soon. If that's the case, be assured you're in the right place. Putting together a plan to secure mortgage financing is one plan you don't have to make on your own.

As independent mortgage professionals, it’s our job to help you navigate all aspects of mortgage financing. Just like saving for a down payment is about managing income and expenses, so is getting a mortgage. Income and expenses, along with credit and property, are what a lender looks at when assessing your suitability for a mortgage.

So while you might assume that putting together a plan to save for a down payment is where you should start, it might not actually be the best place to start. Saving money takes time, and while you're doing that, there are many other things you could be doing at the same time, like building credit to increase your chances of qualifying for a mortgage sooner.

When you’re ready to assess your financial situation and put together a plan to save for a down payment and get into a mortgage sooner, please get in touch. It would be a pleasure to work with you.

Bank of Canada Summary October 2021

scott@themortgagehub.ca (Scott Gingles) — Thu, 28 Oct 2021 23:22:58 GMT

NEST NEWS AT A GLANCE

BoC Announcement: 0.25%, No Change
Prime Rate: 2.45%, No Change
Rate forecast: Rates will rise, and the BoC admits this will happen sooner than originally expected.
Economy: Inflation will continue to be elevated easing back to 2% by late 2022. The Bank will maintain the policy interest rate at the lower bound until this 2% inflation target is met.
BoC's Full Statement: Click here
Next Rate Meeting: November 10, 2021

BANK OF CANADA SUMMARY

An end to the Quantitative Easing Program. How will this affect mortgages?

The latest BoC announcement shares that the quantitative easing program, initially implemented to ease economic concerns and provide a low-rate environment over the past 18 months, will come to an end. As Canada’s recovery through the pandemic continues with strong vaccination numbers, the Bank intends to move forward into the reinvestment phase. At this time, the benchmark rate remains at 0.25% - and the Prime Lending Rate remains unchanged.

*A market notice outlining details of the reinvestment phase is now published on the Bank’s website.

An 18-year high inflation rate of 4.4% reported recently has elevated prices in many categories, including energy and housing. The BoC anticipates that inflation will continue to be elevated easing back to 2% by late 2022. The Bank will maintain the policy interest rate at the lower bound until this 2% inflation target is met.

When will rates rise? By how much? Fixed or variable? Is it time to lock-in?

We will follow-up with an in-depth review answering all questions mentioned above. There are fear-based statements making headlines regarding rates, yet none of us possess a crystal ball. Rates will rise, and the BoC admits this will happen sooner than originally expected. A quick response to some of the burning questions on the street:

Raising rates too high or too fast to address an inflationary problem that will likely resolve itself, may do more harm than good. Canadians with record high mortgage balances are very sensitive to rate increases, and the BoC understands the negative impact that dramatic rate increases will have on the economy.
Variable Rate Mortgages have outperformed fixed over the past 50+ years. The product attributes: the lowest rate, an ability to lock-in, and transparent breakage/low penalty. These are the reasons we still recommend this product.

For instance, if you are sourcing a $500,000 mortgage today, let’s look at what happens if you decide on Variable over Fixed, assuming:

The BoC starts increasing the Overnight Rate by 0.25% every two months starting July 2022.
They also continue to increase 6 times (1.5% total) - which is a very aggressive schedule, returning to pre-pandemic levels.

With all of this accounted for, choosing a Variable Rate Mortgage still outperforms fixed, saving $301.10 over the term.

Should you have questions about your existing or new mortgage, reach out to our team at Nest Mortgage today!

Bank of Canada Rate Announcement Oct 27th, 2021

Wed, 27 Oct 2021 23:21:02 GMT

Bank of Canada maintains policy rate and forward guidance, ends quantitative easing.

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank’s extraordinary forward guidance on the path for the overnight rate is being maintained. The Bank is ending quantitative easing (QE) and moving into the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds.

The global economic recovery from the COVID-19 pandemic is progressing. Vaccines are proving highly effective against the virus, although their availability and distribution globally remain uneven and COVID variants pose risks to health and economic activity. In the face of strong global demand for goods, pandemic-related disruptions to production and transportation are constraining growth. Inflation rates have increased in many countries, boosted by these supply bottlenecks and by higher energy prices. While bond yields have risen in recent weeks, financial conditions remain accommodative and continue to support economic activity.

The Bank projects global GDP will grow by 6½ percent in 2021 – a strong pace but less than projected in the July Monetary Policy Report (MPR) – and by 4¼ percent in 2022 and about 3½ percent in 2023.

In Canada, robust economic growth has resumed, following a pause in the second quarter. Strong employment gains in recent months were concentrated in hard-to-distance sectors and among workers most affected by lockdowns. This has significantly reduced the very uneven impact of the pandemic on workers. As the economy reopens, it is taking time for workers to find the right jobs and for employers to hire people with the right skills. This is contributing to labour shortages in certain sectors, even as slack remains in the overall labour market.

The Bank now forecasts Canada’s economy will grow by 5 percent this year before moderating to 4¼ percent in 2022 and 3¾ percent in 2023. Demand is expected to be supported by strong consumption and business investment, and a rebound in exports as the US economy continues to recover. Housing activity has moderated, but is expected to remain elevated. On the supply side, shortages of manufacturing inputs, transportation bottlenecks, and difficulties in matching jobs to workers are limiting the economy’s productive capacity. Although the impact and persistence of these supply factors are hard to quantify, the output gap is likely to be narrower than the Bank had forecast in July.

The recent increase in CPI inflation was anticipated in July, but the main forces pushing up prices – higher energy prices and pandemic-related supply bottlenecks – now appear to be stronger and more persistent than expected. Core measures of inflation have also risen, but by less than the CPI. The Bank now expects CPI inflation to be elevated into next year, and ease back to around the 2 percent target by late 2022. The Bank is closely watching inflation expectations and labour costs to ensure that the temporary forces pushing up prices do not become embedded in ongoing inflation.

The Governing Council judges that in view of ongoing excess capacity, the economy continues to require considerable monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s projection, this happens sometime in the middle quarters of 2022. In light of the progress made in the economic recovery, the Governing Council has decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant.

We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation target.

Information notes

A market notice outlining details of the reinvestment phase will be published on the Bank’s web site at 10:30 am ET today.

The next scheduled date for announcing the overnight rate target is December 8, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on January 26, 2022.

Monetary Policy Report October 2021.

4 Ways to Access Your Home Equity

Tue, 26 Oct 2021 15:00:34 GMT

If you've been a homeowner for many years, it is likely your property value has increased significantly. One advantage of homeownership is the opportunity to build equity. Home equity growth, partnered with the security of living in your own home, is why most Canadians believe homeownership is the best choice for them!

While home equity is one of your greatest assets, accessing home equity is often overlooked when putting together a comprehensive financial plan. So if you’re looking for a way to access some of your home equity, you’ve come to the right place!

Simply put, home equity is the actual market value of your property minus what you owe. For instance, if your home has a market value of $650k and you owe $150k, you have $500k in home equity.

If you want to stay in your home but also access the equity you have built up over the years, there are four options to consider.

Conventional Mortgage Refinance

Assuming you qualify for the mortgage, most lenders will allow you to borrow up to 80% of your property’s value through a conventional refinance.

Let’s say your property is worth $500k and you owe $300k on your existing mortgage. If you were to refinance up to 80%, you would qualify to borrow $400k. After paying out your first mortgage of $300k, you’d end up with $100k (minus any fees to break your mortgage) to spend however you like.

Even if you paid off your mortgage years ago and own your property with a clear title (no mortgage), you can secure a new mortgage on your property.

Reverse Mortgage

A reverse mortgage allows Canadian homeowners 55 or older to turn the equity in their home into tax-free cash. There is no income or credit verification; you maintain ownership of your home, and you aren't required to make any mortgage payments. The full amount of the mortgage will become due when you decide to move or sell.

Unlike a conventional mortgage refinance, reverse mortgages won’t allow you to borrow up to 80% of your home equity. Rather, you can access a lesser amount of equity depending on your age.

The interest rates on a reverse mortgage can be slightly higher than the best rates currently being offered through standard mortgage financing. However, the difference is not outrageous, and this is an option worth considering as the benefits of freeing up cash without mortgage payments provides you with increased flexibility.

Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit allows you to set up access to the equity you have in your home but only pay interest if you use it. Qualifying for a HELOC may be challenging as lender criteria can be pretty strict. Unlike a conventional mortgage, a HELOC doesn't usually have an amortization, so you're only required to make the interest payments on the amount you've borrowed.

Second Position Mortgage

If the cost to break your mortgage is really high, but you need access to cash before your existing mortgage renews, consider a second mortgage.

A second mortgage typically has a set amount of time in which you have to repay the loan (term) as well as a fixed interest rate. This rate is usually higher than conventional financing. After you have received the loan proceeds, you can spend the money any way you like, but you will need to make regular payments on the second mortgage until it's paid off.

If you’re looking for a way to access the equity in your home to free up some cash, please get in touch. You’ve got options, and we can work together to find the best option for you!

GDS/TDS Ratios Explained

Tue, 12 Oct 2021 15:00:26 GMT

One of the major qualifiers lenders look at when considering your application for mortgage financing is your debt service ratios.

Now, before we get started, if you prefer to have someone walk through these calculations with you, assess your financial situation, and let you know exactly where you stand, let’s connect. There is no use in dusting off the calculator and running the numbers yourself when we can do it for you!

However, if you’re someone who likes to know the nitty-gritty of how things work instead of simply accepting that's just the way it is, this article is for you. But be warned, there are a lot of mortgage words and some math ahead; with that out of the way, let’s get started!

“Debt servicing” is the measure of your ability to meet all of your financial obligations. There are two ratios that lenders examine to determine whether you can debt service a mortgage.

The first is called the “gross debt service” ratio, or GDS, which is the percentage of your monthly household income that covers your housing costs. The second is called the “total debt service” ratio, or TDS, which is the percentage of your monthly household income covering your housing costs and all your other debts.

GDS is your income compared to the cost of financing the mortgage, including your proposed mortgage payments (principal and interest), property taxes, and heat (PITH), plus a percentage of your condo fees (if applicable).

Here’s how to calculate your GDS.

Principal + Interest + Taxes + Heat / Gross Annual Income

Your TDS is your income compared to your GDS plus the payments made to service any existing debts. Debts include car loans, line of credit, credit card payments, support payments, student loans, and anywhere else you’re contractually obligated to make payments.

Here’s how to calculate your TDS.

Principal + Interest + Taxes + Heat + Other Debts / Gross Annual Income

With the calculations for those ratios in place, the next step is to understand that each lender has guidelines that outline a maximum GDS/TDS. Exceeding these guidelines will result in your mortgage application being declined, so the lower your GDS/TDS, the better.

If you don’t have any outstanding debts, your GDS and TDS will be the same number. This is a good thing!

The maximum ratios vary for conventional mortgage financing based on the lender and mortgage product being offered. However, if your mortgage is high ratio and mortgage default insurance is required, the maximum GDS is 39% with a maximum TDS of 44%.

So how does this play out in real life? Well, let’s say you’re currently looking to purchase a property with a payment of $1700/mth (PITH), and your total annual household income is $90,000 ($7500/mth). The calculations would be $1700 divided by $7500, which equals 0.227, giving you a gross debt service ratio of 22.7%.

A point of clarity here. When calculating the principal and interest portion of the payment, the Government of Canada has instituted a stress test. It requires you to qualify using the government's qualifying rate (which is higher), not the actual contract rate. This is true for both fixed and variable rate mortgages.

Now let’s continue with the scenario. Let’s say that in addition to the payments required to service the property, you have a car payment of $300/mth, child support payments of $500/mth, and between your credit cards and line of credit, you’re responsible for another $700/mth. In total, you pay $1500/mth. So when you add in the $1700/mth PITH, you arrive at a total of $3200/mth for all of your financial obligations. $3200 divided by $7500 equals 0.427, giving you a total debt service ratio of 42.7%.

Here’s where it gets interesting. Based on your GDS alone, you can easily afford the property. But when you factor in all your other expenses, the TDS exceeds the allowable limit of 42% (for an insured mortgage anyway). So why does this matter? Well, as it stands, you wouldn’t qualify for the mortgage, even though you are likely paying more than $1700/mth in rent.

So then, to qualify, it might be as simple as shuffling some of your debt to lower payments. Or maybe you have 10% of the purchase price saved for a downpayment, changing the mortgage structure to 5% down and using the additional 5% to pay out a portion of your debt might be the difference you need to bring it all together.

Here’s the thing, as your actual financial situation is most likely different than the one above, working with an independent mortgage professional is the best way to give yourself options. Don’t do this alone. Your best plan is to seek and rely on the advice provided by an experienced independent mortgage professional. While you might secure a handful of mortgages over your lifetime, we do this every day with people just like you.

It’s never too early to start the conversation about mortgage qualification. Going over your application and assessing your debt service ratios in detail beforehand gives you the time needed to make the financial moves necessary to put yourself in the best financial position.

So if you find yourself questioning what you can afford or if you want to discuss your GDS/TDS ratios to understand the mortgage process a little better, please get in touch. It would be a pleasure to work with you, we can get a preapproval started right away.

Fixed-Rate or Variable-Rate Mortgage?

Tue, 28 Sep 2021 15:00:32 GMT

If you're looking to buy a new property, refinance, or renew an existing mortgage, chances are, you're considering either a fixed or variable rate mortgage. Figuring out which one is the best is entirely up to you! So here's some information to help you along the way.

Firstly, let's talk about the fixed-rate mortgage as this is most common and most heavily endorsed by the banks. With a fixed-rate mortgage, your interest rate is "fixed" for a certain term, anywhere from 6 months to 10 years, with the typical term being five years. If market rates fluctuate anytime after you sign on the dotted line, your mortgage rate won't change. You're a rock; your rate is set in stone. Typically a fixed-rate mortgage has a higher rate than a variable.

Alternatively, a variable rate is not set in stone; instead, it fluctuates with the market. The variable rate is a component (either plus or minus) to the prime rate. So if the prime rate (set by the government and banks) is 2.45% and the current variable rate is Prime minus .45%, your effective rate would be 2%. If three months after you sign your mortgage documents, the prime rate goes up by .25%, your rate would then move to 2.25%. Typically, variable rates come with a five-year term, although some lenders allow you to go with a shorter term.

At first glance, the fixed-rate mortgage seems to be the safe bet, while the variable-rate mortgage appears to be the wild card. However, this might not be the case. Here's the problem, what this doesn't account for is the fact that a fixed-rate mortgage and a variable-rate mortgage have two very different ways of calculating the penalty should you need to break your mortgage.

If you decide to break your variable rate mortgage, regardless of how much you have left on your term, you will end up owing three months interest, which works out to roughly two to two and a half payments. Easy to calculate and not that bad.

With a fixed-rate mortgage, you will pay the greater of either three months interest or what is called an interest rate differential (IRD) penalty. As every lender calculates their IRD penalty differently, and that calculation is based on market fluctuations, the contract rate at the time you signed your mortgage, the discount they provided you at that time, and the remaining time left on your term, there is no way to guess what that penalty will be. However, with that said, if you end up paying an IRD, it won't be pleasant.

If you've ever heard horror stories of banks charging outrageous penalties to break a mortgage, this is an interest rate differential. It's not uncommon to see penalties of 10x the amount for a fixed-rate mortgage compared to a variable-rate mortgage or up to 4.5% of the outstanding mortgage balance.

So here's a simple comparison.

A fixed-rate mortgage has a higher initial payment than a variable-rate mortgage but remains stable throughout your term. The penalty for breaking a fixed-rate mortgage is unpredictable and can be upwards of 4.5% of the outstanding mortgage balance.

A variable-rate mortgage has a lower initial payment than a fixed-rate mortgage but fluctuates with prime throughout your term. The penalty for breaking a variable-rate mortgage is predictable at 3 months interest which equals roughly two and a half payments.

The goal of any mortgage should be to pay the least amount of money back to the lender. This is called lowering your overall cost of borrowing. While a fixed-rate mortgage provides you with a more stable payment, the variable rate does a better job of accommodating when "life happens."

If you’ve got questions, connect anytime. It would be a pleasure to work through the options together.

Mortgage Advice to Help You Through a Separation

Tue, 14 Sep 2021 15:00:25 GMT

With the latest stats claiming that about half of marriages end in divorce and with around three-quarters of Canadians being homeowners, it’s important to know how to handle your mortgage if you decide to separate. Here’s a quick list of things to consider.

Keep making your payments.

A mortgage is a legally binding contract between you and the lender. It doesn’t take marriage into account. If your name appears on the mortgage, you're responsible for making sure the regular payments are made. A marital breakdown does not give you an excuse not to make your mortgage payments.

If, during your marriage, you've relied on your spouse to make the mortgage payments and you aren’t certain payments are being made after separating, it's in your best interest to contact the lender directly to verify your mortgage is being paid. If payments aren't being made, it could affect your credit score or worse; the lender could start foreclosure proceedings.

There is always a financial cost to break your mortgage.

When working through how to split your finances, you decided to either refinance your mortgage, remove someone from the title, or sell the property, keep in mind that you will incur legal costs.

If you’re in the middle of a term, the penalty for breaking your mortgage might be significant, especially if you have a fixed-rate mortgage. It’s certainly worth contacting your mortgage lender directly to verify the cost of breaking your mortgage. Having that information accessible when writing out your separation agreement will provide increased clarity.

Listing your marital status as separated or divorced.

When completing a mortgage application for securing new mortgage financing, when you list your marital status as separated or divorced, you can expect that a lender will want to see your legal separation agreement or your divorce papers. The lender wants to make sure you aren’t responsible for support payments. So if you haven’t finalized the paperwork, expect delays in securing mortgage financing.

It could be harder to qualify for a new mortgage.

With the separation of assets also comes the separation of incomes. If you qualified for your existing mortgage on a double income, you might find it hard to maintain the same quality of lifestyle post-separation.

This is where careful planning comes in. Working closely with your independent mortgage professional will ensure you understand exactly where you stand. You’ll want to put together a plan for how to handle the mortgage on the matrimonial home.

Purchasing the matrimonial home from your ex.

There are special considerations given to people going through a separation to buy out the matrimonial home. Instead of looking at the transaction like a refinance where you can only borrow up to 80% of the property’s value, lenders will consider one spouse buying out the other up to a 95% loan to value ratio. This comes in handy when dividing assets and liabilities.

Navigating the ins and outs of mortgage financing isn’t something you have to do alone. If you're going through a separation and you’d like to discuss all your mortgage options, please connect anytime. It would be a pleasure to walk you through the process.

Bank of Canada Summary September 2021

scott@themortgagehub.ca (Scott Gingles) — Fri, 10 Sep 2021 18:51:54 GMT

NEST NEWS AT A GLANCE

BoC Announcement: September 8th, 2021
Prime Rate: 2.45%
Rate forecast: Unchanged until late 2022 [unchanged]
Economy: Recover continues, focus shifts to the Federal Election
BoC's Full Statement: Click here
Next Rate Meeting: October 27th, 2021

BANK OF CANADA SUMMARY

This week the Bank of Canada made its sixth interest rate decision of 2021.

Given we are in the midst of campaigning for the federal election, it comes as no surprise there were no significant policy changes. However, the Bank did offer some key insights on the state of the economic recovery:

Overall, as the economy strives to bounce back, much like our global economic recovery, it is noted that there is still a long way to go. “The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support.”

