Tag Archive for: Nanaimo

CMHC Premium Refunds for Energy Efficient Homes: Eco Program

 

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CMHC Eco Program

 

CMHC has introduced their Eco Program: providing premium refunds for energy efficient homes are for clients who are buying a home deemed “energy efficient”.  Clients could be eligible for a 25% refund of their CMHC Insurance Premium!  For some perspective; on a purchase price of $850,000 with minimum down payment of $60,000 the CMHC insurance premium is $31,600. Clients who buy a qualifying property, are eligible for a refund of up to $7900.  For homeowners who are doing renovations that increase energy efficiency, there are also refunds available.

CMHC recently introduced new eligibility criteria for this program, including an updated and expanded list of energy efficiency certifications, and energy efficiency targets based not only on total Energy consumption but also Greenhouse Gas Emissions.  Building codes are progressing toward net-zero ready standards, eligibility criteria continues to be adjusted.

New Construction

To be deemed an energy efficient new build, properties must have been awarded an eligible certificate–there are multiple eligible certifications including BC Energy Step Code, Built Green Canada, Canadian Home Builders Association to name a few.  However, if a new-build doesn’t come with the certification, clients can get their home assessed by a Natural Resources Canada (NRCan) qualified energy advisor.

How does someone apply?

After closing your mortgage, eligible borrowers have up to 2 years to submit the refund request, directly to CMHC through their Eco Program with supporting documentation.  The homeowner applies through CMHC’s website, uploading their supporting documentation. Once approved, CMHC mails a cheque directly to the client. The funds can be used for any purpose, they do not have to be applied to the mortgage.

Required documents will include:

Final Energy Efficient Certificate from the list of  Eligible Third-Party Certifications and/or

Energuide label for Energuide renovation upgrade report for existing homes

These supporting documents are ‘good’ for up to 5 years. Meaning, if the house sells within 5 years, the new buyer can also apply for the CMHC refund.  Even if it was already applied for by the previous owner.  Yes it’s double dipping that is allowed and encouraged by CMHC for this program.

Renovate for Energy Efficiency

If you have an insured mortgage with CMHC, and you’re spending at least $20,000 in energy efficient renovations, the program is available for you.  This applies to both single family dwellings and condos.  Buyers can use the Purchase Plus Improvements Program through CMHC, to get the money needed for the updates. See the following link: https://www.32degreesbuilding.com.au/how-to-make-your-home-energy-efficient/

Energy Costs are getting higher and the cheapest energy is the energy you don’t use.

Paul Pettipas – Nova Scotia Home Builders Association

To be Eligible:

  • Be a homeowner with CMHC Insured financing
  • Allocate a minimum $20,000 for energy-efficient improvements that fall within any of these 3 categories
  1. Building Envelope (insulation, windows, doors, roof, attic, air tightness & foundation).
  2. Mechanical systems (HVAC- Heating, Ventilation and Air Conditioning, heat pump systems).
  3. Renewable energy systems (solar, wind, geothermal).

CMHC has made the program user friendly and beneficial for the homeowner, putting money back in their pocket is always a positive.

 

If you would like more information or have questions, please ask! Call us at 250-753-2242 or apply here: Online Application

https://www.cmhc-schl.gc.ca/en/professionals/project-funding-and-mortgage-financing/funding-programs/all-funding-programs/canada-greener-homes
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Locally owned and operated since 1985.

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Mid Island Mortgage & Savings Ltd, #12 – 327 Prideaux Street, Nanaimo, BC V9V 1C8, Canada, 250 753 2242

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A Piece of Nanaimo History – The Occidental Hotel

 

The beginnings of the E&N Railway

The Occidental Hotel – a piece of Nanaimo history dates back to the 1870’s when construction began on the Canadian Pacific Railway. The construction of this transcontinental railroad would link British Columbia with the eastern Canadian provinces. This was a ‘term of the Union’ when BC joined the Canadian federation in 1871. Victoria, the capital of British Columbia, was proposed as the railways western terminus, thereby connecting Vancouver Island to the mainland.

The impracticability of bringing the railway across the Strait of Georgia to Victoria meant that the railway would take an alternate route. The line would end in Vancouver. It seemed Vancouver Island would not benefit from the transcontinental railway.  Island residents were angered by the change in route, and threatened to secede from Canada and become an independent colony.

