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New round of tightening measures for the moartgage market? Perhaps

2012-01-30 | 15:09:44

The Federal Government, over the past 3 years has implemented some tightening restrictions on Canadian mortgage rules. The purpose, to put the brakes on Canadian debt load.

These ranged from increasing the minimum down payment (DP) from 0% to 5% in October 2008, decreasing the amortization period from 35 (back) down to 30 years, and reducing the refinance amount allowed on the value of a home from 90% to 85%.

It would appear the government is poised to introduce further restrictions in the coming months although no official announcement has been made.  In recent weeks the governor of the Bank of Canada (BOC) Mr. Mark Carney has “hinted” at the “possibility” of further tightening.

This could include a further reduction in amortization down to 25 years or an increase in DP requirements.  An increase to 7.5% or 10% from the current 5% has been suggested by market watchers.

If you would like to know how this could impact your buying or refinancing options don’t’ hesitate to contact me with any questions.

Thinking About Buying a Home This Year?

2012-01-16 | 13:34:41

Thinking about buying a home this year? 

How is your credit rating? It is very important to consider your credit score and history prior to applying for a loan. 

Credit scores are determined by using a complex formula and rating scale.  Credit rating agencies look at your income, your debt repayment history, your total approved credit limits, your credit usage levels and more and that information is crunched into a scoring system that assigns a number of between 300 and 900.  The higher you are on the scale, the less risky you are to a lender.

This is important as lenders put considerable weight on your credit score.  For example, a score of 750 to 799 is shared by 27 per cent of the population. Statistics show that only two per cent of the borrowers in this category will default on a loan or go bankrupt in the next two years.  That means your chances of an approval are much greater. 

Factors affecting a credit score are paying your bills on time. This one weighs fairly heavily and can impact your score by as high as 35 per cent.  Late payments will drag your score down and are viewed as a “red flag” to lenders.

The amount you owe versus the amount you can borrow affects your score by as high as 30%.  For example if you have a $500 credit limit on a credit card and you constantly run it too the limit each month this has a negative effect,  even if you pay the full balance on time each month.  You could improve your score by increasing the credit limit on that card to $1000.  In this way your regular monthly charges of $500 are now at only 50% of your limit.

Want to learn more?  Don’t hesitate to contact me with any questions or concerns - there is no cost!

Aging baby boomers helping change Canada's housing market: CMHC

2012-01-09 | 10:02:56

Aging baby boomers helping change Canada's housing market: CMHC

Home sales rise, listings decline in November

2012-01-04 | 13:41:38

Financial Post Staff Jan 3, 2012 – 12:50 PM ET

OTTAWA — Canada’s resale housing market tightened slightly in November, as sales rose in more than 50% of markets while the number of listings declined, the Conference Board of Canada said Tuesday.

Sales rose in 16 of the 28 markets the board tracks for its metro resale index, with seven of those markets posing a gain of more than five per cent over October’s number. Year-over-year sales rose in 15 areas, down from October, when 20 of the urban areas posted sales growth over 2010.

“The supply of new listings fell in 23 of 28 markets in November, but still exceeded year-earlier levels in 20 jurisdictions,” the board said. “An easing in supply of listings, combined with slightly weaker sales gains, lifted the sales-to-listings ratio in November in 23 markets. This left four areas as ‘sellers’ markets, while 21 remain ‘balanced’.”

The drop in listings resulted in higher prices in 17 areas month-over-month, while the year-over-year price was higher in 19 — with 16 markets recording growth of four per cent or more.

The Conference Board predicts all but three of the 28 markets it tracks for the index will see some increase in housing prices in the short term — the Ontario cities of Oshawa, London and Windsor being the exceptions.

Saskatoon and several Quebec markets — Gatineau, Montreal, Quebec, Sherbrooke, Trois-Rivieres and Saguenay — are expected to see the biggest increases in housing prices in the near term, the board said, predicting a seven per cent year-over-year gain.

A five per cent gain appears to be in the cards forVictoria,Vancouver, B.C.’sFraserValley,Calgary,Edmonton,Regina,Winnipeg,HalifaxandNewfoundland, the board said. It expects housing prices to rise three per cent inSaint John, as well as theOntariocentres ofThunder Bay,Sudbury,Toronto,Hamilton,St. Catharines,Kitchener,KingstonandOttawa.

Aging baby boomers helping change Canada's housing market: CMHC

2012-01-03 | 09:36:46

Aging baby boomers helping change Canada's housing market: CMHC

Julian Beltrame

OTTAWA— The Canadian Press

Demographic changes from aging to immigration flows are helping shape Canada’s housing market of the future, the federal housing agency suggests in its annual report.

The Canadian Mortgage and Housing Corp.’s study of housing trends sees continued demand for condominium and smaller homes, institutional buildings such as old age facilities, as well as a lively market for renovators.

The oldest of the baby boom generation entered retirement age this year, but by 2036, seniors will represent about one quarter of the total population in Canada, the report stresses.

That will mean more older households and more headed by single seniors, who will demand a different kind of residence from the two-story detached home they raised families in.

Condominiums already accounted for one-third of all starts in urban centres last year, compared with 29 per cent in 2009, but that trend likely will continue, says the CMHC authors.