In order to sustain recovery, the BoC will continue to hold its policy interest rate at the lower bound until a 2% inflation target is met, and economic slack is absorbed [once again, no change].

Global Economy

The economic recovery continued through the second quarter, led by strong US growth. While the global economy “had solid momentum heading into the third quarter,” supply chain disruptions are restraining activity in some sectors. Rising cases of COVID-19 in many regions pose a risk to the strength and speed of the global recovery.

Inflation

With CPI inflation rising to 3% as a result of supply bottlenecks due to the pandemic and rising gasoline prices, the Bank will continue to monitor for its anticipated transitionary impact. Factors pushing up inflation are expected to be transitory, “but their persistence and magnitude are uncertain and will be monitored closely”. Core measures of inflation have risen, but by less than the Consumer Price Index.

Canadian Housing & Economic Performance

As anticipated, the housing market retreated from higher levels witnessed in earlier months. However, there continues to be strong domestic demand that increased 3%, promoting steady market growth. With a rebound in employment during June and July due to some lifted restrictions, it allowed for balance back in the labour market. The economy is expected to strengthen in the second half of 2021, although the fourth wave of COVID-19 infections and ongoing supply bottlenecks could weigh on the recovery.

Looking Forward

With the benchmark rate unchanged, and employment rebounding, conditions remain favourable for all types of property financings.

All eyes now focus on the federal election and political parties selling themselves to people who want to own homes.

Affordability, tweaks to the stress test, restrictions on foreign buyers, increased housing supply, longer CMHC amortizations are just some of the many promises being made. We will keep you apprised of electoral developments as they relate to mortgages closer to the election later this month.

Please feel free to reach out to our team at Nest for all things mortgage – we would love to hear from you!

Bank of Canada Rate Announcement Sept 8th, 2021

Wed, 08 Sep 2021 14:11:48 GMT

Bank of Canada maintains policy rate, continues forward guidance and current pace of quantitative easing

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance on the path for the overnight rate. This is reinforced and supplemented by the Bank’s quantitative easing (QE) program, which is being maintained at a target pace of $2 billion per week.

The global economic recovery continued through the second quarter, led by strong US growth, and had solid momentum heading into the third quarter. However, supply chain disruptions are restraining activity in some sectors and rising cases of COVID-19 in many regions pose a risk to the strength of the global recovery. Financial conditions remain highly accommodative.

In Canada, GDP contracted by about 1 percent in the second quarter, weaker than anticipated in the Bank’s July Monetary Policy Report (MPR). This largely reflects a contraction in exports, due in part to supply chain disruptions, especially in the auto sector. Housing market activity pulled back from recent high levels, largely as expected. Consumption, business investment and government spending all contributed positively to growth, with domestic demand growing at more than 3 percent.

Employment rebounded through June and July, with hard-to-distance sectors hiring as public health restrictions eased. This is reducing unevenness in the labour market, although considerable slack remains and some groups – particularly low-wage workers – are still disproportionately affected. The Bank continues to expect the economy to strengthen in the second half of 2021, although the fourth wave of COVID-19 infections and ongoing supply bottlenecks could weigh on the recovery.

CPI inflation remains above 3 percent as expected, boosted by base-year effects, gasoline prices, and pandemic-related supply bottlenecks. These factors pushing up inflation are expected to be transitory, but their persistence and magnitude are uncertain and will be monitored closely. Wage increases have been moderate to date, and medium-term inflation expectations remain well-anchored. Core measures of inflation have risen, but by less than the CPI.

The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s July projection, this happens in the second half of 2022. The Bank's QE program continues to reinforce this commitment and keep interest rates low across the yield curve. Decisions regarding future adjustments to the pace of net bond purchases will be guided by Governing Council's ongoing assessment of the strength and durability of the recovery. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

Information note

The next scheduled date for announcing the overnight rate target is October 27, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

3 Questions To Ask Yourself Before Listing Your Home!

Tue, 31 Aug 2021 15:01:24 GMT

Deciding to list your home for sale is a big decision. And while there are many reasons you might want/need to sell, here are 3 questions you should ask yourself; and have answers to, before taking that step.

What is my plan to get my property ready for sale?

Assessing the value of your home is an important first step. Talking with a real estate professional will help accomplish that. They will be able to tell you what comparable properties in your area have sold for and what you can expect to sell your property for. They will also know specific market conditions and be able to help you put a plan together.

But as you’re putting together that plan, here are a few discussion points to work through. A little time/money upfront might increase the final sale price.

Declutter and depersonalize
Minor repairs
A fresh coat of interior/exterior paint
New fixtures
Hire a home stager or designer
Exterior maintenance
Professional pictures and/or virtual tour

But then again, these are all just considerations; selling real estate isn’t an exact science. Current housing market conditions will shape this conversation. The best plan of action is to find a real estate professional you trust, ask a lot of questions, and listen to their advice.

What are the costs associated with selling?

Oftentimes it’s the simple math that can betray you. In your head, you do quick calculations; you take what you think your property will sell for and then subtract what you owe on your mortgage; the rest is profit! Well, not so fast. Costs add up when selling a home. Here is a list of costs you’ll want to consider.

Real estate commissions (plus tax)
Mortgage discharge fees and penalties
Lawyer’s fees
Utilities and property tax account settlements
Hiring movers and/or storage fees

Having the exact figures ahead of time allows you to make a better decision. Now, the real wildcard here is the potential mortgage penalty you might pay if you break your existing mortgage. If you need help figuring this number out, get in touch!

What is my plan going forward?

If you’re already considering selling your home, it would be fair to guess that you have your reasons. But as you move forward, make sure you have a plan that is free of assumptions.

If you plan to move from your existing property to another property that you will be purchasing, make sure you have worked through mortgage financing ahead of time.

Just because you’ve qualified for a mortgage in the past doesn’t mean you’ll qualify for a mortgage in the future. Depending on when you got your last mortgage, a lot could have changed. You’ll want to know exactly what you can qualify for before you sell your existing property.

If you’d like to talk through all your options, connect anytime! It would be a pleasure to work with you and provide you with professional, unbiased advice.

Will Collections Impact Your Mortgage?

Tue, 17 Aug 2021 15:02:33 GMT

A question that comes up from time to time when discussing mortgage financing is, “If I have collections showing on my credit bureau, will that impact my ability to get a mortgage?” The answer might have a broader implication than what you might think; let's spend a little time discussing it.

Collections accounts are reported on your credit bureau when you have a debt that hasn’t been paid as agreed. Now, regardless of the reason for the collection; the collection is a result of delinquency, it’s an account you didn’t realize was in collections, or even if it’s a choice not to pay something because of moral reasons, all open collections will negatively impact your ability to secure new mortgage financing.

Delinquency

If you’re really late on paying on a loan, credit card, line of credit, or mortgage, and the lender has sent that account to collections, as they consider it a bad debt, this will certainly impact your ability to get new mortgage financing. Look at it this way, why would any lender want to extend new credit to you when you have a known history of not paying your existing debts as agreed?

If you happen to be late on your payments and the collection agencies are calling, the best plan would be to deal with the issue head-on. Settle the debts as quickly as possible and work towards establishing your credit. Very few (if any) lenders will even consider your mortgage application with open collections showing on your credit report.

If you’re unaware of bad debts

It happens a lot more than you’d think; people applying for a mortgage are completely unaware that they have delinquent accounts on their credit report. A common reason for this is that collection agencies are hired simply because the lender can’t reach someone.

Here’s an example. Let’s say you’re moving from one province to another for work, you pay the outstanding balance on your utility accounts, change your phone number, and make the move. And while you think you’ve paid the final amount owing, they read your meter, and there is $32 outstanding on your bill. As the utility company has no way of tracking you down, they send that amount to an agency that registers it on your credit report. You don't know any of this has happened and certainly would have paid the amount had you known it was due.

Alternatively, with over 20% of credit reports containing some level of inaccuracy, mistakes happen. If you’ve had collections in the past, there’s a chance they might be reporting inaccurately, even if it's been paid out.

So as far as your mortgage is concerned, it really doesn’t matter if the collection is a reporting error or a valid collection that you weren’t aware of. If it’s on your credit report, it’s your responsibility to prove it’s been remediated. Most lenders will accept documentation proving the account has been paid and won’t require those changes to reflect on your credit report before proceeding with a mortgage application.

So how do you know if you’ve got mistakes on your credit report? Well, you can either access your credit reports on your own or talk with an independent mortgage advisor to put together a mortgage preapproval. The preapproval process will uncover any issues holding you back. If there are any collections on your bureau, you can implement a plan to fix the problem before applying for a mortgage.

Moral Collections

What if you have purposefully chosen not to pay a collection, fine, bill, or debt for moral reasons? Or what if that account is sitting as an unpaid collection on your credit report because you dispute the subject matter?

Here are a few examples.

A disputed phone or utility bill
Unpaid alimony or child support
Unpaid collections for traffic tickets
Unpaid collections for COVID-19 fines

The truth is, lenders don’t care what the collection is for; they just want to see that you’ve dealt with it. They will be reluctant to extend new mortgage financing while you have an active collection reporting on your bureau.

So if you decide to take a moral stand on not paying a collection, please know that you run the risk of having that moral decision impact your ability to secure a mortgage in the future.

If you have any questions about this or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you!

How To Establish New Credit

Tue, 03 Aug 2021 15:00:17 GMT

If you’re new to managing personal finance and you want to learn about credit, you’ve come to the right place. Establishing new credit is a bit of a catch-22. To build a credit history, you need credit. But it’s hard to get credit without having a credit history. So, where do you start?

Well, the first thing you should know is that building credit takes time. It’s not something that happens overnight. If you’re looking to secure mortgage financing, you will want to have a minimum of two trade lines (credit cards, loans, or lines of credit) with a minimum limit of $2500, reporting for at least two years.

If you don’t have any credit yet, the best time to get started is right now. However, that may be difficult because, as we've already identified, without a credit history, most lenders won’t feel confident about taking a chance on you. What’s the solution? Consider a secured credit card.

With a secured credit card, you make a deposit upfront that matches the amount you want to borrow. A reasonable amount would be $1000 deposited on a single secured credit card. You then use your secured credit card to make household purchases and regular utility payments, paying off the total balance each month. If you default on the money borrowed for whatever reason, the lender will retain the money you put up as collateral.

When looking for a secured credit card, be sure to ask whether they report to the two nationwide credit bureaus, Equifax and TransUnion. If the credit card company doesn't report, the credit card account will be useless for your purposes; move on until you find a company that reports to both credit bureaus.

Once your secured credit card begins reporting to the credit bureaus, you begin to have a credit score; usually, this takes about three months. Now you can start to seek out a second trade line in the form of an unsecured credit card. Don’t forget to ensure that this card reports to both of the credit reporting agencies. Another option at this point could be a car loan. From here, you simply want to make all your payments on time!

But what happens if you’re looking to secure mortgage financing before you have a fully established credit report?

Well, if you have someone who would consider co-signing, you can certainly go that route. The mortgage application will depend on their income and credit report, but your name will be on the mortgage. Hopefully, when the mortgage is up for renewal, you’ll have the established credit required to remove them from the mortgage and qualify on your own.

Although establishing credit takes a minimum of two years, it really begins with putting together a plan. If you’d like to discuss anything credit or mortgage-related, please get in touch!

What is a Second Mortgage?

Tue, 20 Jul 2021 15:00:13 GMT

If you're not all that familiar with the ins and outs of mortgage financing, the term "second mortgage" might cause a bit of confusion. Many people incorrectly assume that a second mortgage is arranged when your first term is up for renewal or when you sell your first home. They think that the next mortgage you get is your "second mortgage." This is not the case.

A second mortgage is an additional mortgage on a single property, not the second mortgage you get in your lifetime.

When you borrow money to buy a house, your lawyer or notary will register your mortgage on the property title in what is called first position. This means that your mortgage lender has the first claim against the sale proceeds if you sell your property. If you happen to default on your mortgage, this is the security the lender has in repossessing your property. A second mortgage falls in behind the first mortgage on your property title.

When you sell your property, the lawyers will use the sale proceeds to pay off your mortgages in sequence, the first position mortgage is paid out first, and the second mortgage is paid out second. After both mortgages are paid off completely, you get the remaining equity.

When you secure a second mortgage, you continue making payments on your first mortgage as per your mortgage agreement. You must also then fulfill the terms of the second mortgage.

So why would you want a second mortgage? Well, a second mortgage comes in handy when you're looking to access some of your home equity, but you either have excellent terms on your first mortgage that you don't want to break, or you’d incur a huge penalty to break your first mortgage. Instead of refinancing the first mortgage, a second mortgage can be a better option.

A second mortgage is often used as a short-term debt consolidation tool to help provide you with better cash flow. If you’ve accumulated a considerable amount of high-interest unsecured debt, and you have equity in your home, you can secure a second mortgage to lower your overall cost of borrowing.

If you'd like to know more about how a second mortgage works, or if you'd like to discuss anything related to mortgage financing, please connect anytime!

Bank of Canada Summary July 2021

scott@themortgagehub.ca (Scott Gingles) — Mon, 19 Jul 2021 18:55:26 GMT

NEST NEWS AT A GLANCE

BoC Announcement: No rate change
Prime Rate: 2.45%, No change
Rate forecast: The BoC is committed to maintaining interest rates until economic slack is absorbed and the 2% inflation target is sustainably achieved. At this time, there are no changes to rates expected until late 2022.
Economy: With the Benchmark and Prime Rates unchanged, and the economic recovery expected to gather steam, conditions remain favourable for all types of property financing.
BoC's Full Statement: Click here
Next Rate Meeting: September 8, 2021

BANK OF CANADA SUMMARY

The Bank of Canada made its fifth interest rate decision of 2021 last week and updated its outlook for inflation and economic growth. The BoC maintained its target overnight rate and Prime will remain unchanged . The Bank has also reduced its Quantitative Easing program as Canada progresses towards economic recovery.

The expectation is a strong pick up of economic activity in the latter half of 2021 as COVID-19 slows and vaccinations continue to roll out:

“Consumption is expected to lead the recovery as households return to more normal spending patterns, while housing market activity is projected to ease back from historical highs. Stronger international demand should underpin a solid recovery in exports. As domestic and foreign demand increases and confidence improves, business investment will gain strength.”

The BoC is committed to maintaining interest rates until economic slack is absorbed and the 2% inflation target is sustainably achieved. At this time, there are no changes to rates expected until late 2022.

INFLATION

CPI inflation was 3.6% in May reflecting “temporary factors” including the comparison to last year’s depressed economic output. Core measures of inflation have also risen but by less than the CPI.

Inflation is likely to remain about 3% through the second half of 2021 but should ease toward 2% in 2022 as short-run imbalances diminish and overall slack in the economy pulls inflation lower

HOUSING AFFORDABILITY

Canada Mortgage & Housing Corporation (CMHC) has recently announced a return to pre-Covid debt servicing ratios - 39% and 44% GDS & TDS respectively. They have also reversed their requirement of at least one borrower having a credit score of 680. This is a welcomed change improving qualification consistency across all default insurance companies.

LOOKING FORWARD

With the Benchmark and Prime Rates unchanged, and the economic recovery expected to gather steam, conditions remain favourable for all types of property financing. For borrowers, a key consideration is how long low interest rates will last. As no one knows for sure, it will pay to act with a long-term strategy in mind.

Considering the latest central bank projections, there is no better time than now to finance a home purchase with Nest’s assistance!

Bank of Canada Rate Announcement Jul 14th, 2021

Wed, 14 Jul 2021 14:32:35 GMT

Bank of Canada maintains policy rate and forward guidance, adjusts quantitative easing program.

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance on the path for the overnight rate. This is reinforced and supplemented by the Bank’s quantitative easing (QE) program, which is being adjusted to a target pace of $2 billion per week. This adjustment reflects continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook.

The global economy is recovering strongly from the COVID-19 pandemic, with continued progress on vaccinations, particularly in advanced economies. However, the recovery is still highly uneven and remains dependent on the course of the virus. The recent spread of new COVID-19 variants is a growing concern, especially for regions where vaccinations rates remain low.

Global GDP growth is expected to reach 7 percent this year and then moderate to about 4 ½ percent in 2022 and just over 3 percent in 2023. This a slightly stronger forecast than the one in the Bank’s April Monetary Policy Report (MPR) and primarily reflects a stronger US outlook. Global financial conditions remain highly accommodative. Rising demand is supporting higher oil prices, while non-energy commodity prices remain elevated. The Canada-US exchange rate is little changed since April.

In Canada, the third wave of the virus slowed growth in the second quarter. However, falling COVID-19 cases, progress on vaccinations and easing containment restrictions all point to a strong pickup in the second half of this year. The Bank now expects GDP growth of around 6 percent in 2021 – a little slower than was expected in April – but has revised up its 2022 forecast to 4 ½ percent and projects 3 ¼ percent growth in 2023.

Consumption is expected to lead the recovery as households return to more normal spending patterns, while housing market activity is projected to ease back from historical highs. Stronger international demand should underpin a solid recovery in exports. As domestic and foreign demand increases and confidence improves, business investment will gain strength. Employment has once again begun to rebound, and we expect the hardest-hit segments of the labour market to post strong gains as the economy re-opens. However, the pace of the recovery will vary among industries and workers, and it could take some time to hire workers with the right skills to fill jobs. The aftermath of lockdowns and ongoing structural changes in the economy both mean that estimates of potential output and when the output gap will close are particularly uncertain.

CPI inflation was 3.6 percent in May, boosted by temporary factors that include base-year effects and stronger gasoline prices, as well as pandemic-related bottlenecks as economies re-open. Core measures of inflation have also risen but by less than the CPI. In some high-contact services, demand is rebounding faster than supply, pushing up prices from low levels. Transitory supply constraints in shipping and value chain disruptions for semiconductors are also translating into higher prices for cars and some other goods. With higher gasoline prices and on-going supply bottlenecks, inflation is likely to remain above 3 percent through the second half of this year and ease back toward 2 percent in 2022, as short-run imbalances diminish and the considerable overall slack in the economy pulls inflation lower. The factors pushing up inflation are transitory, but their persistence and magnitude are uncertain and will be monitored closely.

The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s July projection, this happens sometime in the second half of 2022. The Bank's QE program continues to reinforce this commitment and keep interest rates low across the yield curve. Decisions regarding further adjustments to the pace of net bond purchases will be guided by Governing Council's ongoing assessment of the strength and durability of the recovery. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

Information note

The next scheduled date for announcing the overnight rate target is September 8, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on October 27, 2021.

Monetary Policy Report - July 2021

Are Lenders Obligated to Renew Mortgages?

Wed, 07 Jul 2021 15:00:03 GMT

It’s a common held belief that if you’ve made your mortgage payments on time throughout the entirety of your mortgage term, that your lender is somehow obligated to renew your mortgage. This is simply not the case. The truth is, a lender is never under any obligation to renew your mortgage. The initial mortgage contract was drawn up for a defined time, when that term comes to an end, the lender has every right to call the loan.

Now, granted, most lenders are happy to renew your mortgage if you have made all your payments on time but there are several factors that can come into play that could prevent this from happening. If the lender becomes aware that you have recently gone through a divorce, a bankruptcy, or a job loss, they might be hesitant to renew your mortgage. Although more frequently seen in commercial mortgages, banks will often decide not to renew a mortgage if they don’t like the economic climate or certain geographical area.