To prevent this, the Federal Government offered to build an Island Railway and began to look for someone to build it. Robert Dunsmuir, the coal magnate from Wellington, BC was eventually chosen. He obtained financial aid from a group of American railroad millionaires and formed the company which was to build and own the railroad. Dunsmuir’s company received a land grant. It consisted of a twenty mile wide strip of land on Vancouver Island’s east coast, as well as a subsidy of $750,000.

Construction began on the Victoria-Nanaimo portion of the railway in 1884 and was completed in August 1886, when the last spike was driven by Sir John A. Macdonald at Shawnigan Lake.  Dunsmuir’s railway became known as the Esquimalt and Nanaimo Railway.

Samuel Fiddick

With the completion of the Esquimalt and Nanaimo Railway in sight, Samuel Fiddick (1833 – 1900) decided that it would be a profitable venture to build a hotel near the railway’s terminus on Selby Street. Nanaimo would become dependent on the railroad for passenger and freight service, and the Occidental Hotel or “Oxy” as it became known, was built to “cater to the railroad trade.”  Over the years, many patrons came to know the Occidental Hotel as “the first and the last.” Upon arriving in Nanaimo by train, the Occidental was the first pub, and upon leaving, it was the last.

Estimated Costs were $8000

The Occidental Hotel was built with money Samuel Fiddick received several years earlier from the sale of his coal lands in Cranberry District.  He and James Beck sold their interests near the Nanaimo River Bridge to James Harvey, close friend and associate of Robert Dunsmuir, for a large sum.

In 1886, Samuel Fiddick purchased three lots between Selby and Richards Streets from Thomas E. Peck of Cavan Street, Nanaimo.  Each lot had a frontage of 55ft on Fitzwilliam Street and varied in depth from 125ft  to 145ft. He submitted plans and specs for his proposed two story brick building to the City in March of 1886.  Alfred Summerhayes was awarded the contract to build Samuel Fiddick’s hotel and  construction cost’s were estimated at $8,000.  Before construction began, Fiddick altered the shape of the building so that its walls were built to the angle of the street.

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The first story was to be comprised of a bar and billiard hall in between.  The kitchen, washrooms, storage rooms, etc were to be located at the rear. The second story was to consist of thirteen large bedrooms.  In December of 1886 Samuel Fiddick applied to the City for a license to sell ales, wines, and liquors by retail.  His license was granted. An early advertisement read:

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And the rest is History.  We are intending to do a series of blogs about Nanaimo’s history and its historical landmarks.  If you have any history that you would like to share about Nanaimo,  we would love to hear from you.

For Sale

The Occidental Hotel: MLS® 941055

 

 

 

The Million Dollar Question…

Moneydoesgrowontrees

The bank of Canada has just raised their rate to a 22 year high at 5.0%. This move has us all pondering : What are interest rates going to do?  Whether you’re a Mortgage Broker, a Realtor, a homeowner, a consumer, or an investor – everyone wants to know what interest rates are going to do. This proves to be a challenging question.  Below are some of the latest opinions of reputable economists.

What the economists think

The economists are divided on predictions for not only the next BOC meeting, but also the strategy that will unfold in the coming months.

RBC Economics – Claire Fan:

“We continue to expect the full impact of rate hikes to date to come through gradually, slow spending over the second half of this year and for that to push the central bank back on the sidelines with no additional interest rate hikes this year.” 

Desjardins’ Senior Director of Economics Randall Bartlett:

“Given that the Bank even considered pausing at this month’s meeting, the better-than-expected inflation outcome reinforces our forecast for the overnight rate to be maintained at 5% for the remainder of the year,” he noted.

CIBC Economist Benjamin Tal:

“This is opening the door for another move in September,” Tal said. “Our official call is now that the Bank of Canada is going to move again, unfortunately, in September by 25 basis points, and that maybe will be the end of it.”

“We have to realize that we are already in a process of, in my opinion, overshooting – maybe by design by the Bank of Canada,” he said. “But it also means that if you overshoot, you accelerate the process of cutting.”

“We have to realize that this is an asymmetrical game, namely a situation in which the Bank of Canada is getting mixed signals from the economy,” he explained. “Some signals suggest that the economy is strong, some suggest that the economy is reacting to higher interest rates and slowing down, especially the housing market.”  

So, now what?

