Canada’s mortgage market is reacting to fears this week that United States President Donald Trump’s threatened tariffs could deliver a sharp blow to the Canadian economy. Experts say that home buyers and owners with a mortgage up for renewal could secure a cheaper rate amid the dysfunction, but also warn that the forecast for the spring housing market is far from…
Exciting New Mortgage Rules Effective December 15th Exciting changes to mortgage rules are here! Here’s what you need to know: Key Updates 1. 30-Year Amortizations 2. Higher Price Cap 3. Newly Built Homes Focus • Homes must be owner-occupied and not previously used for residential purposes. What This Means for You
Economists react to the latest consumer price index print The Bank of Canada has made it clear that any changes in interest rates will be data dependent, but how is the latest consumer price index data likely to influence its decision? With the CPI print from Statistics Canada released Tuesday showing an uptick in the pace of…
If your home ownership dreams have been put on hold, there may be hope on the horizon as Canada’s falling interest rates are impacting how much income is needed to purchase a property. But depending on where you live, it still requires a hefty paycheque to enter the market. According to a new report from Ratehub.ca, the income needed to afford a home has fallen in 12 of 13 cities across the country. This comes after the Bank of Canada (BoC) announced a massive interest rate cut in October. The BoC dropped the rate by 50 basis points, bringing it from 4.25% to 3.75%, which many referred to as a “jumbo-sized” drop. This was the fourth announcement of 2024, and such a low rate hasn’t been seen since December 2022. According to Ratehub.ca’s Penelope Graham, “affordability conditions have been improving since June, when the Bank of Canada first started cutting its benchmark interest rate, easing mortgage costs and the pricing of other borrowing products.” RateHub Vancouver and Toronto, Canada’s most expensive cities, saw the most significant drops in the income needed to purchase a home between September and October 2024. “While both of these cities saw a robust increase in sales activity in October, they remain well supplied, which has helped keep a lid on price growth,” notes the report. Still, prospective buyers in these cities need to take home significant paycheques to get into the housing market. The income required to purchase the average home in Vancouver now stands at $214,000 annually. In Toronto, it’s slightly lower at $195,420. Moreover, Canada’s smaller cities haven’t experienced the softer prices of their larger counterparts. A drop in supply and an increase in buyer activity have resulted in prices going up, as six out of 13 markets across the country saw month-over-month price hikes. Fredericton was the only market where affordability deteriorated between September and October as home prices increased by $16,100, meaning buyers would need $1,890 more income to purchase an average property. Ratehub.ca provided an optimistic outlook for prospective buyers over the next few months as mortgage rates are expected to drop further. The overnight lending rate is predicted to drop by another 25 basis points, bringing the benchmark interest rate to 3.5%. Rates are expected to drop further in 2025. However, lower rates will likely lead to an uptick in prices as more buyers could enter the market. “The national average home price is expected to end the year largely flat at $683,200 – just a 0.9% increase – before rising 4.4% next year to $713,375,” concluded Ratehub.ca.
Stress test curbed credit growth while reducing risks for borrowers facing higher payments Mortgage stress tests have proven to be effective in preventing an uptick in delinquencies despite recent interest rate hikes, according to a new Bank of Canada (BoC) report. The federal government and the Office of the Superintendent of Financial Institutions (OSFI) first…
Second in command speaks out amid supply and demand imbalance The Bank of Canada’s second in command cautioned against “tinkering too much with the mortgage market” to fix housing affordability. Canada’s high home prices are primarily a function of a supply and demand imbalance, and the fix “will take time,” Senior Deputy Governor Carolyn Rogers…
Canadians could see a “mortgage war” in the months and years ahead as interest rates fall and unprecedented conditions drive competition among the country’s banks, according to RBC Capital Markets. The growth restrictions recently imposed on TD Bank’s U.S. operations and the eventual arrival of open banking in Canada are among the factors at play,…
While the vast majority of homeowners opt for the familiar 5-year fixed term, a tiny percentage of Canadians prefer the stability that comes with locking in a 10-year rate. In an unpredictable world where interest rates fluctuate, a 10-year fixed mortgage can offer peace of mind with long-term, stable payments. However, this product comes with…
Variable-rate mortgages track the Bank of Canada’s overnight rate, which is now down 125 basis pointssince May. Fixed-rate mortgages, however, are influenced by bond yields—and Canadians shouldn’t count on those yields dropping much further, Drummond noted. “Odds are, they will be above the bank rate, and we will have a positive yield curve. Why? Because time…
Collateral-charge mortgages might have a bad rep in some quarters but they are not inherently bad products. But many people aren’t aware of what they’ve signed up for. In today’s uncertain interest-rate environment, homeowners want the option to make a change to their mortgage and shop around for the best terms and rates, especially at renewal time. With economists expecting several more central bank rate cuts, and 60 per cent of all outstanding mortgages coming up for renewal over the next two years, mortgage pricing in Canada is poised to get even more competitive as banks look to lure clients from their existing lenders. But when shopping around, one product homeowners might want to steer clear of is a collateral-charge mortgage, which comes with restrictions around switching, whether at renewal or any other time. A collateral-charge mortgage, also known as a readvanceable mortgage, is a type of loan that essentially bundles together your mortgage and a line of credit, based on the amount of your home equity. When a lender registers this type of mortgage, they’ll do so for an amount up to 125 per cent of the home’s assessed value. That extra amount then gives the borrower the ability to tap into their home’s equity either right away, if they’ve made more than a 20 per cent down payment, or as it grows over time – without having to apply and take on a separate borrowing vehicle such as the popular home equity line of credit (HELOC). With a regular mortgage, the lender registers only the amount that the home is worth, minus the down payment made by the borrower. Collateral mortgages are offered by Canada’s biggest lenders. In fact, many Canadians may be surprised to learn that some big banks – such as TD and Tangerine – only offer collateral-charge mortgages. Based on TD’s enormous market share alone, with $266.4-billion in residential mortgages as of the second quarter of 2024, there’s a significant number of borrowers out there with one. But the big downside of a collateral-charge mortgage is that they can’t be transferred to a new lender like a conventional mortgage – the mortgage must be fully discharged first, meaning the current lender has legally taken it off its books. Most banks won’t do this unless the mortgage has been paid off in full, so the borrower will need a lawyer – and pay additional fees in the ballpark of $2,000 – to break the contract. Sometimes a new lender will cover these costs for the borrower, but that’s not guaranteed. Over all, it adds another layer of complexity and cost for someone looking to make a switch. The other risk that comes with a collateral-charge mortgage is that it can make it hard to access other types of financing, such as a second mortgage or HELOC, from other banks. This is because more than 100 per cent of the borrower’s home – typically their largest asset – is already tied up in their mortgage with no financial wiggle room. Not having these options can come as a shock for someone who didn’t realize they were in this type of mortgage to begin with. Collateral-charge mortgages might have a bad rep in some quarters but they are not inherently bad products. They provide borrowers who want to access their equity with a streamlined, cheaper way to do so. This money can be used for anything – renovations, buying a car or paying for school, for example. But borrowers should be aware and accept the associated risks and restrictions and too often, what we’ve experienced when working with brokerage clients is that they are not. Unfortunately, it’s the mortgage shoppers who are most motivated by the best rate or get a big bank mortgage that may unknowingly end up in a collateral mortgage and restricting their options. In today’s volatile rate environment, that’s an oversight few of us can afford. Penelope Graham is the director of content at Ratehub.ca .