So how do you protect yourself? Well, the first plan of action is to speak with your mortgage professional about your options at renewal at least 90-120 days before your term is set to expire. This will ensure you have enough time to look at all your options. It might make sense to switch to another lender, or it might make sense to stay put. However, by dealing with an independent mortgage professional (as opposed to directly with the lender), you have someone working for you, on your team, instead of someone working for the lender, trying to make money for the lender.

The best plan of action is to be prepared, and to have a plan in place. If you would like to talk about your financial situation, please contact us anytime, we would love to work with you.

Can't Find the Perfect Property In Your Price Range?

Wed, 23 Jun 2021 15:00:07 GMT

You’re pre-approved for a mortgage, you’ve been shopping with location in mind, but unfortunately the perfect property isn’t jumping out at you. There is no doubt about it, finding the perfect property (within your price range) is a difficult task, especially for first time home buyers. So, before you go and let buyer’s fatigue set in, maybe you should consider adding the cost of renovations into your purchase.

Let me introduce you to the purchase plus improvements program! When purchasing a home, buyers can add the cost of home upgrades into their mortgage. The program is designed to allow for 10% of the purchase price to a maximum of $40K to be added to the mortgage for renovations and updates. A great option if you can’t find something move in ready, and aren’t afraid to do a little work!

Sounds simple enough, but in all honestly, it’s quite the process, there are some pretty strict rules to follow. Firstly, you must provide quotes to the lender ahead of time for the work that you would like to have completed. It is good to note that the renovations will have to increase the value of the property accordingly. Secondly, the lender doesn’t give you the money to do the renovations, you have to come up with that yourself. Once the work has been completed, (verified by an appraiser) the lender will reimburse you via your lawyer’s trust account.

Obviously this program isn’t for everyone, buying a home is a stressful endeavor to begin with, the added stress of having to undertake renovations right away might not be a good idea. But then again, if you have the financial wherewithal to handle the cost of renovations and like the idea of making it yours from the start, then this might be just the option you have been looking for!

If you would like to know more about the purchase plus improvements program, and how this program might work for you, please don’t hesitate to contact us anytime!

Bank of Canada Rate Announcement Jun 9th, 2021

Wed, 09 Jun 2021 14:58:01 GMT

Bank of Canada will hold current level of policy rate until inflation objective is sustainably achieved, continues quantitative easing

With COVID-19 cases falling in many countries and vaccine coverage rising, global economic activity is picking up. Growth remains uneven across regions, however. The US is experiencing a strong consumer-driven recovery and a rebound is beginning to take shape in Europe, while a resurgence of the virus is hampering the recovery in some emerging market economies. Financial conditions remain highly accommodative, reflected in broadly higher asset prices. Commodity prices have risen further, notably oil, and the Canadian dollar has seen a further appreciation.

In Canada, economic developments have been broadly in line with the outlook in the April Monetary Policy Report (MPR). Despite the second wave of the virus, first quarter GDP growth came in at a robust 5.6 per cent. While this was lower than the Bank had projected, the underlying details indicate rising confidence and resilient demand. Household spending was stronger than expected, while businesses drew down inventories and increased imports more than anticipated. Renewed lockdowns associated with the third wave are dampening economic activity in the second quarter, largely as anticipated. Recent jobs data show that workers in contact-sensitive sectors have once again been most affected. The employment rate remains well below its pre-pandemic level, with low wage workers, youth and women continuing to bear the brunt of job losses.

With vaccinations proceeding at a faster pace, and provincial containment restrictions on an easing path over the summer, the Canadian economy is expected to rebound strongly, led by consumer spending. Housing market activity is expected to moderate but remain elevated. Strong growth in foreign demand and higher commodity prices should also lead to a solid recovery in exports and business investment. Despite progress on vaccinations, there continues to be uncertainty about the evolution of new COVID-19 variants. More broadly, the risks to the inflation outlook identified in the April MPR remain relevant.

As expected, CPI inflation has risen to around the top of the 1-3 percent inflation-control range, due largely to base-year effects and much stronger gasoline prices. Core measures of inflation have also risen, due primarily to temporary factors and base year effects, but by much less than CPI inflation. While CPI inflation will likely remain near 3 percent through the summer, it is expected to ease later in the year, as base-year effects diminish and excess capacity continues to exert downward pressure.

The Governing Council judges that there remains considerable excess capacity in the Canadian economy, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s April projection, this happens sometime in the second half of 2022. The Bank is continuing its QE program to reinforce this commitment and keep interest rates low across the yield curve. Decisions regarding adjustments to the pace of net bond purchases will be guided by Governing Council’s ongoing assessment of the strength and durability of the recovery. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

Information note

The next scheduled date for announcing the overnight rate target is July 14, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

You Just Got a Mortgage. Now What?

Tue, 08 Jun 2021 15:00:05 GMT

Mortgages are a funny thing. On the one hand they allow you to become a home owner without saving up enough money to purchase the home outright, which is a really good thing. On the other hand, even at today’s really low interest rates, as they are amortized over a really long time (most of the time 25 years), they can cost you a lot more money in the long run. With the government tightening mortgage qualification, chances are securing your most recent mortgage wasn’t a painless process.

So now that you finally have a mortgage, and you’re a home owner, the first thing you should do is figure out how to get rid of your mortgage! Here are 4 ways you can do that!

ACCELERATE YOUR PAYMENT FREQUENCY

Making the change from monthly payments to accelerated bi-weekly payments is one of the easiest ways you can make a difference to the bottom line of your mortgage. Most people don’t even notice the difference.

A traditional mortgage splits the amount owing into 12 equal monthly payments. Accelerated biweekly is simply taking a regular monthly payment and dividing it in two, but instead of making 24 payments, you make 26. The extra two payments really accelerate the pay down of your mortgage.

INCREASE YOUR MORTGAGE PAYMENT AMOUNT

Unless you opted for a “no-frills” mortgage, chances are you have the ability to increase your regular mortgage payment by 10-25%. This is a great option if you have some extra cash flow to spend in your budget. This money will go directly towards paying down the principal amount owing on your mortgage, and isn’t a prepayment of interest. The more money you can pay down when you first get your mortgage the better, as it has a compound effect, meaning you will pay less interest over the life of your mortgage.

Also, by voluntarily increasing your mortgage payment, it’s kinda like signing up for a long term forced savings plan where equity builds in your house rather than your bank account.

MAKE A LUMP SUM PAYMENT

Again, unless you have a “no-frills” mortgage, you should be able to make bulk payments to your mortgage. Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance. Some lenders are particular about when you can make these payments, however if you haven’t taken advantage of a lump sum payment yet this year, you will be eligible.

REVIEW YOUR OPTIONS REGULARLY

As your mortgage payments are withdrawn from your account regularly, it’s easy to simply put your mortgage payments on auto-pilot, especially if you have opted for a 5 year fixed term. Regardless of the terms of your mortgage, it’s a good idea to give your mortgage an annual review. There may be opportunities to refinance and lower your interest rate, or maybe not, but the point of reviewing your mortgage annually, is that you are conscious about making decisions regarding your mortgage.

If you have any questions about your mortgage, how to get a mortgage, or how to get rid of the mortgage you have, please don’t hesitate to contact us anytime!

5 Things You Need to Know Before You Co-Sign a Mortgage!

Wed, 26 May 2021 15:00:10 GMT

So you’re thinking about co-signing for a mortgage? Okay, do you really know what that means do you know what you are getting yourself into? Co-signing isn’t necessarily a bad thing, but there is certainly a lot of misinformation floating around on the subject. Although it’s nice to be in a position to help someone close to you qualify for a mortgage, It’s not a decision that should be made lightly. Co-signing on a mortgage could have a significant impact on your future.

Here are some things you should consider before co-signing a mortgage application.

1. Regardless if you’re the principal borrower, co-borrower, or co-signor, If you’re on the mortgage, you’re 100% responsible for the debt of the mortgage and everything that goes along with that. Although the term co-signor makes it sound like you are somehow removed from the actual mortgage, you have all the same legal obligations as everyone else on the mortgage.

2. If the person who you’re co-signing for is unable to make the payments for any reason, you will be expected to make them on their behalf. By signing the mortgage documents, you assume full responsibility for the payments (even if it’s not you making them).

3. If payments aren’t being made, there is a chance the lender will take legal action against you. This includes all available collection methods such as obtaining a judgement in court or garnisheeing your wage or bank accounts. Worse case scenario, they could actually go after your property or assets in order to cover their loses. Now, this is highly unlikely, but not out of the realm of possibility.

4. Once the initial term has been completed, you will not automatically be removed from the mortgage. The person who you co-signed for will have to make a new application for the mortgage in their own name and qualify on their own merit. If they don’t qualify at this time, you will be kept on the mortgage for the next term.

5. When you co-sign for a mortgage, all of the debt of the co-signed mortgage is counted against you. This means that if you’re looking to buy another property in the future, you will have to include the payments of the co-signed mortgage in your debt service ratios, even though you aren’t the one making the payments. This could significantly impact the amount you can borrow in the future.

If you have any questions about co-signing on a mortgage, or about the mortgage application process in general, we’d love to discuss it with you. Please don’t hesitate to contact us anytime!

New Stress Test Qualifications as of June 1st. 2021

Mon, 24 May 2021 19:05:40 GMT

As of June 1st. 2021, if you’re looking to qualify for mortgage financing (either uninsured or insured), you will have to qualify at the greater of the contract rate plus 2% or a new “floor rate” of 5.25%.

A little background.

In early April, the Office of the Superintendent of Financial Institutions (OSFI) proposed changes to the stress test for uninsured mortgages and invited feedback from the public closing in early May 2021. Last Thursday, OSFI announced they would be moving ahead with the proposed changes to uninsured mortgages.

Immediately following OSFI’s announcement, the Department of Finance made an announcement indicating that they would follow suit and apply the same changes to the stress test on insured mortgages as well.

“The recent and rapid rise in housing prices is squeezing middle-class Canadians across the entire country and raises concerns about the stability of the overall market,” Finance Minister Chrystia Freeland said in a statement. “The federal government will align with OSFI by establishing a new minimum qualifying rate for insured mortgages… It is vitally important that homeownership remains within reach for Canadians.”

What you need to know.

It is estimated that these changes to the stress test will impact 1 in 5 mortgage applications and will reduce buying power by roughly 4% to 4.5%.

The government will review the stress test qualifying rate annually (every December) and communicate any changes well before the spring market.

After June 1st. 2021, you will have to qualify at the great of the contract rate or the floor rate of 5.25%.

If you have an active mortgage or pre-approval in place (before June 1st, 2021), please don’t hesitate to get in touch to see if these recent government changes impact you.

How Can I Pay Down My Mortgage Faster?

Wed, 12 May 2021 15:00:06 GMT

Although getting a mortgage is exciting as it allows you to become a homeowner, a mortgage is, in fact, a lot of debt. So if you have a mortgage, your goal should be to get rid of it as quickly as possible.

Here are four things you can do to help pay off your mortgage for good!

Accelerate your payments.

A traditional mortgage splits the amount owing to 12 equal monthly payments. Accelerated biweekly is simply taking a regular monthly payment and dividing it in two, but instead of making 24 payments, you make 26. The extra two payments really accelerate the pay down of your mortgage.

Increase your regular mortgage payments.

Chances are you have the ability to increase your regular mortgage payment by 10-25%. This is a great option if you have some extra cash flow to spend in your budget. This money will go directly towards paying down the principal amount owing on your mortgage and isn’t a prepayment of interest.

Make a lump sum payment.

Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance. Some lenders are particular about when you can make these payments, however, if you haven’t taken advantage of a lump sum payment yet this year, you should be eligible.

Review your options regularly.

As your mortgage payments are withdrawn from your account on a set schedule, it’s easy to put your mortgage payments on auto-pilot, especially if you have opted for a longer term. This is why an annual review is a good idea, there may be opportunities to refinance and lower your interest rate.

The point of reviewing your mortgage annually is that you are conscious about making decisions regarding your mortgage and that you ensure you’ve always got the best mortgage for you!

Questions about your mortgage, or want to compare your mortgage to what is currently available? Please contact us anytime!

Protecting Your Credit Through a Divorce

Wed, 28 Apr 2021 15:00:02 GMT

No secret here, divorces are challenging, there are a lot of things to think about in a short amount of time. Although finances are often at the forefront of the discussions as it relates to the separation of assets, managing and maintaining personal credit can be swept to the side to deal with later. And unfortunately, this can be devastating as you try to rebuild your life down the road.

So, if you happen to be going through or preparing for a divorce, here are a few things you can do to ensure you make it through with your credit intact.

Manage Your Joint Debt

If you have joint debt, you are both 100% responsible for that debt. Your responsibility for that debt continues even if the debt has been allocated to be paid by your ex-spouse in the divorce settlement. A divorce settlement doesn’t mean anything to the lender.

The problem here is if your ex-spouse falls behind on their payments; if the debt has your name on it, your credit report will be negatively impacted for the next 6 - 7 years.

What you need to do is go through all your joint credit accounts and if possible, cancel them and have the remaining balance transferred into a loan or credit card in the name of whoever will be responsible for the remaining debt. You should not have any joint debts remaining.

It’s also a good idea to check your credit report about 3 - 6 months after making the changes to ensure the changes were made. It’s not uncommon for reporting errors to take place.

Manage Your Bank Accounts

Just as you should separate all your joint credit accounts, it's a good idea to open a checking account in your name and start making all your deposits there as soon as possible. You will want to set up the automatic withdrawals for the expenses and utilities you will be responsible for going forward in your personal account.

At the same time, you will want to close any joint bank accounts you have with your ex-spouse and gain sole access to any assets you have. It’s unfortunate, but even in the most amicable situations, money (or lack thereof) can cause people to make bad decisions, you want to protect yourself by protecting your assets. The last thing you want is for your ex-spouse to drain your bank account.

In addition to opening new accounts, chances are your ex-spouse knows your passwords to online banking and might even know the pin to your bank card. While you’re opening new accounts, take this time to change all your passwords to something completely new, don’t just default to what you’ve always used.

Setup New Credit in Your Name

There might be a chance that you’ve never had credit in your name alone, or that you were a secondary signer on your ex-spouse’s credit card. If this is the case, it would be prudent to set up a small credit card in your name. Don’t worry about the limit, the goal is to just get something in your name alone, down the road things can be changed, and you can work towards establishing a solid credit profile.

If you have any questions about managing your credit through a divorce, please don’t hesitate to contact us anytime. As a mortgage expert, understanding how credit impacts your ability to borrow money in the future is what we work with every day.

Bank of Canada Summary April 2021

scott@themortgagehub.ca (Scott Gingles) — Tue, 27 Apr 2021 18:00:18 GMT

NEST NEWS AT A GLANCE

BoC Announcement: No rate change
Prime Rate: 2.45%, No change
Rate forecast: "Based on the Bank’s latest projection, [policy rate increases are] now expected to happen sometime in the second half of 2022."
Economy: "Growth in the first quarter appears considerably stronger than the Bank’s January forecast"
BoC's Full Statement: Click here
Next Rate Meeting: June 9, 2021

BANK OF CANADA SUMMARY

The Bank of Canada (BoC) recently released their third announcement for 2021, sharing their latest updates on bond yields, quantitative easing, and interest rates. This update is especially important with respect to rate predictions and how rates may impact new homeowners and businesses.

As anticipated, the BoC will maintain the effective “lower bound” until inflation targets are met. The biggest news is the Bank now suggests an increases to rates sooner than expected. Rather than 2023 and beyond, Canadians should expect to see an increase “sometime in the second half of 2022”. Prospective homebuyers and existing mortgage holders should prepare for a modest increase in rates later next year. In addition, OSFI recently proposed revisions to the stress test , a tightening of the qualification requirements across most lenders, which will take effect June 1st this year.

The BoC also proposes plans to taper asset purchases [Quantitative Easing Program] by April 28th, 2021. This program has been instrumental bringing stability to the marketplace during the pandemic, and the Bank will maintain its commitment to keep bond yields (and rates) low throughout the next 18 months.

Lastly, macro variables can shift, and so can predictions by the BoC. Results from Q1 were stronger than anticipated, yet full economic recovery will take time and evolve in tandem with COVID-19. The Bank will keep a close eye on all variables effecting the economy and the hot housing market:

“Housing construction and resales are at historic highs, driven by the desire for more living space, low mortgage rates, and limited supply. The Bank will continue to monitor the potential risks associated with the rapid rise in house prices.”

If you have any questions regarding the latest announcement from the Bank of Canada, or would like to secure a mortgage before the proposed changes June 1st, get in touch with our team at Nest Mortgage!

Bank of Canada Rate Announcement Apr 21st, 2021

Wed, 21 Apr 2021 14:14:32 GMT

Bank of Canada will hold current level of policy rate until inflation objective is sustainably achieved, adjusts quantitative easing program.

FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

April 21, 2021

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank continues to provide extraordinary forward guidance on the path for the overnight rate, reinforced and supplemented by the Bank’s quantitative easing (QE) program. Effective the week of April 26, weekly net purchases of Government of Canada bonds will be adjusted to a target of $3 billion. This adjustment to the amount of incremental stimulus being added each week reflects the progress made in the economic recovery.

The outlook has improved for both the global and Canadian economies. Activity has proven more resilient than expected in the face of the COVID-19 pandemic, and the rollout of vaccines is progressing. A number of regions, including Canada, are experiencing a difficult third wave of infections and lockdowns. The more contagious variants of the virus are straining healthcare systems and affecting hard-to-distance activities, and have introduced a new dimension of uncertainty. The recovery remains highly dependent on the evolution of the pandemic and the pace of vaccinations.

Global economic growth is stronger than was forecast in the January Monetary Policy Report (MPR), although the pace varies considerably across countries. After a contraction of 2 ½ percent in 2020, the Bank now projects global GDP to grow by just over 6 ¾ percent in 2021, about 4 percent in 2022, and almost 3 ½ percent in 2023. The recovery in the United States has been particularly strong, owing to fiscal stimulus and rapid vaccine rollouts. The global recovery has lifted commodity prices, including oil, contributing to the strength of the Canadian dollar.

In Canada, growth in the first quarter appears considerably stronger than the Bank’s January forecast, as households and companies adapted to the second wave and associated restrictions. Substantial job gains in February and March boosted employment. However, new lockdowns will pose another setback and the labour market remains difficult for many Canadians, especially low-wage workers, young people and women. As vaccines roll out and the economy reopens, consumption is expected to rebound strongly in the second half of this year and remain robust over the projection. Housing construction and resales are at historic highs, driven by the desire for more living space, low mortgage rates, and limited supply. The Bank will continue to monitor the potential risks associated with the rapid rise in house prices. Meanwhile, strong growth in foreign demand and higher commodity prices are expected to drive a robust recovery in exports and business investment. Additional federal and provincial fiscal stimulus will contribute importantly to growth. The Bank now forecasts real GDP growth of 6 ½ percent in 2021, moderating to around 3 ¾ percent in 2022 and 3 ¼ percent in 2023.

The Bank has revised up its estimate of potential output in light of greater resilience to the pandemic and accelerated digitalization. The virus and lockdowns have had very different impacts across sectors, businesses, and groups of workers, creating an unusual degree of uncertainty about the amount of slack in the economy and how long it will take to be absorbed. To gauge the evolution of slack, the Bank will look at a broad spectrum of indicators, including various measures of labour market conditions.