While interest rates play a major part in our clients decisions, the basic need of housing is universal and is not going away.  Fixed interest rates may be around 5-6% range, making home ownership more costly than Rent is astronomical and not doing anything to build clients networth.  

At the end of the day, you have to live somewhere! Real Estate is always a good long-term investment.

If you have questions, we are here to help. 250-753-2242

Contact Us

Interested in more?

https://www.mpamag.com/ca/mortgage-industry/market-updates/another-bank-of-canada-rate-hike-likely-in-september-cibcs-tal/452614

Death. There, I Said it.

Death. There, I said it.

 

Losing a loved one is one of the most difficult things a person can face. Being left to navigate the estate process can be daunting.  However, with prudent planning, the people left behind can grieve their loss and support the wishes of their loved one.  Make a plan for those you’ll leave behind–it will give you and your loved ones peace of mind.

It’s never too early (or late) to plan for the unexpected.  Read our tips for simplifying the lives of your loved ones upon your passing.  

 

Update Beneficiaries

 

Beneficiaries can be selected on registered investment plans including: Registered Retirement Savings Plans (RRSP), Tax Free Savings Accounts (TFSA), Registered Retirement Income Funds (RRIF).   Review your investment plans with your financial advisor to ensure the beneficiary is still relevant. Your life insurance policy is an important part of estate planning.  Review your life insurance beneficiary with your life insurance provider to ensure it is up to date.  Undergoing a major life event should be a que to review your beneficiaries.

 

Meet with a Professional

 

Enlist the help of an estate planning professional.  Financial Planners, Lawyers or Notaries are all professionals who can assist in this process.  They can help you consider your estate plan from all angles to best protect and provide for your beneficiaries. When you are making your plan, be clear and direct with your wishes to your estate planner.

Never assume that one partner will “go first”.  Never assume that your partner, or children know your wishes.  Making assumptions adds pressure to your family after your passing, and can create tensions amongst remaining family members. 

 

Confirm Title of your Home

 

If you own property, it’s especially important to fully understand the differences in ownership options.  Real Estate is often a cornerstone of an estate, call your lawyer to go over the ownership options in full detail; know the differences and decide on the best fit.  There are two ways that co-owners can be registered on title, each has different implications for the surviving owner.  

 

Joint Tenants: When one owner passes away, the survivor automatically gets the deceased’s portion.  

 

Tenants in Common: the interest of a deceased owner gets transferred to its beneficiaries in accordance with that person’s will. 

All too often the conversation regarding finances and death are avoided, and there’s no wonder why.  If you’re married or in a common-law relationship, you and your spouse need to have the “what if” conversation.  As a parent, determine how your children will be taken care of after you pass.  If you have adult children who will handle your estate, make sure they have an understanding of your financial situation. 

Indicate the following: where your bank accounts are held, what your financial assets are, the details of your mortgage, if you own your home free & clear, what the ownership structure of your property is.  If you are deferring your property taxes or not, and tell them where your will is located.  The more your loved ones know about how you want your estate to be disbursed the easier it will be for the surviving family members. 

 

None of these tips are staggering, but the value of understanding the information truly is!  The Rule of 7 says it takes hearing something 7 times for it to really hit home. By taking the time to read this article, you can add another ‘check mark’ toward creating an estate plan. For more estate planning information check out the links below.   If you’re not sure where to start, call us 250-753-2242 or click here to apply online:  Mortgage Application

 

https://islandlaw.ca/will-considerations 

https://www.ig.ca/en/estate-planning 

https://coastalwealth.ca/leave-a-legacy/ 

https://crossandco.ca/services/tax-services/trusts-estates/

 

 photo credit:https://www.karphotography.net

Subprime vs Traditional Lending

 

Coming from a traditional lending background, I’ve often thought of mortgage lending as a puzzle. In order to help the client, every single piece is necessary to get them what they need.  Credit has to be solid, the income both consistent and sufficient, the security (house) had to be in a good location in a decent condition.  All this is required. Without every piece in place, the puzzle just wont work!  The thing is–people’s lives can be complicated, messy even. Puzzle pieces go missing, and some don’t QUITE fit.  

Traditional Lending

Lets explain; Banks, Credit Union’s, and Monoline Lenders (companies regulated by the bank act who offer single products, in this case mortgages) all have to adhere to specific rules set by the Government.  Within those rules, the companies themselves can work with their board, risk management and shareholders to ensure that their best practices are within those rules.  They may decide to assume more risk in one area but less in another. Offering products or programs that target specific audiences. Acting within the letter of the law and their internal policies and practices.  For the most part, doing the same puzzle, with the same pieces.  