“Aging households will support continued growth in condominium markets. We can also expect to see growing demand for home adaptations ... (and) the number of seniors in institutions would increase by a factor of almost two and a half,” the report states.

The agency advises that it is not forecasting the future, but extrapolating what could occur based on current trends.

Ian Melzer of the CMHC’s housing needs policy group said overall Canada’s housing market will continue to grow, but likely at a slower pace than the recent boom years.

Although Canada’s birth rate remains below the replacement rate, the population is increasing faster than at any time since the early 1990s thanks to immigration. Last year, new arrivals swelled to 271,000, the highest in four decades, accounting for two thirds of population growth.

Most are moving to Canada’s three biggest cities – Toronto, Montreal and Vancouver – but less so than in the past. Last year, 63.8 per cent of immigrants landed in the three cities, compared with 72.7 per cent in 2001.

As well, home ownership rates, currently about 68 per cent, tend to be higher among seniors, although they will require different kinds of homes, or adaptations to current homes.

“Some will move into smaller detached houses or row houses, some will move into condo apartments,” Mr. Melzer said. He points out that Vancouver is experimenting with units as small as 300 square feet, which may be attractive to single seniors.

Seniors tend to stay in their current homes as long as possible, so many will likely choose to adapt their living spaces.

“Typically, young seniors are not living in accessible bungalows, so there will be renovations ... installation of ramps or elevators, widening of the front door, bathroom doors. You might get replacement of bathtubs,” he explained. Another option is extensions to existing homes where seniors can live with their children.

The 184-page “Canadian Household Observer 2011” contains a number of surprising elements, although most of the report is based on previously released data. Among the findings: – Housing and related spending rose 7.1 per cent last year and now accounts for 20.3 per cent of Canada’s gross domestic product output, or about $330-billion – Super-low interest rates, coupled with a small inventory of existing homes for sale, helped push the average Multiple Listing Service price up by 5.8 per cent in 2010 to $339,042 – In 2006, only 35.3 per cent of recent immigrants (since 2001) owned their homes, compared to 68.7 per cent for non-immigrants. The CMHC notes, however, that home ownership among immigrants increases with their duration in the country.

– About 13 per cent of Canadians cannot afford a home in the area they live, a measure CMHC calls “core housing need.” Provincially, core housing need was highest in Newfoundland at 16.7 per cent, followed by Ontario and Nova Scotia at 15.1 per cent of households. Among cities, Toronto leads in core needs at 17.2 per cent, followed by Vancouver and Halifax at 16 per cent.

Still, the agency notes that 87 per cent of Canadian households “either live in, or had sufficient income to access, acceptable housing” in 2008.

The Bank of Canada and many economists have raised concerns about the level of debt, with household debt hitting a record 153 per cent greater than disposable income in the fall of 2011. The central bank said some households could be put under pressure when interest rates rise.

But the CMHC notes that 68 per cent of that debt is in mortgages and that most households can afford the costs associated with home ownership.

While household debt is a serious issue, the agency argues that a major shock to employment would constitute a much greater risk to Canadians’ ability to make mortgage payments than rising interest rates.

“Most Canadian households have the capacity to deal with adverse economic conditions, due to the high quality of mortgage credit in Canada, the substantial equity position of most Canadian homeowners with a mortgage, and households’ ability to adapt their discretionary spending,” the report concluded.

Canada will experience moderate growth in the economy of 2.5%,

2011-12-08 | 10:34:21

OTTAWA — The Canadian economy will walk the line in 2012 between a downturn in Europe and continuing growth in the United States, according to a an outlook issued Tuesday by RBC Economics.

Of course, that’s all assuming European policy-makers finally take action to deal with the currency bloc’s debt crisis, said RBC chief economist Craig Wright.

But if they do,Canadawill experience moderate growth in the economy of 2.5%, Mr. Wright said.

Supporting that expansion will be low Canadian interest rates, high commodity prices and aU.S.economy that should also expand at a 2.5% pace despite continuing high unemployment and its blighted housing market.

Yet even if the Euro zone survives its indecision and foot-dragging on dealing with the debt crisis, Mr. Wright expects the area to fall into recession, albeit a short-lived one, which will weigh on Canadian exports.

As such, Mr. Wright said, “Given concerns about the weakening global economy and its impact onCanada’s growth momentum, we expect that the Bank of Canada will maintain its accommodative policy at least until mid-2012.”

Bank governor Mark Carney and his advisers played into that forecast Tuesday, saying they would hold the bank’s key lending rate at one per cent “over the medium term,” citing a deteriorating global outlook but better-than-expected performance inCanadaand theU.S.in the second half of this year.

“The biggest change to the composition of growth will come from net exports, driven by strongerU.S.expansion and rising demand for auto and energy products,” said Mr. Wright.

Yet, another variable that could throw the forecast of target is record high levels of consumer debt, which “has made the economy more vulnerable to a sharper downturn should there be any unexpected shock like a deterioration in the labour market, a drop in housing prices or spike in interest rates,” Wright warned in the report, whose 2.5% target is unchanged from September.

He added those outcomes are unlikely, and according to a report from Re/Max on Tuesday, the housing market will hold up its end of the bargain, with sales continuing to climb in 2012 and prices to rise to an average $363,000.