Over the next few months, inflation is expected to rise temporarily to around the top of the 1-3 percent inflation-control range. This is largely the result of base-year effects—year-over-year CPI inflation is higher because prices of some goods and services fell sharply at the start of the pandemic. In addition, the increase in oil prices since December has driven gasoline prices above their pre-pandemic levels. The Bank expects CPI inflation to ease back toward 2 percent over the second half of 2021 as these base-year effects diminish, and inflation is expected to ease further because of the ongoing drag from excess capacity. As slack is absorbed, inflation should return to 2 per cent on a sustained basis some time in the second half of 2022.

Even as economic prospects improve, the Governing Council judges that there is still considerable excess capacity, and the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. Based on the Bank’s latest projection, this is now expected to happen some time in the second half of 2022. The Bank is continuing its QE program to reinforce this commitment and keep interest rates low across the yield curve. Decisions regarding further adjustments to the pace of net purchases will be guided by Governing Council’s ongoing assessment of the strength and durability of the recovery. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

Information note:

The next scheduled date for announcing the overnight rate target is June 9, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on July 14, 2021.

Monetary Policy Report April 2021.

Mortgage Options Into Retirement

Wed, 14 Apr 2021 15:00:02 GMT

Although it’s ideal to have your mortgage paid off by the time you retire, in today’s economy, that isn’t always possible. The cost of living is considerably higher than it has ever been, and as a result, a lot of Canadians are putting off retirement, hoping to make just a little more money to add to that nest egg.

So if you find yourself in the position where you’re considering your mortgage options into retirement, you’ve come to the right place. The advantage of working with an independent mortgage professional (as opposed to a single bank) is choice. When you deal with a broker, you won’t be limited to an individual institution’s products; instead, you will have access to considerably more options.

Here are some options available to older Canadians as they plan for mortgage financing through their retirement.

Standard Mortgage Financing

If you’ve got a steady income, decent credit, and equity in your home, there is no reason you shouldn’t qualify for standard mortgage financing which usually comes at the lowest interest rates and best terms. Even if you’ve already retired, some lenders use pension and retirement income to support your mortgage application.

Reverse Mortgage Financing

A reverse mortgage allows Canadian homeowners 55 years and older to borrow money from their home with no proof of income, no credit check, and no health questions. A reverse mortgage is a fabulous mortgage solution that has helped thousands of older Canadians to enhance their lifestyle.

Home Equity Line of Credit (HELOC)

A line of credit secured to the equity you have in your home is an excellent tool to allow you to access money when you need it, but not pay interest if you don’t. A lot of Canadians like the idea of rolling all their expenses and income into one account.

Private Financing

If you happen to be in a bit of a tight spot, you have a plan, but you need a financial solution, private financing might be the answer. Certainly not the first choice for many (typically higher interest rates) however private financing can provide you with options your typical bank can’t.

If you have any questions about securing mortgage financing into your retirement, please don’t hesitate to contact us anytime, we would love to provide you with options!

Employment Status | How it Impacts Your Mortgage Application

Wed, 31 Mar 2021 15:00:07 GMT

Chances are, if you're applying for a mortgage, you feel confident about the state of your current employment, or your ability to find a similar position if you needed to. However, your actual employment status probably means more to the lender than you might think. You see, to a lender, your employment status is a strong indicator of your employer's commitment to your continued employment.

So, regardless how you feel about your position, it's what can be proven on paper that matters most. Let's walk through some of the common ways employment status can be looked at.

Permanent Employment. This is the gold star, if your employer has made you a permanent employee, it means that your position is as secure as any position can be. When a lender see's permanent status (passed probation), it gives them the confidence that you're valuable to the company and that your income can be relied on.

Probationary Period. If you've only been employed with a company for a short period of time, you're going to have to prove that you've passed any probationary period. Although most probationary periods are typically 3-6 months, they can be longer. The lender will want to make sure that you're not under a probationary period because an employer can terminate your employment without any cause while you're under probation. There isn't a lot of confidence for the lender if you haven't made it through your initial evaluation.

Now, it's not really the length of time with the lender that is being scrutinized here, it's the status of your probation. So if you've only been with a company for 1 month, but you've been working with them as a contractor for a few years, and they're willing to waive the probationary period based on a previous relationship, that should give the lender the confidence they need. You'll just need to get that documented.

Parental Leave. If you're currently on, planning to be on, or just about to be done a parental leave, regardless of the income you're currently collecting, as long as you have an employment letter that outlines your guaranteed return to work position (and date), you can use your return to work income to qualify on your mortgage application. It's not the parental leave that the lender has issues with, it's the ability you have to return to the position you left.

Term Contracts. This is hands down the most ambiguous and misunderstood employment status as it's usually well qualified and educated individuals who are working excellent jobs with no documented proof of future employment. A term contract specifies that you will be paid to do a certain job from a start date to an end date. This is not a lot for a lender to go on when evaluating your long term ability to repay your mortgage. The real conflict here is that although most term contracts get renewed or extended, your employer is not making any guarantees.

So in order to qualify income on a term contract, there are several different ways lenders look at it. The best would be to establish the income on at least a 2 year period This is where the 2 year NOA or T4s come into play, the lender would simply take a 2 year average and use that. However sometimes lenders also like to see that the contract has been renewed at least once before considering it as income towards your mortgage application.

If you've recently changed jobs, or are thinking about making a career change, and qualifying for a mortgage is on the horizon, or if you have any questions at all, please don't hesitate to contact us anytime. We can work through the details together and make sure you have a plan in place.

Minimum Required Credit Profile

Wed, 17 Mar 2021 15:01:29 GMT

Credit. The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. When you borrow money to buy a house, you will be required to prove that you have a good history of managing your credit. But what exactly is a "good history of managing credit"? What are lenders looking at when they assess your credit report?

An easy way to remember the minimum requirements for credit is the 2/2/2 rule. 2 active trade lines for a minimum of 2 years, with a minimum of a $2000 limit.

Two active trade lines. You receive a trade line on your credit report anytime a lender extends you credit. This could be a credit card, an instalment loan, or a line of credit. Your repayment history is kept on your credit report. In order for a trade line to be considered active, you must use it at least once every three months.

Two years. Both your trade lines have to be established for at least two years. This gives the lender confidence that you have established your credit over a decent period of time.

Two thousand dollars. This is the bare minimum limit required on your trade lines. So if you have a credit card with a $1000 limit and a line of credit with a $2500 limit, you would be okay as your limit would be $3500. Sometimes people confuse the limit with the balance. You don't have to carry a balance on your trade lines for them to be considered active. In fact, it's best if you use your trade lines, but pay them off in full every month.

A great way to use your credit is to pay your bills via direct withdrawal from your credit card, then setup a regular transfer from your bank account to pay off the credit card in full. Automation becomes your best friend. Just make sure you check that everything is working as it should every once and a while.

Now, although this all may seem pretty straightforward, there are a lot of situations where people assume they will qualify with a minimum required credit profile, when in fact they don't. It could be a simple fix, or it could require a lot of time. So, if you are thinking about buying a house in the next couple of years, and want to make sure that your credit profile will be established by the time you are ready to shop, please contact us and we can work through your mortgage application.

Bank Of Canada Summary April 2021

scott@themortgagehub.ca (Scott Gingles) — Tue, 16 Mar 2021 20:22:35 GMT

Last week the Bank of Canada held its overnight rate steady as expected but did not budge in its commitment to using Quantitative Easing to keep interest rates low across the yield curve. All of this is great news for homebuyers!

No change to rates:
Overnight rate: 0.25%
Prime Rate: 2.45% (last change: 04.03.2020)
Bank of Canada Forecast:
No rate increases until 2023
Market Rate Forecast:
No rate hikes until 2022

REAL ESTATE IS BOOMING!

As most are aware, resale markets nationally are posting all-time high unit sales and values in 2021. It will be interesting to monitor sales activity as we head into the spring market as supply tightens further. The heightened activity has clearly been fueled by historically low rates. Employment in higher-paying industries has risen despite the pandemic, supporting incomes among potential homebuyers. And there has been a dramatic shift in preferences toward more space, further outside major urban centres.

“While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support.”

WHERE ARE RATES HEADED?

Low Rate Pressures

Covid Variants: “The spread of more transmissible variants of the virus poses the largest downside risk to activity” - Bank of Canada
Employment: Canada’s unemployment rate is still above the peak of the last two recessions.
Contraction
Contraction: Canadian economy contracted by 5.4% in 2020. Substantially harder hit than in the US, which posted a 3.5% decline.

Rising Rate Pressures

Economic Recovery: The market is pricing in a strong economy sooner than later. Higher growth expectations mean higher inflation expectations and possible rate increases. In Q4 2020 + Q1 2021, the economy was twice as strong as the Bank of Canada had forecasted.
Bond Yields: Most metrics lenders use to set fixed-rate mortgage pricing have surged in recent weeks: swap rates, bond yields, and government yields
US Outlook: The Bank largely attributed the rise in bond yields, impacting increases to 5-year fixed rates by ~25bpts in recent weeks, to “the improved U.S. growth outlook.” A massive $1.9 trillion stimulus plan is also about to turbocharge Canada's largest trading partner's economy.
Canadian Dollar: The Canadian dollar has been relatively stable against the US dollar but has appreciated against most other currencies.

INTERVENTION?

Policymakers have been caught off-guard in the magnitude of the housing response to very low financing costs (*In Canada, the average home price jumped 22.8% in January YOY).
Ottawa could consider increased tax measures and tougher lending rules to cool market activity.

Government intervention is typically warranted when it happens, but is often reactionary, lags, and has a heftier impact than intended. With positive news on the horizon around vaccines and the economy, we trust recent increases to fixed rates will temper Real Estate naturally without additional policy change.

FIXED VERSUS VARIABLE

If you have already secured a deep-discount variable like prime – 1.00%, you are financially stable and risk-tolerant, you will likely enjoy record-low interest savings for some time to come. Variable provides flexibility: the lowest possible rate, the ability to lock-in, and the avoidance of a high penalty (IRD) if things change before the end of the term.
If you are risk-averse, have been waiting to “set it and forget it”, and are certain you’ll be in the same mortgage for 5-years or longer (the average life of a mortgage in Canada is ~3.5 years), a fixed rate is recommended - we can still source 1.79% 5-year fixed today!

“GDP growth in the first quarter of 2021 is now expected to be positive, rather than the contraction forecast in January.”

RECOMMENDATION

If forced to make a prediction, as it is still anyone’s best guess, we would suggest that we are in a low rate environment for some time to come. Low interest rates are meant to stimulate the economy as a whole – not just Real Estate. Some would suggest the economy is considerably volatile and dramatic increases will negate the growth governments have worked so diligently to support. Low rates into 2023 and beyond (similar to the Bank of Canada ’s stance) is supported at this time.

Should you have any questions regarding a new or existing mortgage, please don’t hesitate to reach out!

Bank Of Canada’s Full Statement , Next Rate Meeting: April 21, 2021

Dedicated to earning your trust and referrals!

Bank of Canada Rate Announcement Mar 10th, 2021

Wed, 10 Mar 2021 16:04:35 GMT

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.

The global economy is recovering from the economic effects of COVID-19, albeit with ongoing unevenness across regions and sectors. The US economic recovery appears to be gaining momentum as virus infections decline and fiscal support boosts incomes and consumption. New fiscal stimulus will increase US consumption and output growth further. Global yield curves have steepened, largely reflecting the improved US growth outlook, but global financial conditions remain highly accommodative. Oil and other commodity prices have risen. The Canadian dollar has been relatively stable against the US dollar, but has appreciated against most other currencies.

In Canada, the economy is proving to be more resilient than anticipated to the second wave of the virus and the associated containment measures. Although activity in hard-to-distance sectors continues to be held back, recent data point to continued recovery in the rest of the economy. GDP grew 9.6% in the final quarter of 2020, led by strong inventory accumulation. GDP growth in the first quarter of 2021 is now expected to be positive, rather than the contraction forecast in January. Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected. Improving foreign demand and higher commodity prices have also brightened the prospects for exports and business investment.

Despite the stronger near-term outlook, there is still considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth. The labour market is a long way from recovery, with employment still well below pre-COVID levels. Low-wage workers, young people and women have borne the brunt of the job losses. The spread of more transmissible variants of the virus poses the largest downside risk to activity, as localized outbreaks and restrictions could restrain growth and add choppiness to the recovery.

CPI inflation is near the bottom of the 1-3 percent target band but is likely to move temporarily to around the top of the band in the next few months. The expected rise in CPI inflation reflects base-year effects from deep price declines in some goods and services at the outset of the crisis a year ago, combined with higher gasoline prices pushed up by the recent run-up in oil prices. CPI inflation is then expected to moderate as base-year effects dissipate and excess capacity continues to exert downward pressure. Measures of core inflation currently range from 1.3 to 2 percent.

While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s January projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway. As the Governing Council continues to gain confidence in the strength of the recovery, the pace of net purchases of Government of Canada bonds will be adjusted as required. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

Information note

The next scheduled date for announcing the overnight rate target is April 21, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

Maternity/Parental Leave, and Qualifying for a Mortgage

Wed, 03 Mar 2021 16:00:05 GMT

So your family is growing! Congratulations!

If you’ve thought now is the time to find a new property to accommodate your growing family, but you’re unsure how your maternity or parental leave will impact your ability to get a mortgage, you’ve come to the right place!

Here’s the skinny. It won’t be a problem to qualify your income on a mortgage application, as long as you have documentation proving that you have a guaranteed position to return to.

While taking parental/maternity leave, if you walk into your local bank to get qualified, there is a chance they will only allow you to use the income you are currently receiving to qualify for a mortgage (55% of your income up to $562/week). This means you will qualify for significantly less, as your income is a fraction of what it is when you’re working.

The advantage of working with a mortgage broker is that you have a choice between mortgage products and institutions. This includes lenders who will use 100% of your return to work income. To do this, you need an employment letter from your employer that states the following:

Your employer’s name
Your position
Your initial start date
Your return to work date
Your salary

From there, you might also need to provide a history of income, but that is typical to mortgage financing.

What you decide to do; whether you return to work after your parental/maternity leave or not, is entirely up to you. However, for a lender to feel confident in your ability to cover your mortgage payments while qualifying, you will need to have a position waiting for you once your leave is over, and the letter to prove it.

If you have any questions about this or anything else mortgage qualification related, please don’t hesitate to contact us anytime!

Deposit vs Downpayment

Wed, 17 Feb 2021 16:00:04 GMT

As part of the mortgage and real estate processes, there’s a lot of confusion around the differences between the deposit and the downpayment. It's important to understand what sets them apart so you don’t get confused when it’s time to secure financing on a property once you have an accepted offer.

Deposit

A deposit, as it relates to real estate, is money that is included with a purchase contract, as a sign of good faith. It is the "consideration" that helps make up the contract. It's what is used to bind you to the contract. Typically, when you make an offer to purchase on a property, you would include a certified cheque or a bank draft that gets held by your real estate brokerage while negotiations are being finalized. If your offer is accepted, the deposit is then placed “in trust” where it is held until just before your mortgage closes. The final step is when the deposit is transferred to the lawyer's trust account and is included as part of your downpayment.

If you aren't able to reach an agreement, the deposit is then returned to you. However if you come to an agreement, and then you back out of that agreement, your deposit is forfeited to the seller. Now, although the deposit is separate from the downpayment in that it's money that goes ahead of the downpayment in the negotiation of the purchase, once everything is finalized, the deposit is then included in and makes up part of the total downpayment.

The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it's best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance at having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you aren't able to complete the purchase.

Downpayment

The downpayment can be defined as the initial payment made when something is bought on credit. In Canada, as it relates to the purchase of real estate, the minimum downpayment amount is 5%. This means that you have to come up with a minimum of 5% of the total price of the property you are purchasing. The lender will allow you to borrow the remaining 95% of the property value on credit through mortgage financing.

If you have 20% of the purchase price of the property available for a downpayment, you may qualify for conventional financing, which means you aren't required to pay for mortgage default insurance through a provider like CMHC.

Example Scenario

Let's say that you are looking to purchase a property worth $400k. You're planning on making a downpayment of 10% or $40k. When you make the initial offer to purchase on the property, you put forward $10k as a deposit which is held by your real estate brokerage. The sellers aren't comfortable with that amount, and they request you increase the deposit by $5k. You agree to these terms and the contract is finalized, you would then send another $5k to your real estate brokerage trust account making a total deposit of $15k.

Your deposit is held in trust until such time that it is sent to the lawyer's trust account where it's combined with the remaining $25k that you will be using for the downpayment. It's not rocket science, but as there are a lot of moving parts, and some of the words can be used interchangeably, it's good to go through it in detail.

If you have any questions about the deposit, and how it plays into the downpayment, please let me know. And if you have any other mortgage questions or simply want to discuss your personal financial situation, please contact us anytime. We’d love to work with you!

New Construction Assignment

Wed, 03 Feb 2021 16:00:04 GMT

One of the benefits of working with an independent mortgage professional is having lots of great financing options! Rather than dealing with a single lender who has one set of products, brokers work with multiple lenders who offer a wide selection of mortgage financing options. This comes in handy when your situation isn't "normal" or you don't quite fit the profile of a standard buyer. Purchasing a new construction home through an assignment contract would be a great example of this.

Purchasing a new construction home through an assignment contract can be tricky as not every lender wants the added perceived risk of dealing with this type of transaction. Most of these lenders won't come out and say it, rather they will simply add a significant list of qualifying conditions to make the process harder. The good news is, there are lenders available exclusively through the broker channel that have favourable policies for assignment purchases.

Here are some of the highlights:

In order to qualify, all standard purchase qualifications apply (income, credit, and downpayment)
Assignments can be at original purchase price, or current market value
Minimum 620 beacon score with no previous bankruptcies or consumer proposals
The full downpayment must come from the purchaser and not include any seller incentives

As far as documentation goes, the lender is going to want to see the original purchase agreement signed by all parties, the MLS listing, the assignment agreement signed by the builder, original purchaser, and the new buyer. The lender will also want to see the side agreement between the original purchaser and the new buyer that includes the amended purchase price, and the lender will want to substantiate the value through a full appraisal.

Now, as every situation is different, this list of conditions is in no way exhaustive, but simply meant to show that assigning a new construction purchase contract is in fact doable while highlighting some of the terms necessary to secure financing.

If you are looking to purchase new construction through an assignment contract, or if you want to discuss purchasing a home through traditional means, please contact us anytime! We have access to the very best products on the market that won't limit your financing options!

Bank of Canada Rate Announcement Jan 20th, 2021

Wed, 20 Jan 2021 15:18:02 GMT

Bank of Canada will hold current level of policy rate until inflation objective is achieved, continues quantitative easing.

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.

The COVID-19 pandemic continues to take a severe human and economic toll in Canada and around the world. The earlier-than anticipated arrival of effective vaccines will save lives and livelihoods, and has reduced uncertainty from extreme levels. Nevertheless, uncertainty is still elevated, and the outlook remains highly conditional on the path of the virus and the timeline for the effective rollout of vaccines.

The economic recovery has been interrupted in many countries as new waves of COVID-19 infections force governments to re-impose containment measures. However, the arrival of effective vaccines combined with further fiscal and monetary policy support have boosted the medium-term outlook for growth. In its January Monetary Policy Report (MPR), the Bank projects global growth to average just over 5 percent per year in 2021 and 2022, before slowing to just under 4 percent in 2023. Global financial markets and commodity prices have reacted positively to improving economic prospects. A broad-based decline in the US exchange rate combined with stronger commodity prices have led to a further appreciation of the Canadian dollar.