Subprime

Subprime, or “B” Lenders, do not have to adhere to the same rules as big banks.  Privately owned, operated and regulated they offer their own unique pieces to the puzzle.  These lenders offer assistance to borrowers who aren’t a fit for the major lenders, so credit issues, self-employment or lack of sufficient income fits for them.  They have more flexibility in how they lend and who they lend to. 

Of course, guidelines are still in place, they merely have more of a landing pad for the “unbankable”.  Anytime a lender is taking on higher risk mortgages, there is a premium for that, and with subprime lenders it translates to higher interest rates than other lenders, and sometimes lender fees.  It would be easy for a person to sit back and form opinions based on the idea that they are charging what they are. Some might say that the people seeking money from these companies “shouldn’t even be borrowing”.

Self Employed

For our self-employed clients, the general rule of thumb is that lenders want to see the last two year’s income tax returns (T1 Generals).  For a self-employed individual, this may not be the most current and accurate version of their finances.  Subprime lenders offer Business for Self programs such as stated income that require the last 6 months of business bank statements to support the cash flowing into the company.

Credit Issues

If you go bankrupt or file a consumer proposal you’ll generally be waiting 2 years from your date of discharge in order to be a candidate for a mortgage at a bank or Credit Union.  With subprime lenders, they consider you right away.  Their minimum credit requirements are significantly lower.  Many people may think that once their mortgage is placed with a Subprime lender that they’re going to be with them forever. This is not true.  Often clients will work with their Mortgage Broker to make a plan to make their way back to an A lender.  This could mean a variety of things. A hyper focus on paying bills on time, to earning additional income.  Whatever it may be, you won’t be alone, our Brokers will work with you to set a plan and will continue to check in to help keep you on track.

Stigma

There tends to be a real stigma out there about the Subprime lending world. In a situation where you may lose the house because of lack of income, an illness, a bad relationship or business venture that left you in a tough spot–There are options for you.  Of course the ideal lending situation is to be able to have a mortgage through a major bank, or monoline company. The interest rates will be less and there will be less fees.  No one is disputing that. 

However, in my decade and a half in the finance world to confidently say that there are many of us who “do not make the mark” set by banks.  I feel fortunate to be able to offer people solutions that fit their situation, to meet them where they are.  In many cases the solutions will help them maintain or improve their housing situation, and help their financial situation.

Being a mortgage underwriter at a traditional financial institution for many years, my experience with lending was limited to our own products and services. Helping people to have access to the Subprime lenders gives me the ability to help people work with what they have.  Putting their puzzles together in a way that works for them! 

I am grateful and appreciative of the opportunity to offer mortgage and financing solutions for our clients.  Interested in learning more, or have questions about your own ability to qualify for a mortgage please call or email us.  If you’re buying, renewing, refinancing we would be more than happy to help work with you to figure out your options.

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HOW SOME YOUNG PEOPLE CAN AFFORD A HOME

– HOW SOME YOUNG PEOPLE CAN AFFORD A HOME –

By: Edward Trapunski

We were recently very flattered to be invited to dinner by a young couple that we know. It was the first time that we visited their home and we were overwhelmed by how beautiful it is. Home for them and their two pre-schoolers is on an attractive street in one of the most desirable enclaves in the city.

He’s on leave from his job while he pursues more education so that he can better himself. She has a good job but, as yet, she has no security. It’s scary.

It’s very hard for young people to buy a house, according to what you read and hear. Still, here’s a young couple who own a beautiful five-bedroom, four-bathroom house near a ravine for which they paid $1.2 million. It’s not out of line for Toronto.

Here’s how they managed to do it:

The house they owned previously wasn’t in a nice neighborhood. It was a fixer-upper and they spent the money to have the work done. It was a good investment because they were able to sell their modest first house for considerably more than they bought it for. It helped that housing prices were escalating and the area they were leaving had yuppified.

So it was the first house that gave them the leverage. They had saved up for it. My young friend is a family guy and the prospect of a household full of children was a stronger motivator for him than travelling. He still enjoyed his good seats watching the Blue Jays but he came straight home right after the game. The nest egg my friend and his wife accumulated by being homebodies showed the lenders enough that they were responsible and had no problem shopping for a favorable mortgage.

