Original Article HERE

The Bank of Canada has decided to keep its benchmark interest rate steady at 1 per cent.

The bank's rate, officially known as the target for the overnight rate, has a large impact on the rates that retail banks offer consumers on savings accounts and loans.

The bank has already hiked its rate twice this year — once in July and then again last month.

Those moves came amid signs that Canada's economy was heating up, but since then economic indicators have been more subdued, which helps to explain the bank's cautious tone.

"The current stance of monetary policy is appropriate," the bank said in announcing its decision. "While less monetary policy stimulus will likely be required over time, [the bank] will be cautious in making future adjustments to the policy rate."

Aubrey Basdeo, the head of fixed income at BlackRock Canada, said that word — "cautious" — could be just the right strategy. "They're trying to have a very measured approach in terms of removing stimulus," he said.

None of the economists polled by Bloomberg were expecting the bank to move its rate. But currency traders were caught a little by surprise — the Canadian dollar lost almost a full cent from where it was before the decision, changing hands at 78.15 cents US after the bank's decision came out.

"The Bank of Canada shifted to a significantly more cautious tone on interest rates Wednesday, prompting a sharp descent by the Canadian dollar," said Don Curren, strategist at Cambridge Global Payments, "and perhaps presaging more weakness in the currency as expectations about … monetary policy evolve."

Along with its rate decision, the bank also released its Monetary Policy Report, which comes out four times a year and provides a deeper dive into the bank's line of thinking. 

The bank said it expects inflation to rise to two per cent by the end of next year — a little later than expected, because of strength in the Canadian dollar.

According to the latest MPR, the bank expects Canada's economy to expand by 3.1 per cent in 2017, 2.1 per cent in 2018 and 1.5 per cent in 2019. The figure for next year is slightly better than the bank was forecasting three months ago, but the 2019 figure is a little worse.

One of the main reasons for that slight downgrade is a "shift toward protectionist trade policies" and "uncertainty around the outcome of the North American Free Trade Agreement (NAFTA) renegotiations," the bank said in its MPR.

The uncertainty around NAFTA  alone could be enough to explain the bank's caution.

"As things stand today," TD Bank economist Brian DePratto said, "it appears that the urgency to increase rates has faded."

While growth of just 1.5 per cent two years from now isn't an optimistic view, forecasting that far into the future always has to come with a grain of salt, Blackrock's Basdeo said.

BlackRock is slightly more optimistic than the bank, forecasting growth of 2.5 per cent in 2018.

"By all accounts the economy does look reasonably healthy," he said. "We think growth of 2.5 per cent is pretty darn good at this stage."

Links: 

• How a central bank rate hike affects you
• Interest rates are about to go up — no, for real this time

Original article HERE

All mortgage applicants will have to pass a “stress test” on their qualifying income – no matter how high their down payment – from January 1, the Office of the Superintendent of Financial Institutions (OFSI) confirmed October 17.

The stress test was introduced last fall to all applicants of insured mortgages (those with less than 20% down), but has now been extended to all mortgage applicants including uninsured borrowers, as that group comprises a larger segment of the mortgage market. The test requires an applicant’s income to qualify them for mortgage repayments at the Bank of Canada’s five-year posted rate – higher than the discounted rate they would pay in reality, and currently 4.89% – to create a buffer against future rate rises and any financial difficulties.

The move is said by mortgage professionals to reduce Canadians’ home-purchasing power by around 20% as the higher interest rate will reduce the maximum mortgage that buyers will be able to borrow.

Mortgage professionals widely criticized the new policy as making it harder for buyers to enter an already challenging market, but opinions seem to differ widely on the reasons behind the new policy.

Michael Lloyd, team leader for Dominion Lending Centres (DLC) Canadian Mortgage Experts, told Mortgage Broker News that he thinks the feds’ true aim is to lower high housing prices in Vancouver and Toronto.

“It certainly seems that way,” Lloyd told Mortgage Broker News. “They don’t have any room to raise rates, so it seems like the only other options they can do is make it tougher for people to qualify for mortgages.”

However, Lloyd’s DLC colleague Dustan Woodhouse, a mortgage broker and coach for Dominion Lending Centres, disagrees with this assessment. When asked whether cooling hot housing markets was one of OFSI’s goals, he told REW.ca, “I don’t think that’s the case, nor do I think that’s the premise [for this policy]. I spent some time in Ottawa talking to senior government members about why. Why, why, why? And OSFI’s mandate is the stability of the Canadian banking system. Period, full stop. They are not worried about the consumer, they are not worried about condo prices in Vancouver. They are looking at the banking system, and finding cause for concern in the stats on household debt numbers (which I think you really have to look hard to find cause for concern in those numbers), but they feel these steps are worth taking to preserve the stability of the banking system.”