Canada’s economy had strong momentum through to late 2020, but the resurgence of cases and the reintroduction of lockdown measures are a serious setback. Growth in the first quarter of 2021 is now expected to be negative. Assuming restrictions are lifted later in the first quarter, the Bank expects a strong second-quarter rebound. Consumption is forecast to gain strength as parts of the economy reopen and confidence improves, and exports and business investment will be buoyed by rising foreign demand. Beyond the near term, the outlook for Canada is now stronger and more secure than in the October projection, thanks to earlier-than-expected availability of vaccines and significant ongoing policy stimulus. After a decline in real GDP of 5 ½ percent in 2020, the Bank projects the economy will grow by 4 percent in 2021, almost 5 percent in 2022, and around 2 ½ percent in 2023.

CPI inflation has risen to the low end of the Bank’s 1-3 percent target range in recent months, while measures of core inflation are still below 2 percent. CPI inflation is forecast to rise temporarily to around 2 percent in the first half of the year, as the base-year effects of price declines at the pandemic’s outset — mostly gasoline — dissipate. Excess supply is expected to weigh on inflation throughout the projection period. As it is absorbed, inflation is expected to return sustainably to the 2 percent target in 2023.

In view of the weakness of near-term growth and the protracted nature of the recovery, the Canadian economy will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway. As the Governing Council gains confidence in the strength of the recovery, the pace of net purchases of Government of Canada bonds will be adjusted as required. We remain committed to providing the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

Information note

The next scheduled date for announcing the overnight rate target is March 10, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on April 21, 2021.

As announced, starting with this decision the target for the overnight rate will take effect on the business day following each rate announcement.

Here is a copy of the latest monetary policy report for January, 2021.

This article was originally published on the Bank of Canada's website on January 20th, 2021.

Planning Ahead, A Guide to Mortgage Documentation

Tue, 19 Jan 2021 16:00:20 GMT

It doesn’t matter if you are looking to purchase your first home, your next home, or your twentieth home; typically the mortgage documentation required to secure financing will be the same. The earlier on in the process you can collect these documents, and provide them to your broker, the better.

So here we go, here is a list of the most common documents that will be required to secure mortgage financing.

Income Verification

Letter of Employment - Written on company letterhead with a current date, your letter of employment should have your name, start date, position, and list whether you are full or part-time. It should also indicate your salary or the minimum guaranteed hours/week & hourly rate. The letter should be signed with the best contact information to allow for a verbal confirmation.

Pay Stub or Direct Deposit Form - This will confirm your income, and should match what is written on the letter of employment.

T4 Slips - Typically your last two years T4s should work.

Notice of Assessments - Your previous two years of NOAs will help to establish your annual income. We will be looking at your line 150.

Financial Statements - If you happen to be self-employed, having three years of financial statements or T1 Generals will be required.

Down Payment Verification

Bank Statements - 90 days of bank statements are required to show that you have had the downpayment in your possession or have accumulated the funds through payroll deposits. You will want to make sure that your name and account number appear on the statements.

Gift Letter - If all or part of the downpayment is coming by way of a gift, you will have to provide a letter signed by you and the person gifting the money. The amount written on the gift letter will have to be deposited to your bank and substantiated on the bank statements.

RRSP Statements - If part of your downpayment is coming by way of RRSP, you will be required to provide a 90-day history from your RRSP account. If you are using the Home Buyers Plan, there will be an additional form to complete.

Agreement of Purchase and Sale - If your downpayment is coming by way of a sale of another property, the contract indicating the sale price, and your current mortgage statement will prove the equity to be used for the downpayment.

Property Details

MLS Listing - If you are purchasing a property through a Realtor, please have a copy of the MLS listing so we can verify the property details.

Purchase and Sales Agreement - If you already have an accepted offer, please provide a copy of the purchase and sales agreement including all amendments and counteroffers.

Survey - If you have one, send it along, if not, no worries.

Property Tax Assessment - If you don’t have a copy of the most recent property tax assessment, one can usually be found on the local municipality/city website. The most recent assessment will be required.

Other Documentation

Solicitor or Notary Information - Please provide the name of your lawyer/notary, the firm, and their contact information.

Mortgage Statement - If you are doing a mortgage refinance, please provide a copy of your current mortgage statement.

VOID Bank Cheque - This is the account that your mortgage payments will be withdrawn from. A pre-authorized debit form works just as well.

As each mortgage is different, the documentation to satisfy each mortgage will vary somewhat. This list is a great place to start, but please know that more documentation may be required depending on your specific financial situation.

If you have any questions, please don’t hesitate to contact us anytime!‌

Costs Associated with Buying a Property

Tue, 05 Jan 2021 16:00:06 GMT

So you want to buy a property, that’s great! Make sure you have your wallet ready to bring to the table. In addition to the downpayment, there are many other costs associated with purchasing a home; typically, these are called closing costs.

Your closing costs represent the things you will have to pay for out of your pocket, and the amount of money necessary to finalize the purchase of a property. And like most things in life, when it comes to closing costs, it pays to plan ahead.

The best time to work through the costs associated with closing your mortgage is before you even start looking for a place to buy. Closing costs should be part of the pre-approval conversation; they are just as important as saving for your downpayment.

If your mortgage is high ratio and insured through CMHC, they will want to see that you have at least 1.5% of the purchase price available in addition to your downpayment. Ensuring this money is available will make sure you have enough to pay for everything associated with buying a property.

So with that said, here is a list of the things that will cost you money when you’re buying a home. If you have any questions or would like a referral to an industry professional, please ask!

Inspection or Appraisal

A home inspection is when you hire a professional to assess the condition of the property to make sure that you won’t be surprised by unexpected issues.

An appraisal is when you hire a professional to compare the value of the property against other properties that have recently sold in the area.

The cost of a home inspection is yours, while the cost of the appraisal is sometimes covered by your high-ratio insurance, and sometimes covered by you!

Lawyer or Notary Fees

To handle all the legal paperwork, you will be required to hire a real estate lawyer. They will be responsible for the transfer of the title from the seller's name into your name and will make sure the lender is registered correctly on the title. Chances are, this will be one of your most significant expenses, except if you live in a province with a property transfer tax.

Taxes

Depending on which province you live in, and the purchase price of the property you are buying, you might have to pay a property transfer tax or land transfer tax. This cost can be high; you’ll want to know ahead of time an estimated cost here, before ever writing an offer.

Insurance

Before any financial institution lends you money, they will want to see that you already have property/home insurance in place for the purchase. If disaster strikes and something happens to the property, they want to be listed on an insurance policy to cover the costs.

Unlike property insurance, which is mandatory, you might also consider mortgage insurance, life insurance, or a disability insurance policy that protects you in case of unforeseen events. Not necessary, but worth a conversation.

Moving Expenses

Congratulations, you have a home, now you have to get all your stuff there! Don’t underestimate the cost of moving your stuff. If you’re moving across the country, the cost of hiring a moving company is steep, while renting a moving truck is a little more reasonable. If you’re moving locally, hopefully, the cost of moving amounts to some gas money and pizza for friends.

Utilities

Hooking up new services to a property is more time consuming than costly. However, if you are moving to a new province or don’t have a history of paying utilities, you might be required to come up with a deposit for services. It's not really worth moving into your new place if you can’t afford to turn on the power or connect the water.

So there you have it, this covers the majority of the costs associated with buying a new property. However, this list is by no means exhaustive, but it should serve as a guide as you work with trusted professionals.

If you have any questions about your closing costs, or anything else mortgage-related, contact us anytime, we’d love to hear from you!

The Interest-Only Mortgage

Wed, 23 Dec 2020 16:00:02 GMT

Relatively self-explanatory, an interest-only mortgage is one where your entire mortgage payment goes to interest and does not pay down the principal mortgage amount at all. So at the end of your term, you will owe the same amount as when you got your mortgage.

So you might be asking yourself, what are the advantages? Well, an interest-only mortgage frees up your cash flow. As you’re not responsible for paying down the principal balance, you can expect a lower mortgage payment. The interest-only mortgage shines as a management tool for rental properties, where cash-flow is king.

Here’s an example. On a $400k mortgage balance, over 25 years, at a 4% interest rate, the monthly repayment on an amortized mortgage would be roughly $1902/mth. However, as an interest-only mortgage, the payment is $1,321/mth, providing you with an extra $580 in monthly cash flow.

The money you save by not paying down the principal of your mortgage can be used however you like. It could be used to pay off higher interest debts like credit cards, unsecured line of credits, or any other high-interest loans. Or it could be used to offset the increased cost of maintaining your home through retirement; property taxes certainly aren’t going down anytime soon. It could even be used to maintain your current lifestyle if you're planning retirement.

Regardless of what you decide to do with the extra cash, the choice is yours. If you would like to discuss the option of an interest-only mortgage (or any other mortgage product for that matter), please contact us anytime!

Bank of Canada Rate Announcement Dec 9th, 2020

Wed, 09 Dec 2020 16:17:10 GMT

Bank of Canada will maintain current level of policy rate until inflation objective is achieved, continues its quantitative easing program.

The rebound in the global and Canadian economies has unfolded largely as the Bank had anticipated in its October Monetary Policy Report (MPR). More recently, news on the development of effective vaccines is providing reassurance that the pandemic will end and more normal activities will resume, although the pace and breadth of the global rollout of vaccinations remain uncertain. Near term, new waves of infections are expected to set back recoveries in many parts of the world. Accommodative policy and financial conditions are continuing to provide support across most regions. Stronger demand is pushing up prices for most commodities, including oil. A broad-based decline in the US exchange rate has contributed to a further appreciation of the Canadian dollar.

In Canada, national accounts data for the third quarter were consistent with the Bank’s expectations of a sharp economic rebound following the precipitous decline in the second quarter. The labour market continues to recoup the jobs that were lost at the start of the pandemic, albeit at a slower pace. However, activity remains highly uneven across different sectors and groups of workers. Economic momentum heading into the fourth quarter appears to be stronger than was expected in October but, in recent weeks, record high cases of COVID-19 in many parts of Canada are forcing re-imposition of restrictions. This can be expected to weigh on growth in the first quarter of 2021 and contribute to a choppy trajectory until a vaccine is widely available. The federal government’s recently announced measures should help maintain business and household incomes during this second wave of the pandemic and support the recovery.

CPI inflation in October picked up to 0.7 percent, largely reflecting higher prices for fresh fruits and vegetables. While this suggests a slightly firmer track for inflation in the fourth quarter, the outlook for inflation remains in line with the October MPR projection. Measures of core inflation are all below 2 percent, and considerable economic slack is expected to continue to weigh on inflation for some time.

Canada’s economic recovery will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our October projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway and will adjust it as required to help bring inflation back to target on a sustainable basis. We remain committed to providing the monetary policy stimulus needed to support the recovery and achieve the inflation objective.

Information note

The next scheduled date for announcing the overnight rate target is January 20, 2021. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

Subsequent to the Bank’s previously announced review of the publication time of its interest rate announcements, the Bank re-confirms that it will remain at 10:00 (ET). As announced, starting in January the target for the overnight rate will take effect on the business day following each rate announcement.

Mortgage Post Bankruptcy

Wed, 02 Dec 2020 16:00:02 GMT

This should come as no surprise, but sometimes life throws you a financial curveball. Bankruptcy and consumer proposals happen. It doesn't mean your life is over, and it doesn't mean you won't ever qualify for a mortgage again. The key here is to get a plan in place and show that you've got things under control. You must be able demonstrate to anyone considering you for financing that what happened in the past won't happen again in the future.

Mortgage financing post bankruptcy is possible, it's just different than your standard mortgage financing in that the following considerations must be taken into account.

Firstly, financing will be dependent on how long it has been since you were discharged from your bankruptcy, or how long since you completed your consumer proposal. Most lenders consider the discharge date on both to be your new ground zero.
Secondly, financing will be dependent on how you have been re-establishing your credit since your discharge date. Also, how in depth that credit is. A $700 Visa is nice, but a $5000 Line of Credit carries a little more weight.

In order to qualify for mortgage financing with a mainstream lender, they will want to see a minimum of the following before they will give you a mortgage. You must be discharged for at least 2 years, have at least a 5% downpayment from your own resources (although 10% is a safer bet), 2 years of credit established through 2 trade lines with a minimum credit amount of $2500 each, and no late or missed payments. This would be the bare minimum to qualify.

As mortgage professionals, our job is to provide solutions and strategies for our clients. As such we have access to lenders who aren't mainstream. These alternative lenders will consider extending mortgage financing when clients have a larger downpayment. You're looking at 20%-25% downpayment minimum, and the interest rates will be a little higher than mainstream lending. Alternative lending isn't for everyone, but it's a great solution for some, especially those who have gone through a bankruptcy or consumer proposal.

So whether you're looking for a plan to help you qualify for a mortgage with the most favourable terms, or if you need something more immediate. Please don't hesitate to contact us anytime. We would love to help outline your financing options and give you a plan so that you can get a mortgage post bankruptcy.

Will a Temporary Loss of Income Impact Your Mortgage Post-COVID-19?

Wed, 18 Nov 2020 20:49:43 GMT

While unemployment peaked over 13% at the onset, it's hard to quantify just how many Canadians had some form of a reduction in their income over the last year. Especially if you're self-employed or your income varies year to year because you receive a bonus, pick up shifts, freelance, or you earn income that isn't guaranteed.

If you earn variable income, and you've seen a reduction in income because of the pandemic, this has the potential to impact how much mortgage you qualify for up to the next three years.

Here's why. For income that isn't guaranteed, when assessing your mortgage application, most of the time, lenders will look at a 2-year average. So let's say you're looking to secure a mortgage now in 2020, the lender will want to see documentation proving what you earned in 2018 and 2019, and they will take a 2-year average.

If your income is lower in 2020 because of the pandemic, once we come to tax time in 2021, your 2-year average will now include that reduction in revenue for the next couple of years, even if you are back to making what you did pre-pandemic. It will be the same case in 2022 (and into 2023), as any lender will want to see your 2-year average between 2020 and 2021. Less income in 2020 could mean qualifying for a lower mortgage amount over the next few years.

The advantage of working with an independent mortgage professional is the ability we have to represent you to several lenders who all offer different products and have different guidelines. So while one lender might be hard and fast on the 2-year average, depending on your industry, another lender might make an exception.

Additionally, depending on where the housing market is at and how much the economy has rebounded in 2021, lenders might consider COVID-19 and be flexible or implement amended guidelines. However, we will have to wait and see on that. But for the most part, if your income is lower because of COVID, it will impact you going forward, feel free to get in touch if you have any questions or hear anything in the news that you'd like clarified.

So what can you do about this today? Well, if you're currently looking to purchase a property or you have a mortgage that's almost up for renewal, or if you'd like to refinance before 2021, it's definitely in your best interest to talk with an independent mortgage professional about all your options as soon as possible.

Alternatively, if you're not looking to secure a mortgage right now, it's always a good idea to have a plan in place for when you do. It never hurts to plan ahead, especially when you have time and can make up some of the lost income with additional income in the future.

If you'd like to discuss your financial situation and see exactly how your income impacts your mortgage qualification, please don't hesitate to contact us anytime, we would love to work through everything with you!

What is Bridge Financing?

Wed, 04 Nov 2020 16:00:06 GMT

Let's say you have a home that you've outgrown, it's time to make a move to something more suited for your family. You have no desire to keep two houses, so you decide that selling your existing home, and moving into something new is the best idea.

Ideally, when planning out how that looks, most people want to take possession of the new house before having to move out of the old one. Not only does this make moving (your stuff) easier, it allows you to make the house a little more "you" by adding some paint, or doing some small renovations before moving in.

But what if you need the money from the sale of your existing house to come up with the downpayment for your next house? This is where bridge financing comes in. Bridge financing allows you to bridge the financial gap between the firm sale of your current home, and the purchase of your new home. Bridge financing allows you to access some of the equity in your existing property to be used towards the downpayment on the property you are buying.

Now, here is where people get confused, in order to secure bridge financing, you must have a firm sale on your existing house. If your house isn't sold, you won't get the bridge financing, because there is no concrete way for a lender to calculate how much equity you have available.

Instead of going through all the fine details of documentation required to apply for bridge financing, or outlining scenarios that may or may not be applicable to you, if you've got questions, why don't you contact us directly! We'd love to hear from you!

Bank of Canada Rate Announcement Oct 28th, 2020

Wed, 28 Oct 2020 14:18:18 GMT

The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program. The Bank is recalibrating the QE program to shift purchases towards longer-term bonds, which have more direct influence on the borrowing rates that are most important for households and businesses. At the same time, total purchases will be gradually reduced to at least $4 billion a week. The Governing Council judges that, with these combined adjustments, the QE program is providing at least as much monetary stimulus as before.

The global and Canadian economic outlooks have evolved largely as anticipated in the July Monetary Policy Report (MPR), with rapid expansions as economies reopened giving way to slower growth, despite considerable remaining excess capacity. Looking ahead, rising COVID-19 infections are likely to weigh on the economic outlook in many countries, and growth will continue to rely heavily on policy support.

In the United States, GDP growth rebounded strongly but appears to be slowing considerably. China’s economic output is back to pre-pandemic levels and its recovery continues to broaden. Emerging-market economies have been hit harder, especially those with severe outbreaks. The recovery in Europe is slowing amid mounting lockdowns. Overall, global GDP is projected to contract by about 4 percent in 2020 before growing by just over 4 ½ percent, on average, in 2021–22.

Oil prices remain about 30 percent below pre-pandemic levels. Meanwhile, non-energy commodity prices, on average, have more than fully recovered. Despite continued low oil prices, the Canadian dollar has appreciated since July, largely reflecting a broad-based depreciation of the US dollar.

In Canada, the rebound in employment and GDP was stronger than expected as the economy reopened through the summer. The economy is now transitioning to a more moderate recuperation phase. In the fourth quarter, growth is expected to slow markedly, due in part to rising COVID-19 case numbers. The economic effects of the pandemic are highly uneven across sectors and are particularly affecting low-income workers. Recognizing these challenges, governments have extended and modified business and income support programs.

After a decline of about 5 ½ percent in 2020, the Bank expects Canada’s economy to grow by almost 4 percent on average in 2021 and 2022. Growth will likely be choppy as domestic demand is influenced by the evolution of the virus and its impact on consumer and business confidence. Considering the likely long-lasting effects of the pandemic, the Bank has revised down its estimate of Canada’s potential growth over the projection horizon.

CPI inflation was at 0.5 percent in September and is expected to stay below the Bank’s target band of 1 to 3 percent until early 2021, largely due to low energy prices. Measures of core inflation are all below 2 percent, consistent with an economy where demand has fallen by more than supply. Inflation is expected to remain below target throughout the projection horizon.

As the economy recuperates, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our current projection, this does not happen until into 2023. The Bank is continuing its QE program and recalibrating it as described above. The program will continue until the recovery is well underway. We are committed to providing the monetary policy stimulus needed to support the recovery and achieve the inflation objective.

The next scheduled date for announcing the overnight rate target is December 9, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on January 20, 2021.

Here is a link to the latest Monetary Policy Report.

What You Can Expect When Locking in a Variable Rate

Wed, 21 Oct 2020 15:00:25 GMT

If you have a variable rate mortgage, and recent economic news has you thinking about locking into a fixed rate, here is what you can expect will happen.

Firstly, your lender will be very happy as they will now make considerably more money off you. Not only will your interest rate increase, but the cost of breaking your mortgage will increase as well.