For that first house they also took advantage of the Home Buyers’ Plan (HBP). The Canadian government allows first-time home buyers to borrow up to $35,000 tax free from their RRSP. If you’re purchasing with someone who’s also a first-time homebuyer, you can both access the $35,000 for a total of $60,000. If you have a down payment of at least 20% of the purchase price of the home, the savings can be significant, and you won’t have to buy mortgage default insurance. Married couples and common-law partners both qualify. However, since the HBP is considered a loan, it must be repaid within 15 years at the rate of at least 1/15 of the loan every year.

My friends also accessed what is colloquially known as the Bank of Mom and Dad. They were lucky enough that both sides of the family were prepared to help them out with the down payment. This isn’t as rare as you think any more. In the 1960s, people usually lived until they were 65 or 70. When they passed away, they’d leave enough in their estate for their children—who were 30 or 35 years younger than them—to use to buy a house. Now that people are living longer, they’re giving their adult children the money while they’re still alive to help them get into the housing market.

Many parents these days are prepared to help their children settle down faster than they could do on their own. Also, with interest rates at such historically low levels, it makes sense to help your children take advantage of a situation that may never come again. Provided it doesn’t jeopardize their own finances or retirement plans, many parents feel a sense of personal satisfaction in making a difference in their adult children’s lives. They also want to ensure that they’ll see the rewards of having a stable life for their grandchildren before they’re gone.

My young friends began with a starter home, as I did. Now they plan to live in their lovely home for the rest of their lives — and they can — so they see it as an important investment for themselves and for their children. That’s why they’re glad they did it.

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo
We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

Lenders hike fixed rates yet again, bringing them closer to 4.5%

-Steve Huebl of Canadian Mortgage Trends-

 

Following a jump in bond yields last week, lenders across the country once again bumped up their fixed mortgage rates.

 

Big banks like RBC, TD and BMO hiked 5-year fixed rates by 20 to 25 basis points, with all three offering uninsured rates at 4.39%.

 

The move follows a nearly 10-bps jump in the Government of Canada 5-year bond yield, which leads 5-year fixed rates. The 5-year bond yield closed at an 11-year high of 2.88% on Friday. Since the beginning of the year, bond yields are up over 165 bps.

 

 

Among national lenders, the average uninsured 5-year fixed rate is now 4.37%, up from 3.92% a month ago, according to data tracked by Rob McLister, rate analyst and editor of Mortgage Logic. The average rate for an insured 5-year fixed mortgage, meaning that with a down payment of less than 20%, is now 4.14%, up from 3.78% a month ago.

 

That means fixed rates are now up roughly 40 bps in just the span of one month. For perspective, a 50-bps rate increase translates into a roughly $25 higher monthly payment per $100,000 of debt, based on a 25-year amortization.

 

While this doesn’t impact most borrowers with fixed rates, new borrowers and those renewing a mortgage are facing significantly higher rates compared to just several months ago, and potentially double for those renewing a mortgage.

 

As fixed rates march higher, variable rates are likely to jump again following the Bank of Canada’s next rate decision meeting on June 1, when it’s expected to hike interest rates another 50 bps. That could bring prime rate—the rate upon which variable rate mortgages and lines of credit are priced—up to 3.70%.

 

How rising rates will impact mortgage borrowers…

Aside from higher monthly payments, how will mortgage borrowers be impacted by these rising rates?

 

“As interest rates march higher—we expect the overnight rate to hit 2% by October, a projection that increasingly looks conservative—borrowing costs for Canadians will also rise, leaving the average Canadian household to spend almost $2,000 more in debt payments in 2023,” say economists from RBC Economics.

 

“This will erode spending power, especially for the lowest earning fifth of households which spend 22% of their after-tax income on debt servicing (including mortgage principal and interest payments),” they add.

 

On the other hand, RBC notes that the pandemic helped boost savings among Canadian households.

 

“The pandemic may have boosted debt, but it also left Canadian households sitting on $300 billion in savings,” the RBC economists wrote. “That’s a huge backstop—enough to cover about a year and a half of total Canadian household debt payments.”

 

How will rising rates impact home prices?

While the latest housing data showed home sales plummeting in April, house prices have so far held steady throughout most of the country outside of Ontario. In the Greater Toronto Area, average prices are so far down roughly 6%, but by as much as 22% depending on the housing type and specific region. Benchmark prices are often a lagging indicator, so further price declines are likely in the months ahead.