Woodhouse added, “This [stress test] will mean a reduction in the amount of mortgage money available to a buyer of about 20%. So if you’re looking at $500K homes, you’re being told, well sorry, now you’re looking at $400,000. That’s a very significant drop... And in this next round of changes… this is for someone with a large down payment, impeccable credit, clearly documented income… And we’re saying all this in the face of rising home prices. So it seems odd that the government is handicapping Canadians in the way that they are.”

Public policy think tank the Fraser Institute last week released a report stating that the new rules will do “more harm than good” and are “unnecessary” for the Canadian banking system.

Original report HERE

As the oldest millennials enter their 30s, more and more are entering the housing market. In fact, according to a 2015 report, peak levels of millennials will be making housing decisions in the next five years, including the decision to buy. Although some of their ‘must haves’ are the same as those of generations past—such as ample storage and updated bathrooms—they also have a few new items on their list. If you’re thinking of selling your home in the next few years, here are five things that today’s homebuyers are looking for.

1. Open Kitchen

As part of an overall trend away from rigidly compartmentalized floor plans, there has been a move in recent years toward the open kitchen. Many homebuyers are now opting for kitchens that flow seamlessly into other spaces, as opposed to formal dining rooms, so that they can cook, socialize and watch television all at the same time. While a modern kitchen has always been on many homebuyers’ wish lists, it now has to have an open concept as well.

2. Office Space

As working from home becomes increasingly common, working from the kitchen table no longer cuts it. Many homebuyers are now seeking a designated office space that allows them to conduct business as usual, away from household distractions. Although an extra room is often sought out by growing families, it is becoming increasingly popular among professional couples that are looking to make a living from home.

3. Low Maintenance

People are busier than ever nowadays, meaning they have less time to spend keeping up with their homes. As a result, more and more buyers are looking for turnkey homes that require little or no maintenance. That’s why low maintenance materials, such as hardwood floors and granite countertops, are an increasingly popular choice. Not only do they look modern, they are easy to wipe up and mop down, which is especially convenient for families with young children.

4. Outdoor Living

Perhaps a side effect of social media platforms like Pinterest and Instagram, more and more homebuyers are seeking functional outdoor living spaces. Long gone are the days of a simple patio set and umbrella—today’s homebuyers want outdoor fireplaces, comfy lounge chairs and a hammock where they can take a Sunday afternoon nap. This is as true for those with mild weather year-round as it is for those who just want to make the most of those few precious summer months.

5. Energy Efficiency

An increasing focus on environmental sustainability, as well as rising energy costs, has many modern homebuyers gravitating toward green homes. Although it is not the most important factor when selecting a home, energy efficient features are certainly a welcome bonus for this environmentally conscious generation. These features don’t have to be elaborate either—they can be as simple as energy efficient appliances or double-paned windows.

If you’re thinking about selling your home in the foreseeable future, it is important to keep in mind what the new generation of homebuyers is looking for. Whether you plan to do some renovations or simply stage your home to fit more modern tastes, keeping these 5 things in mind can help you fetch a higher price when your home finally sells!

Original Articles HERE

After going through a divorce and hearing the struggles of one of his co-workers he decided to finally go through with an idea he had had for a long time. Through this plan he is enabling those unable to come up with a down payment to become home owners. 

See the CTV article below for details. 

A North Vancouver, B.C. developer is offering a rent-to-own program for multimillion-dollar homes as a way to help would-be buyers get in to Canada's most expensive real estate market.

Ray Vesely, CEO of Apex Western Homes, allows those interested to lock into a five-year lease with five per cent down. He explains the deal as similar to a traditional home purchase, but with five years to "close."

A portion of the buyer's rent each month goes toward their future purchase, Vesely said. The buyer has the option to purchase the home between one and five years at the rate locked in on the date the agreement is made. If its value increases, the buyer keeps the market gains.

Rent is higher than a traditional lease, but the money goes to building up a down payment to secure a mortgage in the future. When the renter decides to exercise the "buy" option, they apply for a mortgage and use the equity already built up in the home.

He came up with the idea following his own experience after a divorce, but was also inspired by his staff members' struggles.

"I try to come up with creative ways to help them get a place… I've been thinking about this program for a while," Vesely said Thursday.

The rent-to-own option is meant to help those who want to buy their own place, but are unable to come up with a down payment.

The minimum down payment in Canada is five per cent of the first $500,000, but those buying a home for $1 million or more are required to have 20 per cent. In a market where the benchmark detached home price was $1,617,300 last month, down payments can easily exceed $200,000.

Vesely showed CTV News one of the homes that could be rented to own: a 3,800-sq.-ft. house on MacKay Avenue with four bedrooms, three bathrooms and a legal two-bedroom basement suite. The home was appraised at $2.3 million.