Now, each lender has a different way of handling this process, but it's very safe to say that regardless of which lender you are with, you will end up paying more money in interest, and potentially way more money if you have to break your mortgage.

Higher Rates

Fixed rates are always higher than variable rates. If you're a variable rate mortgage holder, this is most likely the reason you went variable in the first place. The perception is that fixed rates are somewhat "safe" while variable rates are "uncertain". It is true, as the variable rate is tied to prime, it can increase (or decrease) within your term. However, there are controls in place in Canada to ensure that rates don't take a roller coaster ride. As the Bank of Canada has scheduled rate announcements, 8 times per year, and they rarely move more than 0.25% per move, it's impossible for your variable rate to double overnight.

Increased Penalty

Obviously each lender has a different way of calculating the cost to break a mortgage, with the Big Banks being absolutely the worst, but a general rule of thumb is that breaking a variable rate mortgage will cost roughly 3 months interest or roughly 0.5% of the total mortgage balance, while breaking a 5 year fixed rate mortgage will roughly cost 4% of the total mortgage balance. So on a $500k mortgage balance, the cost to break your variable rate would be roughly $2500, while the cost to break your fixed rate mortgage could be as high as $20,000, eight times more.

Reasons People Break Mortgages

Did you know that 6 out of 10 Canadians will break their current mortgage at an average of 38 months? As we've discussed, locking in your variable rate to a fixed rate will increase the cost of breaking your mortgage. Despite our best intentions, sometimes life happens, and we need flexibility.

So here is a list of potential reasons you might need to break your mortgage.

Sale of your home (you have to move).
Purchase of a new home.
Access equity from your home.
Refinance your home to pay off consumer debt.
Refinance your home to fund a new business.
Because you got married (you combine assets and want to live together in a new home)
Because you got divorced. (you need to split up your assets and access the equity in your home)
Because you (or someone close to you) got sick.
Because you lost your job or because you got a new one.
Because you got relocated for work.
You want to remove someone from the title.
You want to pay off your mortgage before the maturity date.

Essentially, locking your variable rate mortgage into a fixed rate is voluntarily paying more interest to the bank, while giving up some of the flexibility to break your mortgage.

If you would like to discuss your personal financial situation, regardless if you have a mortgage or not, we'd love to talk with you. Please contact us anytime!

Payment Frequency, Does it Really Make a Difference?

Wed, 07 Oct 2020 15:27:30 GMT

It has been said that there are two certainties in life; death and taxes. Well, as it relates to your mortgage, the single certainty is that you will pay back what you borrowed, plus interest. However, how you make your mortgage payments, the payment frequency, is somewhat up to you! The following is a look at the different types of payment frequencies and how they will impact you and your bottom line.

Here are the 6 main payment frequency types

Monthly payments - 12 payments per year
Semi-Monthly payments - 24 payments per year
Bi-weekly payments - 26 payments per year
Weekly payments - 52 payments per year
Accelerated bi-weekly payments - 26 payments per year
Accelerated weekly payments - 52 payments per year

Options one through four are designed to match your payment frequency with your employer. So if you get paid monthly, it makes sense to arrange your mortgage payments to come out a few days after payday. If you're paid every second Friday, it might make sense to have your mortgage payments match your payday! These are lifestyle choices, and will of course pay down your mortgage as agreed in your mortgage contract, and will run the full length of your amortization.

However, options five and six have that word accelerated attached... and they do just that, they accelerate how fast you are able to pay down your mortgage. Here's how that works.

With the accelerated bi-weekly payment frequency, you make 26 payments in the year, but instead of making the total annual payment divided by 26 payments, you divide the total annual payment by 24 payments (as if the payments were being set as semi-monthly) and you make 26 payments at the higher amount.

So let's say your monthly payment is $2000.

Bi-weekly payment : $2000 x 12 / 26 = $923.07

Accelerated bi-weekly payment $2000 x 12 / 24 = $1000

You see, by making the accelerated bi-weekly payments, it's like you're actually making two extra payments each year. It's these extra payments that add up and reduce your mortgage principal, which then saves you interest on the total life of your mortgage.

The payments for accelerated weekly work the same way, it's just that you'd be making 52 payments a year instead of 26.

Essentially by choosing an accelerated option for your payment frequency, you are lowering the overall cost of borrowing, and making small extra payments as part of your regular cash flow.

Now, It's hard to nail down exactly how much interest you would save over the course of a 25 year amortization, because your total mortgage is broken up into terms with different interest rates along the way. However, given todays rates, an accelerated bi-weekly payment schedule could reduce your amortization by up to three and a half years.

If you'd like to have a look at some of the mortgage numbers as they relate to you, please don't hesitate to contact us anytime, we'd love to work with you and help you find the mortgage (and the mortgage payment frequency) that best suits your needs.

Porting Your Mortgage!

Wed, 23 Sep 2020 15:07:20 GMT

As simple as porting your mortgage! Said by no one ever. The truth is, there is nothing simple about porting your mortgage.

"Porting your mortgage" involves transferring the remainder of your existing mortgage term, outstanding principal balance, and interest rate to a new property. This is of course, if you are selling your current home and buying a new one.

Despite what some of the big banks would lead you to believe, porting your mortgage is not an easy process. It's not a magic process that guarantees you will qualify for the purchase of a new property using the mortgage you had on a previous property. In addition to completely re-qualifying for the mortgage, and having to qualify the property you are purchasing, there are a lot of moving parts that come into play. It seems that executing a port flawlessly is like having the stars align perfectly, chances are, it's not going to happen. Here are a few reasons why:

You may not qualify for the mortgage.

Let's say you are moving to a new city to take a new job, if you are relying on porting your mortgage in order to buy a new house, you will have to substantiate your new income. If you are on probation, or have changed professions, there is a chance the lender will decline your application. Porting a mortgage is a lot like qualifying for a new mortgage, just with more conditions.

The property you are buying has to be approved.

So let's say that your income is in good shape, and that you qualify for the mortgage, the property you want to purchase has to be approved as well. Just because they accepted your last property as collateral for the mortgage, doesn't mean the lender will accept the new property. An appraisal will be required, and the condition of the property you are buying will be scrutinized.

Value's are rarely the same.

How often do you buy a property that is exactly the same value as the one you just sold? Not very often. And when it comes to porting your mortgage, if the value of the new home is higher than the outstanding balance on your existing mortgage, you will most likely have to take a blended rate on the new money, which could increase your payment. If the property value is considerably less, you might actually incur a penalty to reduce the total mortgage amount. If the value of the properties are different, the terms of your mortgage will be amended anyway!

You still need a downpayment.

Porting a mortgage isn't just a simple case of swap one property for the another and keep the same mortgage. You're still required to come up with a downpayment on the new property.

You will most likely have to pay a penalty.

When you sell your house, most lenders will charge the full penalty and take it from your sale proceeds of your property. They will of course refund it back to you when you execute the port and purchase the new property. So if you were relying on the proceeds of sale to come up with your downpayment on the property you are purchasing, you might have to make other arrangements.

Timelines almost never work out.

It's rarely a buyers and a sellers market at the same time. So although you may be able to sell your property overnight, you might not be able to find a suitable property to buy. Alternatively, you might be able to find many suitable properties to purchase while your house sits on the market with no showings. And when you do end up selling your property, and finding a new property to buy, chances are the closing dates won't match up perfectly.

Different lenders have different port periods.

This is where the fine print in the mortgage documents comes into play. Did you know that depending on the lender, the period of time you have to port your mortgage can range from 1 day to 6 months? So if it's 1 day, your lawyer will have to close both the sale of your property and the purchase of your new property on the same day, or the port won't work. Or with a longer port period, you run the risk of selling your house with the intention of porting the mortgage, only to not be able to find a suitable property to buy.

So as you can see, although porting your mortgage may make sense if you have a low rate that you want to carry over to a property of similar value, it is always a good idea to get professional mortgage advice and look at all your options.

Please contact us anytime if you would like to discuss mortgage financing, we'd love to work with you!

Bank of Canada Rate Announcement Sept 9th, 2020

Wed, 09 Sep 2020 14:17:14 GMT

Bank of Canada maintains commitment to current level of policy rate, continues program of quantitative easing.

Both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR), with activity bouncing back as countries lift containment measures. The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.

The rebound in the United States has been stronger than expected, while economic performance among emerging markets has been more mixed. Global financial conditions have remained accommodative. Although prices for some commodities have firmed, oil prices remain weak.

In Canada, real GDP fell by 11.5 percent (39 percent annualized) in the second quarter, resulting in a decline of just over 13 percent in the first half of the year, largely in line with the Bank’s July MPR central scenario. All components of aggregate demand weakened, as expected.

As the economy reopens, the bounce-back in activity in the third quarter looks to be faster than anticipated in July. Economic activity has been supported by government programs to replace incomes and subsidize wages. Core funding markets are functioning well, and this has led to a decline in the use of the Bank’s short-term liquidity programs. Monetary policy is working to support household spending and business investment by making borrowing more affordable.

Household spending rebounded sharply over the summer, with stronger-than-expected goods consumption and housing activity largely reflecting pent-up demand. There has also been a large but uneven rebound in employment. Exports are recovering in response to strengthening foreign demand, but are still well below pre-pandemic levels. Business confidence and investment remain subdued. While recent data during the reopening phase is encouraging, the Bank continues to expect the recuperation phase to be slow and choppy as the economy copes with ongoing uncertainty and structural challenges.

CPI inflation is close to zero, with downward pressure from energy prices and travel services, and is expected to remain well below target in the near term. Measures of core inflation are between 1.3 percent and 1.9 percent, reflecting the large degree of economic slack, with the core measure most influenced by services prices showing the weakest growth.

As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. To reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at the current pace. This QE program will continue until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective.

Information note

The next scheduled date for announcing the overnight rate target is October 28, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

Mortgage Deferrals Now Recorded on Credit Reports

Tue, 25 Aug 2020 20:18:06 GMT

If COVID-19 has negatively impacted your finances and you're currently deferring your mortgage payments, you should know that this will be visible on your credit report. Here is an image from a recent credit report.

In this scenario, it shows that the mortgage was paid as agreed monthly for 33 months before being deferred for the last two months. It also shows that mortgage payments are currently in deferral.

Some may consider the credit bureau reporting a deferred status as good news. As COVID-19 hit like a freight train, many financial experts wondered about reporting errors on credit bureaus as a result of deferred payments. The fact that there is a system in place to report deferrals is a good sign.

Deferring your mortgage payment won't lower your credit score, but reporting errors from deferrals might. Once you've resumed your payments, it's a good idea to get a copy of your credit report to check for errors.

So, why does this matter to me now?

If you're considering a change to your mortgage, most lenders will be very hesitant to consider lending you new money when you aren't able to make your existing mortgage payments. This will be the case if you are looking to purchase a new property, renew, or refinance your current mortgage.

In fact, some lenders expect to see a history of regular repayment on any previously deferred loans before proceeding with any new application. Length of time after deferral varies by lender. This would include any debt payments (loan, line of credit, credit card) that have been deferred as well.

If changes to your mortgage are on the horizon, you need to have resumed all your regular debt payments before it will be possible to secure new mortgage financing.

If you'd like to discuss your personal financial situation with us, please contact us anytime!

Do You Need Time For Your Retirement Investments To Recover?

Tue, 11 Aug 2020 01:16:22 GMT

COVID-19 is wreaking havoc on retirement investments, particularly for those who rely on dividends as part of their income. Over the past decade, many older Canadians have taken a riskier approach with retirement investments because of low bond yields and interest rates caused by the financial crisis in 2008.

Instead of playing it safe, many retirees have turned to the stock market for better returns and dividend income. With global markets in a highly volatile state due to the pandemic, right now it is challenging to move investments to safer ground, and many companies have put dividend payments on hold.

If you need immediate cash to ride out the remainder of the pandemic, you may think you need to liquidate some investments. But what if there were other options that can provide the much-needed cash without taking investment losses? Consider borrowing from your home equity instead of liquidating investments prematurely. Here’s why this makes sense.

Take advantage of low interest rates

Uncertainty in the economy has caused the government to lower interest rates. Mortgage rates are at historic lows, and borrowing money at this point in time doesn’t cost a lot. By gaining access to your home equity through mortgage financing, you can somewhat bridge the gap. You can increase your cash flow until the markets, economy, and your investment portfolio recover.

Historically, stock markets have always recovered.

Bloomberg’s Canadian retirement expert Dale Jackson explains, “The S&P 500 lost half its value between October 2007 when the meltdown began and its March 2009 bottom. By October 2013, the S&P 500 topped its pre-meltdown high and has since doubled from there (pre-pandemic). It wasn’t until June 2014 that the TSX topped its pre-meltdown high. It has since rallied an additional 20 per cent (pre-pandemic).”

If the markets recovered both the Great Depression and Great Recession, there’s little reason to fear it won’t happen post-pandemic. The timing of the recovery, however, is uncertain.

Strategically tapping into home equity

You may be reluctant to use home equity to provide for living expenses until the post-pandemic economy recovers. And that is understandable. You worked hard to pay off your mortgage, why would you want a new one?

Well, if you’re faced with the choice of selling investments at a loss, or borrowing against your home equity to give yourself time to bridge the current cash flow gap and allow your investments to recover, it really becomes a matter of calculating the dollars and cents.

This is where expert financial planning comes in. You should be considering ALL your options, not just the ones we’ve been conditioned to consider over the years.

Unfortunately, there is no guidebook for navigating a global pandemic. However, there are options you can consider, now is a good time to consider them.

Reverse Mortgage

If you’re 55+ and occupying your home as your primary residence, you should seriously consider a reverse mortgage. It’s the ultimate mortgage deferral option.

You’ve likely seen commercial ads for reverse mortgages. And while some people think this is a risky way to access funds, if you intend to live in your home throughout your retirement years, it can be an inexpensive source of funds. Especially given our current low-rate environment.

One common misconception is that the bank owns your home if you get a reverse mortgage. This just simply isn’t true. A reverse mortgage is like any other mortgage, however, instead of making regular payments, the mortgage amount increases each year and is due when you choose to sell your house.

Other mortgage options

If you’ve got a steady pension income, you may be able to qualify for conventional mortgage financing. However, if you’re still paying off your first mortgage, you can apply for a second mortgage based on the remaining equity in your home.

It should be noted that a second mortgage is a high-risk option with significantly higher interest rates. If you’re cash-strapped already and are having trouble making payments on your first mortgage, there’s no benefit gained by adding a second payment.

Another option to consider is a Home Equity Line of Credit (HELOC), which operates much like a bank overdraft. It’s a pool of funds attached to your home that can be used when cash flow is low and paid back when cash flow improves. Interest rates are typically low because the line of credit is secured by your home equity. Further, interest is calculated based on actual borrowing not on the amount approved.

Avoid Fear-Based Decisions

Making fear-based investment decisions rarely work out. Because these are uncertain times, it’s important to consult with financial experts to discuss your options and allay your concerns.

Remember you’re not alone. Millions of Canadians are in similar circumstances. There are options. As part of a solid financial plan, using your home equity can provide funds that act as a bridge to avoid investment losses until the economy and market recover.

If you’d like to discuss your financial situation, contact us anytime for a free consultation. We would love to work through all your options with you!

4 Ways Alternative Lending Beats Traditional Bank Financing

Tue, 28 Jul 2020 00:53:29 GMT

Alternative lending refers to lending practices that fall outside the normal banking channels. These are lenders that think outside the box and offer lending solutions to Canadians who wouldn’t otherwise qualify for traditional bank products.

Although we all like to think that we’re going to qualify for the best mortgages available, this isn’t always the case. Sometimes life just gets in the way! So here are four times that alternative lending beats your typical banking practices.

Damaged Credit

Life happens, businesses and marriages break down, health can be taken for granted and then taken away. Regardless of why credit has been damaged, there are alternative lenders that look at the strength of employment and income, and the downpayment or equity to offer a new mortgage.

Although the rates can be a little higher here, if it’s the choice between buying a property or not, having options is always a good thing and that’s what the alternative lenders will do, offer options.

If you do have damaged credit, the goal is to be working towards establishing better credit and moving back into a typical mortgage as soon as possible. Use an alternative lender to bridge that gap!

Self-Employment

If you run your own business, you most likely have considerable write-offs that make sense for tax planning reasons but don’t do so much for your verifiable income. Traditional lenders want to see verifiable income, alternative lenders can be considerably more understanding and offer very competitive products.

As the rates on alternative lending aren’t that far from A lending, alternative lending has become the home for most serious self-employed Canadians. Yes, you might pay a little more in interest rates, but oftentimes that money is saved through corporate structuring.

Non-traditional income

Welcome to the new frontier of earning an income.

If you make money through non-traditional employment like Airbnb, tips, commissions, uber, or uber eats, alternative lending is more likely to be flexible to your needs. Most traditional lenders want to see a minimum of two years of established income before considering income on a mortgage application. Not always so with alternative lenders (depending on the strength of your overall application).

Expanded Debt-Service Ratios

With the government stress test significantly lessening Canadians ability to borrow, it’s a good point to note that there are lenders in the alternative channel that allow expanded debt-service ratios which can help finance more expensive (and suitable) property for responsible individuals.

Typical A channel lenders are restricted to GDS and TDS ratios of 35/42. However, alternative lenders, depending on the loan-to-value ratio have more flexibility. The more money you have as a downpayment, the more you’re able to borrow and expand those debt-service guidelines.

So there you have it, 4 ways alternative lending beats out traditional bank financing. If you would like to discuss mortgage financing, please don’t hesitate to contact me anytime!

Bank of Canada Rate Announcement July 15th, 2020

Wed, 15 Jul 2020 14:23:31 GMT

Bank of Canada will maintain current level of policy rate until inflation objective is achieved, continues program of quantitative easing.

The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds. The Bank’s short-term liquidity programs announced since March to improve market functioning are having their intended effect and, with reduced market strains, their use has declined. The provincial and corporate bond purchase programs will continue as announced. The Bank stands ready to adjust its programs if market conditions warrant.

While economies are re-opening, the global and Canadian outlook is extremely uncertain, given the unpredictability of the course of the COVID-19 pandemic. Reflecting this, the Bank’s July Monetary Policy Report (MPR) presents a central scenario for global and Canadian growth rather than the usual economic projections. The central scenario is based on assumptions outlined in the MPR, including that there is no widespread second wave of the virus.

After a sharp drop in the first half of 2020, global economic activity is picking up. This return to growth reflects the relaxation of necessary containment measures put in place to slow the spread of the coronavirus, combined with extraordinary fiscal and monetary policy support. As a result, financial conditions have improved. The prices of most commodities, including oil, have risen from very low levels. In the central scenario, the global economy overall shrinks by about 5 percent in 2020 and then grows by around 5 percent on average in 2021 and 2022. The timing and pace of the recovery varies among regions and could be hampered by a resurgence of infections and the limited capacity of some countries to contain the virus or support their economies.

The Canadian economy is starting to recover as it re-opens from the shutdowns needed to limit the virus spread. With economic activity in the second quarter estimated to have been 15 percent below its level at the end of 2019, this is the deepest decline in economic activity since the Great Depression, but considerably less severe than the worst scenarios presented in the April MPR. Decisive and necessary fiscal and monetary policy actions have supported incomes and kept credit flowing, cushioning the fall and laying the foundation for recovery. Since early June, the government has announced additional support programs, and extended others.