 

“…tomorrow’s homebuyers are going to have a much harder time paying today’s prices if they’re paying 5% on their mortgage compared to the low 2% range just a few months ago, and the high 1% range a year ago,” wrote real estate analyst John Pasalis, president of Realosophy Realty, in a recent post on move smartly.

 

Pasalis noted some have argued that this isn’t a concern, since many borrowers have been qualifying at a stress test rate of at least 5.25%, but he suggests that’s an oversimplification of the situation.

 

The mortgage stress test is currently used to qualify borrowers at the greater of the buyer’s actual mortgage rate plus 2% or the benchmark rate, which is currently 5.25%.

 

“As these are dynamic measures that will change as rates do, the stress test will also increase, which will reduce the amount of debt a buyer can take on,” Pasalis writes, adding that the contract rate influences how much mortgage debt the borrower is willing to take on.

 

“A buyer who qualifies for a $1M mortgage may be willing to take on that much debt when interest rates are 1.75%, but less so when rates are 4%, because under the higher rate their actual mortgage payment would be roughly $1,100 per month higher,” he wrote.

 

As a result, if interest rates continue to trend higher, Pasalis says he “would not be surprised if we see some downward pressure on home prices over the next 9 to 18 months due to homebuyers being unwilling or unable to pay today’s prices at tomorrow’s higher interest rates.”

 

Although, he adds that any price decline would “likely be a temporary one due to long-term fundamental factors that have been contributing to rising home prices in the Toronto area.”

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Supporting Ukraine…

Mortgage Professionals Canada | 2022

 

Mortgage Professionals Canada and the Mortgage Professionals Canada Foundation have partnered to raise and distribute humanitarian relief funds to Ukraine.

 

The MPC and MPC Foundation Boards of Directors have carefully selected two established charitable organizations for their outstanding efforts to provide much needed medicine, supplies, and shelter to vulnerable individuals coping with hardship in Ukraine.

 

With the urgency facing the people of Ukraine, we ask that mortgage professionals donate generously to this joint initiative to provide humanitarian relief through: The Canadian Red Cross, and Doctors Without Borders/ Médecins Sans Frontières (MSF). Funds will be collected by the MPC Foundation and distributed evenly between these two very capable organizations, each of which will provide support directly to those most impacted.

 

Mortgage Professionals Canada has already donated $10,000 to support this initiative.

 

Please join us. Any amount helps. Click here to donate… https://mpcfoundation.ca/donate/ukraine/

 __________________________________________________________

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

 

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

 

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

Many BC homeowners reportedly planning to leave province soon – CMP – REMAX

-Many BC homeowners reportedly planning to leave province soon-

Pandemic impacts and affordability concerns rank high among the reasons for moving out…

A significant share of British Columbian homeowners are planning to leave the province within the next five years, raising the possibility of even more supply entering the red-hot market during that period, according to RE/MAX.

Citing data from Insights West, RE/MAX said that 17% of the province’s homeowners are thinking of selling their home in the next two years, while 29% are considering doing so in the next five years.

Of those planning to sell their homes, 10% are considering downsizing, 11% want to relocate somewhere else in BC, and 9% are planning to move to another province altogether in search of more affordable housing.

“The relentless climb of real-estate prices in BC, and in Metro Vancouver in particular, has resulted in many homeowners weighing their options for cashing out,” said Steve Mossop, president of Insights West. “The option to downsize or move to a different location… in order to take advantage of the equity in their existing home has many weighing the alternatives.”

For 36% of BC’s homeowners, a major driver of the decision to move out was the financial impact of the pandemic. Affordability concerns ranked high on the list as well, with 72% of respondents saying that housing prices will likely continue rising over the next 12 months and lasting well into the next two to five years.

Anxiety surrounding “the likelihood of higher interest rates is also prevalent among BC residents,” RE/MAX said.

Low Rates Help Borrowers Pay Mortgage at Record Pace – Canadian Mortgage Trends

Home prices may be astronomical in certain parts of the country, but historically low mortgage rates are allowing borrowers to pay off their mortgages faster than ever.

At today’s average rates, 61% of a new homebuyer’s very first mortgage payment is going towards principal repayment, according to data from Edge Realty Analytics.