The monthly rent for the MacKay Avenue home is listedat $10,000 online, but those on a rent-to-own contract would be able to live in the basement and rent out the house or vice versa to help with the payments, Vesely said.

Buyers also defer paying GST and property transfer taxes until they exercise the "buy" option.

And the company is marketing the rent-to-own option to foreign buyers as a way to avoid the 15 per cent transfer tax imposed on all foreign nationals or corporations purchasing property in Metro Vancouver.

However, Vesely says the offer is only available to those who are approved for permanent residency status before buying.

B.C.'s finance minister says rent-to-own leases are legal, but that the ministry will be taking a closer look at the tax policy.

"We're very serious about ending tax loopholes and finding those tax loopholes, so I'm very concerned and we'll be investigating," Carole James told CTV.

Vesely said he's already spoken with the ministry and was told what he's offering is permitted.

"Really it's targeting guys like the tech community that are trying to come in. They actually have well-paying jobs, it's just hard to save up for the down payment," he said.

He added that while his program is generating interest, no one has taken him up on his offer so far.

Currently the program is only offered on homes in North Vancouver, but he said he's thinking of expanding into the condo market.

Original article HERE

A recent report from Royal Bank of Canada painted a scary picture of home affordability — it's the worst it's been in 27 years nationwide, and in Toronto, it's the worst on record.

But all this talk about declining affordability masks the reality of today's market: It has rarely, if ever, been cheaper to take out a mortgage.

Even with the Bank of Canada hiking rates twice this past summer, rates remain near historic lows, and many lenders are offering fixed-rate mortgages at around 3 per cent.

What this means is that, despite record-high house prices in many markets, there are actually many places where you can afford a home today on a modest income. (If the Bank of Canada keeps hiking rates, that may not be the case for long.)

Using Ratehub's mortgage affordability calculator, we determined that a household income of $50,000 a year will buy you a house of up $364,360, assuming a 3-per-cent mortgage rate, a 30-year amortization period and a 20-per-cent down payment.

That's enough to buy an average home in numerous markets. Here they are. (Note: This is a list only of major Canadian metro areas. Plenty of smaller cities, including Thunder Bay, Saguenay and Saint John are also affordable for the $50,000 crowd.)

Montreal

PAWEL.GAUL VIA GETTY IMAGES

Average house price (Aug. 2017): $374,333

Montreal's average house price has moved slightly out of range for someone earning $50,000 a year, but given how close it is, we've added the city to the list anyway. Montreal is also enjoying some record-low unemployment rates, so this may be a good time to take a second look at Canada's second-largest city.

Saskatoon

GETTY IMAGES/ISTOCKPHOTO

Average house price (Aug. 2017): $329,654

Saskatoon's economy is struggling in the wake of the oil price crash, and its unemployment rate is above 8 per cent, among the highest in the country. All the same, if you have a job here, odds are good you can afford to own a home.

Regina

BENKRUT

Average house price (Aug. 2017): $328,586

With an unemployment rate around 5 per cent, Regina is faring much better than its cousin Saskatoon. Despite this, house prices are very similar in the two cities, and Regina remains a relatively affordable city for those earning $50,000 or more.

Winnipeg

MYSTICENERGY VIA GETTY IMAGES

Average house price (Aug. 2017): $297,897

Winnipeg's housing market has been famously affordable for a city its size for some time now, and with the city's economy humming along nicely these days, it's a fairly easy place to buy a home.

Halifax

SHAUNL VIA GETTY IMAGES

Average house price (Aug. 2017): $284,037

Halifax has surprisingly expensive rental housing, given the level of house prices in the area. And with an average price below $300,000, the argument for buying a home may be stronger here than anywhere else.

Quebec City

ONFOKUS

Average house price (Aug. 2017): $266,072

Beautiful Quebec City is also beautifully affordable, with an average house price that's roughly one-third of Toronto's. If francophone culture is for you, and if you can handle some fairly sharp winters, this could be the place to buy a home.

BIG CAVEAT: All the above estimates of affordable cities will be instantly wrong if the federal government goes through with plans to tighten mortgage rules this fall.

The country's financial regulator, OSFI, has proposed a new rule that would require borrowers of uninsured mortgages to qualify at a rate two percentage points higher than the one being offered. (OSFI introduced a similar rule for insured mortgages last year.)

According to Ratehub, the new rule would shave 21 per cent off of the purchasing power of homebuyers.

In our scenario, a $50,000 annual income would afford you a house of only $297,915 with the new rules in place. That would move average homes in Montreal, Regina and Saskatoon out of affordable range for those earning $50,000.

So given that you may soon be required to qualify at higher rates, and given that interest rates are on the rise in Canada as it is, this might be a good time to lock in a mortgage rate with your local lender.