There are early signs that the reopening of businesses and pent-up demand are leading to an initial bounce-back in employment and output. In the central scenario, roughly 40 percent of the collapse in the first half of the year is made up in the third quarter. Subsequently, the Bank expects the economy’s recuperation to slow as the pandemic continues to affect confidence and consumer behaviour and as the economy works through structural challenges. As a result, in the central scenario, real GDP declines by 7.8 percent in 2020 and resumes with growth of 5.1 percent in 2021 and 3.7 percent in 2022. The Bank expects economic slack to persist as the recovery in demand lags that of supply, creating significant disinflationary pressures.

CPI inflation is close to zero, pulled down by sharp declines in components such as gasoline and travel services. The Bank’s core measures of inflation have drifted down, although by much less than the CPI, and are now between 1.4 and 1.9 percent. Inflation is expected to remain weak before gradually strengthening toward 2 percent as the drag from low gas prices and other temporary effects dissipates and demand recovers, reducing economic slack.

As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainability achieved. In addition, to reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at a pace of at least $5 billion per week of Government of Canada bonds. This QE program is making borrowing more affordable for households and businesses and will continue until the recovery is well underway. To support the recovery and achieve the inflation objective, the Bank is prepared to provide further monetary stimulus as needed.

Information note

The next scheduled date for announcing the overnight rate target is September 9, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on October 28, 2020.

Here is a copy of the Monetary Policy Report for July 2020.

Looking for a new mortgage? Start here.

Thu, 02 Jul 2020 00:15:20 GMT

It's safe to say that things have (mostly) calmed down in the mortgage world since the beginning of COVID-19. The rush of mortgage deferral applications appears to be behind us. So if you're looking for a new mortgage, right now is an excellent time to get things going!

Even before we've discussed your financial situation, and you've completed an online mortgage application, the best place to start is to collect all your supporting documents and have them accessible ahead of time. This is the absolute best way to ensure there won't be any surprises down the line and that we're dealing with concrete numbers, and not estimates.

Most lenders won't entertain any type of mortgage approval without providing supporting documents along with the application. Here are some of the documents you will be required to provide.

Income documents if you are employed:

Letter of employment

Two recent paystubs

Notice of Assessments (NOA) for the past two years

T4 or T4A's's for the past two years

Income documents if you are self-employed:

Company Financial Statements for the past two years

T1 Generals with your statement of business activity

Notice of Assessments (NOA) for the past two years

Confirmation of being self-employed for more than three years

Confirmation of company ownership

Down payment confirmation:

90-day bank statements for your downpayment (in your account)

Confirmation of 1.5% for closing costs

Gift letter if any of the funds are going to be gifted

Current mortgage statement and unconditional offer to purchase for your current property (once available) if your downpayment is coming from the sale of a property

For any existing properties:

Your current mortgage statement

Your current property tax statement

Your current lease agreement (if applicable)

Other documents:

Void Cheque for the account you would like your payments to come from

2 Pieces of Identification

A separation agreement (if applicable)

Making sure you have all your documents together ahead of time will give you the best chance at a smooth mortgage transaction. If you have any questions, please don't hesitate to contact us anytime!

Latest in Mortgage News, COVID-19, and Economic Recovery.

Wed, 24 Jun 2020 00:18:09 GMT

Although the volume of news over the last month has been pretty tame in comparison to when COVID-19 initially hit, there has still been a lot going on. If you find yourself wondering about the current state of affairs as it relates to real estate, mortgage financing, and the recovery of our economy mid and post-pandemic, you've come to the right place!

Here is a quick recap, a look forward, and links to many good sources of information!

Questionable economic outlook.

Back in the third week of May, the head of the Canadian Mortgage and Housing Corporation (CMHC) made some pretty gloomy predictions. These Included a potential decrease in house prices of 18%, a jump in mortgage deferrals by 20% from 12% by September, and a debt-to-GDP ratio jump from 99% to 130% by Q3.

However, this particular economic outlook wasn't widely accepted in the mortgage industry and was seen more as an absolute worst-case scenario. Despite this, CMHC went ahead and made changes to their underwriting guidelines and qualifying criteria for insured mortgages.

CMHC changes policy for insured mortgages.

On June 4th, 2020, CMHC announced that they would be making changes to their underwriting qualification effective July 1st 2020.

Essentially, they have lowered the buying power of anyone looking for an insured mortgage by up to 10% by limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to 35% and 42% respectively. They changed the credit score requirements to a minimum of 680 for at least one borrower. While they also removed non-traditional sources of down payment that increase indebtedness, (borrowed downpayment). A gifted downpayment from a family member is still acceptable.

Genworth and Canada Guaranty don't plan on changing guidelines.

In response to CMHC's changes, the other two mortgage insurers in Canada made announcements that they would not be changing their guidelines.

"Genworth Canada believes that its risk management framework, its dynamic underwriting policies and processes and its ongoing monitoring of conditions and market developments allow it to prudently adjudicate and manage its mortgage insurance exposure, including its exposure to this segment of borrowers with lower credit scores or higher debt service ratios," said Stuart Levings, President and CEO.

"Canada Guaranty confirms that no changes to underwriting policy are contemplated as a result of recent industry announcements... Given implementation of the qualifying stress test and historic default patterns, Canada Guaranty does not anticipate borrower debt service ratios at time of origination to be a significant predictor of mortgage defaults."

So although CMHC is taking a very pessimistic view towards our economic recovery and has made it harder to qualify for an insured mortgage going forward, Genworth and Canada Guaranty will be there to make sure more Canadians have access to insured mortgage products.

Economic Outlook from the Bank of Canada.

On June 22nd, Tiff Macklem, the new governor of the Bank of Canada, released his first public press release called Monetary Policy in the Context of COVID-19.

"Currently, we expect growth to resume in the third quarter. The economy will get an immediate boost as containment measures are lifted, people are called back to work, and households resume some of their normal activities. But it will be important not to assume that these growth rates will continue beyond the reopening phase. The pandemic is likely to inflict some lasting damage to demand and supply. The recovery will likely be prolonged and bumpy, with the potential for setbacks along the way."

Conference Board of Canada.

In a sizeable release, the Conference Board of Canada shared their Canadian Outlook Summary: Summer 2020.

"With the worst of the recession likely over, the outlook for 2021 is brighter. The economy is forecast to rebound by 6.7 per cent in 2021 and 4.8 per cent in 2022. As the threat of the pandemic eases, how well the reopening of the economy and the withdrawal of government support is managed will be a crucial determinant of the economy's trajectory over the next several years."

Business as usual.

By all accounts, it's business as usual amid this global pandemic. Although COVID-19 has impacted the number of houses being bought and sold, prices haven't dropped. CMHC has made it harder to qualify for an insured mortgage through them, but you have two other insurers providing options, so it's not a big deal.

If you're looking to make a move or need to discuss mortgage financing, please don't hesitate to contact us anytime . We would love to work with you!

Spousal Buyout Mortgage?

Wed, 17 Jun 2020 01:44:12 GMT

If you happen to be going through, or considering a divorce or separation, you might not be aware that there are mortgage products designed to allow you to refinance your property in order to buyout your ex-spouse.

For most couples, their property is their largest asset and where the majority of their equity has been saved. In the case of a separation, it is possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property's value. Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program.

Here are some common questions about the spousal buyout program:

Is a finalized separation agreement required?

Yes. In order to qualify, you will be required to provide the lender with a copy of the signed separation agreement. The details of asset allocation must be clearly outlined.

Can the net proceeds be used for home renovations or to pay out loans?

No. The net proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly agreed upon in the finalized separation agreement.

What is the maximum amount that can be withdrawn?

The maximum equity that can be withdrawn is the amount agreed upon in the separation agreement to buy out the other owner’s share of property and/or to retire joint debts (if any), not to exceed 95% loan to value (LTV).

What is the maximum permitted LTV?

Max. LTV is the lesser of 95% or Remaining Mortgage + Equity required to buy out other owner and/or pay off joint debt (which, in some cases, can total < 95% LTV). The property must be the primary owner occupied residence.

Do all parties have to be on title?

Yes. All parties to the transaction have to be current registered owners on title. Solicitor is required to do a search of title to confirm.

Do the parties have to be a married or common law couple?

No. The current owners can be friends or siblings. This is considered on exception with insurer approval. In this case, as there won't be a separation agreement, there is a standard clause that can be included in the purchase contract that outlines the buyout.

Is a full appraisal required?

Yes. When considering this type of a mortgage, it is similar to a private sale and a physical appraisal of the property is necessary.

If you have any questions about how a spousal buyout mortgage works, please contact us anytime . Be assured that our communication will be held in the strictest of confidence.

Improving Your Credit Score

Wed, 10 Jun 2020 00:53:58 GMT

Along with employment stability, and downpayment/equity, your credit score and how you manage your credit is a huge factor in qualifying for a mortgage. If you want the best interest rates available on the market, the higher your credit score the better.

However, if you've had credit mishaps in the past, don't let it stop you from improving your score now. Everyone has a credit score, and regardless of where it is on the scale of 300-900, there is always room for improvement. So here are some things to consider that will help boost your credit score.

Make all your payments on time. This is so important. Probably the most important factor. When any lender extends credit to you, you agree to make payments on a schedule. When you break that schedule, you show the lender you can't be trusted. The lender reports the missed payments to the credit reporting agencies, and your credit score is lowered. It's that simple. So what if you miss a payment? The second you realize it, or have the money, make the payment. It's also a good idea to contact the lender, let them know what happened and tell them that the payment has been made. Although lenders only report after payments have been missed for 30 days, don't let that stop you from making all your payments on time.

Stop acquiring new credit. Assuming you have at least 2 different trade lines with a minimum $2500 balance each, you shouldn't just go out and acquire new credit. Now, if you need a car loan, that's fine, make an application, but having more credit available to you just for the sake of it doesn't help your credit score. In fact, each time a lender looks at your credit report, it will lower your credit score a little bit.

Keep a reasonable balance. The more credit you use compared to the limit, the less credit worthy you will appear. So it's better to carry a minimal balance compared to maxing out your credit cards, and just making the minimum payments. It's a good idea to keep your spending to 20%-30% of the limit of the card or line of credit. That shows good utilization.

Check your credit report periodically. Did you know that roughly 20% of credit reports have misinformation on them? Mistakes happen all the time, lenders misreport information, people with the same names get merged reports, you miss a final bill from a utility and it gets sent to collection without you knowing. By checking your credit periodically, you can stay on top of everything and correct any errors before they become a problem. Equifax Canada has a great program. As does Transunion.

Pay out collections immediately. It happens more than you would think. Closed cell phone contracts with a small balance owing, or a utility final billing that got missed, parking tickets, or wage garnishments, or spousal support payments. They can all show up on your credit bureau, and they won't drop off until they are handled. So if you have any of these on your credit report, you should consider taking care of them as soon as possible. Then make sure to follow up, and ensure they have been removed.

Use your credit card. On the other side of the coin, you want to make sure that you at least periodically use your credit at least every three months. Loan payments are great in that they come out of your account on a schedule, if you only have credit cards, and never use them, there is a chance the lender might not report your usage, and that won't help your credit score. A simple way to go is to use a credit card for gas and groceries, and pay it off every month.

So there you have it, regardless of what your credit looks like now, if you follow the points outlined above, you will continue to increase your credit score.

If you would like to work through your credit report with us, and put together a plan so you can qualify for a mortgage, please don't hesitate to contact us anytime!

CMHC Guidelines Changing July 1st 2020

Thu, 04 Jun 2020 23:09:26 GMT

CMHC just shared the following press release. If you have any questions, please don't hesitate to contact us anytime!

CMHC RELEASE JUNE 4th 2020

The COVID-19 pandemic is affecting all sectors of Canada’s economy, including housing. Job losses, business closures and a drop in immigration are adversely impacting Canada’s housing markets, and CMHC foresees a 9% to 18% decrease in house prices over the next 12 months. In order to protect future home buyers and reduce risk, CMHC is changing its underwriting policies for insured mortgages.

Effective July 1, the following changes will apply for new applications for homeowner transactional and portfolio mortgage insurance:

Limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to our standard requirements of 35/42;
Establish minimum credit score of 680 for at least one borrower; and
Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes.

To further manage the risk to our insurance business, and ultimately taxpayers, during this uncertain time, we have also suspended refinancing for multi-unit mortgage insurance except when the funds are used for repairs or reinvestment in housing. Consultations have begun on the repositioning of our multi-unit mortgage insurance products.

“COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” said Evan Siddall, CMHC’s President and CEO. “These actions will protect home buyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.”

These decisions are within CMHC’s authorities under the National Housing Act and are in anticipation of potential house price adjustment. We will continue to monitor market conditions and work with our federal colleagues on potential macro-prudential policy options.

CMHC supports the housing market and financial system stability by providing support for Canadians in housing need, and by offering housing research and advice to all levels of Canadian government, consumers and the housing industry.

Bank of Canada Rate Announcement June 3rd 2020

Wed, 03 Jun 2020 13:39:39 GMT

The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent.

Incoming data confirm the severe impact of the COVID-19 pandemic on the global economy. This impact appears to have peaked, although uncertainty about how the recovery will unfold remains high. Massive policy responses in advanced economies have helped to replace lost income and cushion the effect of economic shutdowns. Financial conditions have improved, and commodity prices have risen in recent weeks after falling sharply earlier this year. Because different countries’ containment measures will be lifted at different times, the global recovery likely will be protracted and uneven.

In Canada, the pandemic has led to historic losses in output and jobs. Still, the Canadian economy appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report (MPR). The level of real GDP in the first quarter was 2.1 percent lower than in the fourth quarter of 2019. This GDP reading is in the middle of the Bank’s April monitoring range and reflects the combined impact of falling oil prices and widespread shutdowns. The level of real GDP in the second quarter will likely show a further decline of 10-20 percent, as continued shutdowns and sharply lower investment in the energy sector take a further toll on output. Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery. While the outlook for the second half of 2020 and beyond remains heavily clouded, the Bank expects the economy to resume growth in the third quarter.

CPI inflation has decreased to near zero, as anticipated in the April MPR, mainly due to lower prices for gasoline. The Bank expects temporary factors to keep CPI inflation below the target band in the near term. The Bank’s core measures of inflation have drifted down, although by much less than the CPI, and are now between 1.6 and 2 percent.

The Bank’s programs to improve market function are having their intended effect. After significant strains in March, short-term funding conditions have improved. Therefore, the Bank is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers’ acceptances to bi-weekly operations. The Bank stands ready to adjust these programs if market conditions warrant. Meanwhile, its other programs to purchase federal, provincial, and corporate debt are continuing at their present frequency and scope.

As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment. The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.

Information notes

Tiff Macklem assumes his role as the Bank’s tenth Governor today. He participated as an observer in Governing Council’s deliberations for this policy interest rate decision and endorses the rate decision and measures announced in this press release.

The next scheduled date for announcing the overnight rate target is July 15, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

Advice for Living Through These Uncertain Times

Wed, 27 May 2020 13:44:28 GMT

It only takes a quick trip to the grocery store to realize that life is VERY different than it was just a couple of months ago. COVID-19 has already left a permanent mark in modern human history. So as you continue life mid-pandemic, here's some good advice: don’t believe everything you read on the internet or see in the news.

As it relates to your personal financial situation.

As it relates to the Canadian economy.

As it relates to the value of your home.

As it relates to Canadian real estate values.

Because as the media continues to cover COVID-19, you can expect to see financial doomsday headlines; designed to grab your attention, get more outlandish as time goes on. The goal is to catch your eye with a wild headline so that you read an article (or watch a video) and are exposed to the advertisements contained within.

Media and news companies are in the business of selling advertisements, not providing you with accurate unbiased information.

The best way to grab your attention is with an attempt to instil fear or shock. One headline will read that house prices are expected to plummet, the next will claim mortgage defaults are on the rise by a billion per cent, while the next will provide incredible proof that house sales are expected to grind to a screeching halt and will never return to normal.

And although most of these stories contain *some* level of truth, rest assured that what may be true for the rest of Canada (or the US) is not necessarily true about your personal financial situation, your local economy, your local real estate, or your mortgage.

Don’t buy into the hype and get anxious about things you can’t control.

It might be best to just turn off the TV, put down the newspaper, and stop scrolling Facebook. Especially if you aren't thinking of making a move anytime soon anyway! But if your mortgage is up for renewal, if you're thinking of buying a new property, or if you're looking to make a change with your investments, then it's best to talk with local professional and seek their advice!

Be influenced by those who have your best interest in mind!

If you have any questions about your mortgage, please don’t hesitate to contact me anytime . I’d be more than happy to let you know exactly where you stand.

Your Financial Plan to Becoming Debt-Free Post-COVID

Wed, 20 May 2020 13:48:00 GMT

Although everyone is experiencing the impact of COVID-19 differently, one thing has become evident. As a result of the pandemic, we’re all paying closer attention to our finances. Looking at life post-COVID, it’s going to be essential to have a financial plan.

Here are some action points to consider as life returns to some sense of routine and as you plan your financial future.

Pay off your revolving consumer debt first.

If you have consumer debt, or if you’ve gone into debt to cover your expenses through social-isolation, paying off any consumer debt should be your priority. This would be your credit cards and line of credits.

You want to start by making any additional payments on the highest interest debt while maintaining minimum payments on everything else. Once the first debt is paid off, roll all your payments onto your next debt. And so on, until you’ve paid off all your revolving consumer debt.

Set up an emergency fund second.

It doesn’t make much sense to put money in a bank account for an emergency fund when you have revolving debt that is incurring interest. Once you’ve paid off all your revolving debt, you will still have access to that money again should you need it, which acts like an expensive emergency fund before you have money in the bank.

Finance experts suggest you should have 3-6 months in a savings account in case you lose your job or experience unforeseen health issues. And in the face of the most recent global pandemic; the unexpected has just happened, this is the proof that the experts are right, and having an emergency fund is an excellent idea.

Then pay off your instalment loans.

With all your revolving debt paid off and a healthy amount of money in the bank to prepare for the next national emergency, you should start paying off your instalment loans, like a car loan or student loans. Start with the highest interest loans first, working your way through until everything is paid off. Most loans will allow you to make additional payments, double-up on payments when possible.

Start saving for a downpayment.

If you don’t yet own a home, and you would like to work through a plan to get you there, please contact me anytime. Although you don’t have to be completely debt-free to qualify for a mortgage, the less money you owe, the more money you are allowed to borrow in mortgage financing.

And the same principles used to pay down your debt can be used to save for a downpayment. The more money you have as a downpayment, the more you qualify for, and the less interest you will pay over the long run.

If you already own a home, you’re debt-free, and you have a healthy emergency fund, you should consider accelerating your mortgage payments.

Accelerate your payment frequency.

Increase your mortgage payment amount.

Unless you opted for a “no-frills” mortgage, chances are you can increase your regular mortgage payment by 10-25%. This is an excellent option if you have some extra cash flow to spend in your budget. This money will go directly towards paying down the principal amount owing on your mortgage and isn’t a prepayment of interest.

The more money you can pay down when you first get your mortgage, the better, as it has a compound effect, meaning you will pay less interest over the life of your mortgage.

Also, by voluntarily increasing your mortgage payment, it’s kind of like signing up for a long term forced savings plan where equity builds in your house rather than your bank account.

Make a lump-sum payment.