In the early 2000s, that percentage was 26.5%. The change is even more drastic when looking back at the 1990s, where just 11.9% of a homebuyer’s first payment went towards paying down the principal, or the 1980s, when that percentage was a minuscule 4.6%.

The result is a much faster build-up of equity over a short period of time, so long as interest rates remain low.

After the first five years of mortgage payments, today’s homebuyers borrowing at today’s prevailing rates will have paid back more than a fifth of their mortgage (16.5%). Here’s a look at how that compares to past decades:

 

Mortgage payments

(Courtesy: Edge Realty Analytics)

 

“Homeownership represents a very aggressive forced saving program,” Mortgage Professionals Canada noted in its annual consumer report.

“As a result (and even before we consider the impact of price growth) housing equity is built very rapidly,” the report noted. “This excellent ‘net affordability’ goes a long way to explaining why homebuying activity has remained strong in Canada and why a large majority of Canadians see homeownership as financially better than renting, despite the rapid run–up in house prices and the higher burden of mortgage (principal plus interest) payments.”

(Source: Mortgage Professionals Canada)

 

Not only have low interest rates allowed borrowers to repay their mortgages more quickly, but it’s also kept housing moderately “affordable” despite the 38.4% run-up in average home price in the past 12 months.

“If it were not for the extremely low interest rate, most cities in Canada, especially Toronto, Ottawa, Vancouver and Montreal, would be in overvalued territory,” Alberta Central chief economist Charles St-Arnaud wrote in a recent analysis. “It means that the main driver for affordability is the record low level of interest rates.”

But Rates Won’t Stay Low Forever

All good things must come to an end, and that goes for ultra-low mortgage rates.

The Bank of Canada has made it abundantly clear that it expects to start raising interest rates by late next year.

How much rates will increase in the Bank’s next rate-hike cycle is anyone’s guess. But for what it’s worth, markets are pricing in at least eight 25-bps hikes over the next five years, which would bring Canada’s overnight rate to 2.25%, up two percentage points from its current record-low of 0.25%.

But even a more modest rise in rates of as little as 100-150 basis points could “push the valuation metrics into overvalued territory,” St-Arnaud noted, making today’s still somewhat “affordable” housing market patently unaffordable for most.

“Our simulations show that many cities in Canada will struggle with housing affordability as interest rates increase,” he added. “A 150-bps increase in mortgage rates could be enough to generate significant headwinds on some housing markets and house prices.”

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

 

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CANADA’S HOUSING MARKET – 2021 FORECASTS – CANADIAN MORTGAGE TRENDS

CANADA’S HOUSING MARKET – 2021 FORECASTS – CANADIAN MORTGAGE TRENDS

The Canadian real estate market defied gravity last year in spite of a global pandemic and nationwide lockdowns.

The year ended with the seasonally adjusted MLS Home Price Index up 13% year-over-year and the average house price surpassing the $600,000 mark.

“It’s official, despite all the challenges, 2020 was a record year for Canadian resale housing activity,” Costa Poulopoulos, Chair of the Canadian Real Estate Association (CREA), declared.

But where do prices go from here?

Will prices finally fall, as many have been predicting since early last year? Will they moderate and return to more sustainable growth, or is it still full-steam ahead?

Nobody knows for sure, of course. But we’ve compiled a rundown of some of the many (and varied) 2021 house price forecasts to get an idea of what some of the smart minds in the industry think.

We’ve also included some previous 2020 forecasts, where possible, to illustrate the fallibility of forecasting.

In case we need a reminder of how “off” forecasts can sometimes be, one need not look further than CMHC’s prediction of a 9% to 18% decline from pre-COVID prices by the end of 2020. That was a forecast that, at least so far, hasn’t aged well.

CREA

·         2021 forecast: +9.1%

·         2020 forecast: +6.2%

·         Commentary: “(We are) anticipating healthy housing price growth in 2021, with move-up and move-over buyers continuing to drive activity in many regions across the Canadian housing market. An ongoing housing supply shortage is likely to continue, presenting challenges for homebuyers and putting upward pressure on prices.”

CMHC

·         2021 forecast: -9% to -18% (pre-COVID peak-to-trough decline)

·         The agency first released this forecast last spring at the height of the first wave of the pandemic. While the timeframe has been been pushed out, CMHC continues to stand by this forecast.