Again, unless you have a “no-frills” mortgage, you should be able to make bulk payments to your mortgage. Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance. Some lenders are particular about when you can make these payments; however, if you haven’t taken advantage of a lump sum payment yet this year, you will be eligible.

Review your options regularly.

As your mortgage payments are withdrawn from your account regularly, it’s easy to simply put your mortgage payments on auto-pilot, especially if you have opted for a five year fixed term.

Regardless of the terms of your mortgage, it’s a good idea to give your mortgage an annual review. There may be opportunities to refinance and lower your interest rate, or maybe not. Still, the point of reviewing your mortgage annually is that you are conscious about making decisions regarding your mortgage.

Want to review your existing mortgage, or discuss getting a new one?

Contact me anytime!

Access Your Home Equity COVID-19

Wed, 13 May 2020 13:56:38 GMT

As the initial shock of living through a global pandemic wears off and restrictions start to loosen, it would seem that Canada is en route to de-COVID soon (time will tell).

If you’ve been waiting until things flatten out before making any significant financial decisions, now might be a good to time start working through your options. If those options include accessing the equity from your home; for whatever reason, here are some of the things to consider moving forward.

Expect heightened scrutiny

Due to COVID-19, lenders are currently dealing with a tremendous amount of uncertainty, as many Canadians are still out of work and deferring mortgage payments, appraisal values are in question, and sales in the housing market have slowed down considerably. And for most lenders, the best way to deal with uncertainty is by being cautious.

Moving forward, you can expect heightened scrutiny on any mortgage transaction. Qualification standards are no longer hard and fast rules, but rather guidelines. So although you may qualify to access up to 80% of your property’s value based on the government regulations, depending on the lender, they might only be comfortable lending to 75% or less.

Part of this heightened scrutiny will also include a more in-depth assessment of your employment. Lenders want to see evidence of stable income to ensure you have the means to make your new mortgage payments.

So if you’ve experienced any type of job loss or reduced hours, if you have deferred your mortgage payments, or if you’ve accessed any government relief programs, qualifying to refinance your mortgage won’t be a walk in the park.

55+? Consider a reverse mortgage

For those Canadians 55+ who have significant home equity, a reverse mortgage is worth serious consideration. Qualifying for a reverse mortgage is way less complicated compared to traditional mortgage financing as there are no income or credit requirements. Any money borrowed is tax-free and does not impact CPP or OAS qualifications.

Instead of making regular payments to reduce the total balance outstanding, the interest is added to the total mortgage amount and increases each year.

Accessing home equity, without having to make regular payments, has proven to be the ultimate in cash flow management and a useful tool in helping older Canadians live their desired lifestyle.

You need a plan

Despite the uncertainty, mortgage lenders are still in the business of lending money. It is still possible to refinance your mortgage and access your home equity, but if a lender assesses you’re using your home as a personal ATM, it’s probably not going to work out.

So, the best plan of action is to have a plan of action. That starts with working with an independent mortgage professional who understands the lending landscape and can provide you with mortgage options at many different lenders.

If you have any questions, please don’t hesitate to contact me anytime , together we can look at all your options and figure out a plan going forward.

A Mid-Pandemic Mortgage Checkup

Wed, 06 May 2020 13:59:49 GMT

If you've been sitting on the sidelines waiting to see the full impact of COVID-19 on the economy before asking any pressing questions about your financial situation, now might be a good time for a mid-pandemic mortgage checkup!

Here is a list of questions that have come up in the last couple of weeks.

Should I make an application to defer my mortgage payments?
I have already deferred my mortgage payments, how will this impact me down the line?
My job is on hold, and I'm collecting assistance, but my mortgage term is up for renewal, what are my options?
I'd like to refinance my mortgage to increase my on hand, can this be done?
I have a variable rate mortgage, is now a good time to lock in?
How does my mortgage rate compare to the rates available on the market now?
Are rates going up, or down, or both? Should I wait, or act now?
I'm looking to buy a new property, will anyone give me a mortgage?
I paid off my mortgage years ago; I have a property, can I borrow money using my house to help my kids?

If you'd like answers to any of these questions or have different questions of your own, please contact me anytime to discuss your mortgage and your personal financial situation. I'd be more than happy to discuss all your options.

Open For Business During COVID-19

Wed, 29 Apr 2020 14:03:47 GMT

If you're thinking about buying a new property, refinancing your existing mortgage, or if your mortgage is up for renewal, you might be wondering if getting a mortgage is even possible amid a global pandemic? Be assured that it is possible, mortgages are being written, and we're open for business (virtually).

Although it may not be business as usual. Mortgage brokers are still brokering, lenders are lending, real estate agents are selling houses, appraisers are appraising (virtually), inspectors are inspecting (some in hazmat suits), while lawyers continue to do what it is that lawyers do. Albeit in a climate of social distancing, with the increased use of technology.

Here are 3 things to consider while you plan for mortgage financing during the COVID-19 pandemic.

Everything is taking more time | Prepare yourself

As almost everyone involved in getting you a mortgage has had to alter the way they regularly do business, entire workforces are shifting from in-person to online. Despite the uptake in technology, things are taking a little longer than usual. Compounded by the fact that lenders are dealing with high submission volumes from clients wanting to defer mortgage payments, processing new mortgage applications can take longer than in previous months.

Your best plan of action is to prepare yourself ahead of time. Everyone is under a lot of pressure, so do everything you can to make sure your proverbial ducks are in a row and that you allow enough time to get everything done. Get as much of your personal documentation together upfront and be as organized as possible, it will go a long way in making for a smooth transaction.

Technology is keeping things running.

While many of the typical steps in the home buying process have been disrupted, with the use of technology, it is possible to buy a home while isolating in COVID-19.

Mortgage, real estate, and lawyer's documents should all be signed online. Although new technology can be scary, e-signatures allow transactions to take place, while doing your part to keep a social distance.

Admittedly, not the same as walking through a property, virtual tours allow you to get a sense of feel for a property more so than simple pictures. A lot of listings should have a virtual tour, while many real estate professionals are hosting virtual open houses, where they can take you on a virtual journey through the property using their phone.

Appraisers aren't required to complete a physical inspection any longer to determine a property's value; instead, everything happens online. An appraiser will use information from MLS data, municipal permits, property assessment information, client or owner information, and any other available source to estimate the physical characteristics of the house interior and the remainder of the property to come up with a valuation.

If you're looking to refinance or renew an existing property, the same is true, with the use of e-signatures and virtual appraisals, you can get a new mortgage, assuming you qualify.

You should expect more scrutiny on your mortgage application!

With over half of Canadians claiming to have lost work due to the COVID-19 coronavirus, it's not surprising that lenders are making a move towards extra scrutiny when assessing your overall application and employment documents. Lenders want to ensure your job stability now but also if things get worse down the line, you have good job prospects in the future.

As far as income goes, in a COVID-19 world, past job performance and income isn't a reliable indicator of future performance and income, everything has changed, and lenders are doing their due diligence. Lenders are becoming more conservative and risk-averse.

Lenders are starting to ask for income documents upfront. There is no use entertaining your mortgage application if they aren't confident about your prospects of employment.

Also, for self-employed borrowers, in addition to the standard required documentation of your past business income, you might be required to provide additional documentation going forward. Including, but not limited to: a description of your business activities, number of employees (including how many are actively working or laid off), current business status (operating or shut down), along with bank statements to prove stable income.

So although it might take a little longer than usual to get a mortgage, and you can most likely expect more scrutiny on your application, with the increased use of technology, mortgage financing is still possible.

If you'd like to discuss your personal financial situation, and how to go about getting a mortgage in these unprecedented economic times, we might not be able to get together in person for a coffee, but I'm open for business virtually and would love to help; please contact me anytime!

Questions about Appraisals During COVID-19

Wed, 22 Apr 2020 14:10:40 GMT

If you're looking to purchase or refinance a property while most of Canada is self-isolating to stop the spread of COVID-19, you probably have some questions around how the pandemic is impacting appraisals.

If you're looking to put a plan together that involves mortgage financing, the best place to start is to contact me directly. I would love to work with you!

However, here a few questions that you may be asking about appraisals and some general information.

1. Can I get an appraisal without having someone come into my property?

Rest assured that to prevent the spread of COVID-19, it is possible to have an appraisal completed without anyone coming into your personal space to view and assess the property.

Instead, the appraiser will use information from MLS data, municipal permits, and property assessment information, as well as information provided by the client or owner to find the property's value.

Be aware that as the provincial government starts reopening and loosening regulations around social distancing and self-isolation, this might change.

2. Is there anything I can provide to assist with the appraisal?

As the appraiser won't be able to assess the property physically, consider providing some interior photos. Your pictures could then be included in the report in place of photos that they would typically take themselves.

Alternatively, if you're a little more tech-savvy, consider a video tour of your property carried out by a Zoom Call, FaceTime, WhatsApp, or Marco Polo.

In these times, appraisers are very flexible; it's a good idea to be available, and as helpful as possible.

3. Will the banks accept an appraisal if the property wasn't physically inspected?

As we're living in unprecedented times, the real estate industry is taking Public Health Authority guidelines and advice seriously and is working together to help stop the spread of COVID-19. This includes adapting the way business is done, and accepting that alternatives to the ordinary course of business may be required.

At this time, most lenders are accepting property valuation from accredited appraisers, even if the property hasn't been physically inspected. Your team of real estate professionals will be able to provide you with guidance at the appropriate time.

4. Are property values coming in lower because of COVID-19

While this is a tough question to answer, here are the facts.

An appraiser's job is to assess the property to establish a value, so that a lender can confidently provide mortgage financing while protecting their investment, making sure there is sufficient equity in case of default.

Establishing property value includes scrutinizing comparable listings; assessing what has sold, at what price, within a reasonable time frame. While also considering how long that property sat on the market.

In the middle of a global pandemic, nothing can be considered normal.

Unfortunately, as we're living through a time of uncertainty, pessimism and conservatism will most likely lead to lower appraisal values.

As MLS data will undoubtedly show a significant drop in sales activity during COVID-19, it might be harder for appraisers to find "comparable properties" to use in assessing another property's value. However, if the values of the properties that did sell remain steady, there is cause to believe that appraised values could remain stable as well. Only time will tell.

If you have any more questions, please contact me directly, I'd love to talk with you.

Bank of Canada Maintains Overnight Rate Target and Unveils New Market Operations

Wed, 15 Apr 2020 14:14:35 GMT

The Bank of Canada today maintained its target for the overnight rate at ¼ percent, which the Bank considers its effective lower bound. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank also announced new measures to provide additional support to Canada’s financial system.

The necessary efforts to contain the COVID-19 pandemic have caused a sudden and deep contraction in economic activity and employment worldwide. In financial markets, this has driven a flight to safety and a sharp repricing of a wide range of assets. It has also pushed down prices for commodities, especially oil. In this environment, the Canadian dollar has depreciated since January, although by less than many other currencies. The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.

The Canadian economy was in a solid position ahead of the COVID-19 outbreak, but has since been hit by widespread shutdowns and lower oil prices. One early measure of the extent of the damage was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April some six million Canadians had applied for the Canada Emergency Response Benefit.

The outlook is too uncertain at this point to provide a complete forecast. However, Bank analysis of alternative scenarios suggests the level of real activity was down 1-3 percent in the first quarter of 2020, and will be 15-30 percent lower in the second quarter than in fourth-quarter 2019. CPI inflation is expected to be close to 0 percent in the second quarter of 2020. This is primarily due to the transitory effects of lower gasoline prices.

The pandemic-driven contraction has prompted decisive policy action to support individuals and businesses and to lay the foundation for economic recovery once containment measures start to ease. Fiscal programs, designed to expand according to the magnitude of the shock, will help individuals and businesses weather this shutdown phase of the pandemic, and support incomes and confidence leading into the recovery. These programs have been complemented by actions taken by other federal agencies and provincial governments.

For its part, the Bank of Canada has taken measures to improve market function so that monetary policy actions have their intended effect on the economy. This helps ensure that households and businesses continue to have access to the credit they need to bridge this difficult time, and that lower interest rates find their way to ultimate borrowers. The Bank has lowered its target for the overnight rate 150 basis points over the last three weeks, to its effective lower bound. It has also conducted lending operations to financial institutions and asset purchases in core funding markets amounting to around $200 billion.

These actions have served to ease market dysfunction and help keep credit channels open, although they remain strained. The next challenge for markets will be managing increased demand for near-term financing by federal and provincial governments, and businesses and households. The situation calls for special actions by the central bank. To this end, the Bank is furthering its efforts with several important steps.

Under its previously-announced program, the Bank will continue to purchase at least $5 billion in Government of Canada securities per week in the secondary market, and will increase the level of purchases as required to maintain proper functioning of the government bond market. Also, the Bank is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40 percent, effective immediately.

The Bank is also announcing today the development of a new Provincial Bond Purchase Program of up to $50 billion, to supplement its Provincial Money Market Purchase Program. Further, the Bank is announcing a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment grade corporate bonds in the secondary market. Both of these programs will be put in place in the coming weeks. Finally, the Bank is further enhancing its term repo facility to permit funding for up to 24 months.

These measures will work in combination to ease pressure on Canadian borrowers. As containment restrictions are eased and economic activity resumes, fiscal and monetary policy actions will help underpin confidence and stimulate spending by consumers and businesses to restore growth. The Bank’s Governing Council stands ready to adjust the scale or duration of its programs if necessary. All the Bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.

Information note

The next scheduled date for announcing the overnight rate target is June 3, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on July 15, 2020.

Here is a copy of the Bank of Canada's Monetary Policy Report for April 2020.

Are Interest Rates Going Up and Down at the Same Time?

Wed, 08 Apr 2020 14:17:04 GMT

If you’re paying more attention to the Canadian economy due to COVID-19, and it seems like you’re getting mixed messages; that mortgage interest rates are going both up and down at the same time, you’re not that far off. There are a lot of moving parts, and to find clarity, we need to make sure we’re comparing apples to apples, and oranges to oranges.

Let’s begin by acknowledging that not all interest rates are the same. The term “interest rates” can mean a lot of different things in news story headlines.

The Government “overnight rate” is different from the “qualifying rate”, which is different from the banks “prime rate”, which is different from “variable rates”, which is different from the “discount on a variable rate” which is different from “fixed rates”.

Here’s a list of the different types of mortgage rates, a quick summary of what they are, the direction they’re going, and how they impact you.

Target for the Overnight Rate.

Also known as the policy rate, this is the rate that the Bank of Canada (The Government) controls. When the Bank of Canada changes the Target for the Overnight Rate, this change affects other interest rates in the economy.

Typically there are only eight days in the year for the Bank of Canada to announce if they will change the rate. However, given the recent COVID-19, the Bank of Canada has made special announcements.

The overnight rate was set with a target of 1.75% for a long time before the pandemic.

March 4th 2020, the rate was lowered to 1.25%.

March 16th 2020, the rate was lowered to 0.75% in an emergency rate cut.

March 27th 2020, the rate was lowered to 0.25% in a second emergency rate cut.

The overnight rate now sits at 0.25% with April 15th 2020, as the next scheduled announcement date.

By cutting interest rates, the government hopes to stimulate economic growth. Lower financing costs encourages borrowing and investing, which is what our government believes will get us through this pandemic.

Qualifying Rate

Also known as the Benchmark Qualifying Rate or the five year qualifying posted rate, this is another rate set by the government. If you’re getting an insured mortgage, the government wants to make sure you will be able to afford your mortgage at the end of your term (in case interest rates go up). So they make you qualify for your mortgage at a higher rate than you will actually be paying.

The government has recently dropped the qualifying rate from 5.19% to 5.04%. This decrease, like the drop in the overnight rate, is meant to help stimulate the economy. The average Canadian will qualify to borrow an additional $10,000 with this drop.

Prime Rate

The banks prime lending rate isn’t the same as the overnight rate; however, the banks prime lending rate is impacted by the overnight rate. Each bank sets its own prime lending rate. When the Bank of Canada moves the overnight rate, typically the prime rate at each bank will follow.

As of the emergency rate cut on March 27th, banks did lower their prime lending rate to 2.45%. Some banks moved immediately, while some made the change effective April 1st, which means the savings will be seen on May 1st, but they all did lower their prime rates.

The prime lending rate is used by banks to determine rates on floating mortgage products (like the variable rate), lines of credit, home equity lines of credit (HELOC), and some credit cards.

If you currently have a variable rate mortgage or a HELOC, a lower prime rate means that you are now paying less interest on your existing mortgage, this is a good thing.

Variable Rate Mortgage

A variable rate mortgage is a mortgage that fluctuates with the prime lending rate. Typically, the mortgage rate will change with the prime lending rate and includes a “component” or “discount” to the prime rate +/- a specified amount, such as Prime - 0.45%. The lender sets this component to prime.

So, if you have a variable rate mortgage at Prime -0.45%, the rate you’d be paying today (with a prime rate of 2.45%) is 2%.

This is where it gets a little confusing because while the government is trying to stimulate the economy by lowering the overnight rate, banks have followed by lowering their prime rate, but at the same time have increased the component to prime - by the same amount 0.5%.

Although there are immediate savings for existing variable rate mortgage holders, anyone looking to get a new variable rate mortgage will do so at a higher rate than a few weeks ago.

Fixed Rate Mortgage

As its name suggests, a fixed rate mortgage is where your mortgage rate stays the same throughout your term. Your rate isn’t tied to the prime lending rate but rather is unmoved by outside factors. With all the uncertainty in the Canadian economy, lenders have actually been increasing rates for new fixed rate mortgages.

So while the government is doing all they can to keep rates low, why are banks increasing fixed rate mortgages?

Well, banks are in the business of making money, and given that over 2 million Canadians have applied for some kind of assistance to get through COVID-19, the fear is that mortgage delinquency will go up considerably as the coronavirus financially impacts people.

Banks are increasing fixed rates to protect themselves against economic uncertainty.

So what does this mean for you? Well, as everyone’s financial situation is different, it’s impossible to give blanket advice that applies to everyone. But here is some general advice.

Existing Variable Rate Holders

You’re doing well. The recent drop in the banks prime rate to 2.45% has lowered the amount of interest you are paying on your mortgage. You have a discount to prime for the remainder of your term that isn’t currently available in the market. Your mortgage rate is one of the lowest in Canadian history.

As the next announcement by the government will be April 15th 2020, there is a chance your rate could go even lower.

If at this time, you’re considering locking your variable rate into a fixed rate, that would significantly increase the amount of interest you are paying. As fixed rates have increased over the last weeks, this isn’t a good option right now.

The reason you went variable in the first place is the reason you should stay variable at this point. With all the economic uncertainty, the prime rate won’t be going up anytime soon.

Existing Fixed Rate Mortgage Holders

Your fixed rate is set lower than the fixed rates currently being offered. If you break your term now, you will incur a higher penalty. So unless you must make a move, it would probably be best just to stay the course.

Hopefully, fixed rates will go down when the economic uncertainty winds down, and rates will be in a good spot when your term comes up for renewal.

Are you looking for a new mortgage?

The most important thing for you going forward is flexibility. Variable rates are still historically low, and although fixed rate mortgages have gone up over the last weeks, there are many great options, maybe a shorter term is a better fit for you?

The best place to start is to contact us directly so we can go over your financial situation and discuss the best plan for you to move ahead in these uncertain times.

So although it may appear that mortgage interest rates are going both up and down at the same time, understanding what is meant by “interest rates” is crucial. The government is lowering rates to stimulate the economy, while banks are trying to protect themselves against future loses by increasing rates while they can.