·         2020 forecast: an average MLS Price of between $506,200 and $531,000

·         Commentary: “When I say I stand by our forecasts, it’s really with respect to what are the broad trends we expect moving forward,” CMHC Chief Economist Bob told reporters in September. “When I look at the housing market there are a tremendous number of risks.”

Real Estate Firms

Royal LePage

·         2021 forecast: +5.5%

·         2020 forecast: +3.2%

·         Commentary: “Across the country, a large number of hopeful buyers intent on improving their housing situation were not able to find the home they were looking for this year, as the inventory of properties for sale came nowhere near to meeting surging demand. With policy-makers all but promising record-low, industry-supportive interest rates to continue, we do not see this imbalance improving (this) year. The upward pressure on home prices will continue.”

RE/MAX

·         2021 forecast: +4% to 6%

·         2020 forecast: +3.7%

·         Commentary: “(We are) anticipating healthy housing price growth in 2021, with move-up and move-over buyers continuing to drive activity in many regions across the Canadian housing market. An ongoing housing supply shortage is likely to continue, presenting challenges for homebuyers and putting upward pressure on prices.”

The Banks

RBC

·         2021 forecast: +8.4%

·         Commentary: “We see little that will stop activity or prices from reaching new heights in the year ahead…Yet we also expect cooling signs to emerge, which will come into fuller display in 2022. The main restraining factors will be a lack of supply, waning pandemic-induced market churn, a modest creep-up in interest rates and an erosion of affordability. Call it a 2022 soft landing.”

TD

·         2021 forecast: +5.8%

·         TD is calling for an initial plunge in home prices of 7% in early 2021, before recovering in the latter part of the year to post an overall year-over-year price gain.

·         Commentary: “Canadian prices will likely drop through the first half of 2021 by around 7%, before regaining some traction later (in the) year. While this sounds like a big hit, it would still leave the upward trend in prices, established prior to the pandemic, in place. Some added pressure on prices could emerge on the supply side. Case in point, the end of mortgage deferral programs is likely to spark some additional supply on the market.”

CIBC

·         2021 forecast: +2.4%

·         This is based on an average of the bank’s upside case of an 11.2% price gain vs. its downside case of a 6.9% decline over the next 12 months.

National Bank of Canada

·         2021 forecast: -5.2%

·         This is based on an average of the bank’s upside case of a 1.5% price decline in 2021 vs. its downside case of a 9.9% decline.

·         Commentary: “We were pleasantly surprised by the performance and house prices so far during the pandemic. Although in our forecasts, particularly in the pessimistic case, we don’t assume strength in the housing market. I think for the macroeconomic scenarios, and that which goes into generating our allowances, you can consider those scenarios quite prudent.”

BMO

·         2021 forecast: +6.6%

·         This is based on an average of the bank’s quarterly MLS Home Price Index forecasts, ranging from +11.6% in Q1 to +0.5% by Q4.

·         Commentary: “We expect the market to lose some momentum in the months ahead, as tighter mobility restrictions, the small back-up in long-term yields, the ongoing absence of immigration, and still-soft employment conditions will weigh. To be clear, we don’t look for a reversal in the broader (housing) market, just some moderation from (December’s) extraordinary results. After all, ‘stay at home’ doesn’t translate to ‘don’t buy a home.’“

Scotiabank

·         2021 forecast: +0.4%

·         Commentary: “The delay of some activity into H2-2021, when we had already expected widespread inoculation to lift economic growth, likely means stronger second-half activity than we previously anticipated. Rock-bottom interest rates, ongoing federal and provincial fiscal supports, and the current supply-demand tightness should also contribute to home price gains over the medium-term.”

Credit Rating Agencies

Moody’s Analytics

·         2021 forecast: -7% (peak-to-trough decline)

·         Commentary: “The housing market will no longer be able to escape the poor condition of the labour market as vacancy and delinquency rates rise in 2021…Fortunately, the declines will be brief and the restoration of robust job growth in 2022 along with Canada’s strong demographics will put a floor under the housing market.”

Fitch Ratings

·         2021 forecast: -5%

·         Commentary: “We attribute the expected decline to lower demand caused by elevated levels of unemployment and increasing affordability issues…Although we expect delinquencies to increase in 2021, we do not expect the level of delinquencies, distressed sales or foreclosures to increase to the levels seen in the U.S. during the financial crisis.”

 

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

 

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

 

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.