The Bank of Canada surprised markets on Oct. 27th with a more hawkish stance on inflation and the economy. The Bank released its widely anticipated October Monetary Policy Report (MPR) in which its key messages were:

* The Canadian economy has accelerated robustly in the second half.
* Labour markets have improved, especially in the hard-to-distance sectors. Despite continuing slack, many businesses can’t find appropriate workers quickly enough to meet demand.
* Disruptions to global supply chains have worsened, limiting production and leading to both higher costs and higher prices.
* The output gap is narrower than projected in July. The Bank now expects slack to be absorbed in Q2 or Q3 of next year, one quarter sooner than earlier projected.
* Given persistent supply constraints and the increase in energy prices, the Bank expects inflation to stay above the control range for longer than previously anticipated before easing back to close to the 2 percent target by late 2022.
* The Bank views the risks around this inflation outlook as roughly balanced.

Bottom Line

Since the Bank last met in early September, the Government of Canada five-year bond yield has spiked from .80% by a whopping 60 basis points to a 1.40%. That is an incredible 75% rise. A year ago, the five-year bond yield was only .37%.

The Bank believes the surge in inflation is transitory, but that does not mean it will be brief. CPI inflation was 4.4% y/y in September and is expected to rise and average around 4.75% over the remainder of this year. Macklem now believes inflation will remain above the Bank’s 1%-to-3% target band until late next year.

There is also a good deal of uncertainty about the size of the slack in the economy. This is always hard to measure, especially now when unemployment remains elevated at 6.9%, while sectors such as restaurants and retail are fraught with labour shortages. Structural changes in the labour force are afoot. Many former restaurant employees have moved on or are reluctant to return to jobs where virus contagion risks and poor working conditions. There was also a surge in early retirements during the pandemic and a dearth of new immigrants.
Concerning housing, the MPR says the following: “Housing market activity is anticipated to remain elevated over 2022 and 2023 after having moderated from recent record-high levels. Increased immigration, solid income levels and favourable financing conditions will support ongoing strength. New construction will add to the supply of houses and should help soften house price growth”.

This article was written and provided by our own Chief Economist Dr. Sherry Cooper

CLICK HERE to read the full article and of course if you want to chat more about it, please call us at 604-552-6190.

There has been a lot of chatter in the markets over the past week about fixed rates rising.  This is mainly due to the government bond yields continuously rising which in turn will impact fixed mortgage rates.  While many are enjoying the benefits of ultra low rates since the start of the pandemic, we could expect to see rates rise with lenders over the next week.  We have already had notification from two major banks that fixed rates are rising, some effective late last week and some effective this week.  It’s only a matter of time that they all follow suit.

With that said, it doesn’t necessarily mean time to panic.  We are still at record low variable rate mortgages for those that are a little more comfortable with risk and would rather take advantage of savings and lower payments.  While no one has a crystal ball, each borrower needs to do what is best for you and your risk tolerance. The way to protect yourself?

1. Secure a pre-approval if you think you are about to purchase a property, either a principal residence or investment property.  This will protect you for 120 days while you shop for further increases.

2.  Request a lock in agreement from your lender if you are thinking of locking in your variable rate.  This generally protects you for 7-10 days while you decide what to do.

3.  Set your payments higher on your variable rate so you have more going to principal.  Often we will advise people to set their variable mortgage payment to a fixed rate amount to protect you from rising rates when the day comes.

We are here to chat anytime you need assistance or would like some guidance with your new or existing mortgage.

~Trish~

When it comes to finding your perfect home, there are so many more options for potential homeowners! From a single-family dwelling to a townhouse to a modular home, the choices are seemingly endless. Before you start widening your search, let’s take a look at what makes these home types different – and which one is perfect for you!

• Single-Family Detached: This is a stand-alone house that sits on its own lot and is the most common type of home. As these are detached dwellings, they provide more privacy with less noise from neighbours. They also tend to be larger dwellings (complete with a yard!) which gives you the space and freedom to really make it your own.
• Single-Family, Semi-Detached: These homes are suitable for a single family and are typically attached to another house on one side. Semi-detached homes are often more affordable to both buy and maintain. With this affordability does come somewhat less privacy and protection from noise due to the shared walls on one side.
• Duplex: These structures contain two single-family units on separate levels and are great options for individuals looking to reduce home purchase and carrying costs – live in one unit, rent the second! This type of home also provides unique flexibility for older families, giving you the option to move adult children or aging parents into the second unit as needed. As expected, these units offer less privacy than single-dwelling homes and can sometimes have increased noise through the floor or ceiling.
• Townhouse or Row House: These are a row of single-family homes, which are connected on both sides to the next home (excluding the end unit, which is only connected on one side). Townhouses typically have private yards but, in some cases, it may be freehold or condo-style with shared ownership rights and responsibilities. However, these homes are typically more affordable and easier to maintain, though you may have to consider strata or maintenance fees. Similarly to duplexes, these home types have less privacy and may have noise from shared walls.
• Condominium: These are low- or high-rise buildings containing multiple apartment units. Condos are excellent starter homes for single adults, or couples, as they are affordable and require minimal maintenance. Some buildings even have shared amenities, such as a fitness center or swimming pool or party room. QUICK TIP: Always check for these amenities and if you would be interested in using them. If not, why pay for them? In this case, you might be better off finding a condo with less amenities and lower strata fees.
• Modular or Mobile Home: Growing in popularity are modular homes, which are prefabricated homes delivered to a home-site for installation. These homes are owned by the individual, while the land it sits on could be rented or owned outright. These types of homes are highly affordable and extremely flexible; if you relocate, you can sell the mobile home with the property or keep the home and relocate it! If renting land in a mobile home community, there are also those costs to consider.
• Carriage House or Urban Infill: A carriage house is located on the periphery of a single-family detached house. Similarly, are urban infill homes which are a modern solution to crowded cities. These homes are often located in interesting, urban environments and have their own character. They are also generally less expensive, but there is potential for noise pollution if you are in a busy location. Due to the size, there is also limited inventory and limited or non-existent yard space. But if you’re looking for something affordable and unique, these are a great option!

Finding the right home to suit your needs means considering your lifestyle and budget now, as well as where you’ll be a few years down the road. Want more information or need help deciding the best option for you? Contact me today to learn more about your options when it comes to buying and owning a home.

Part of trying to be the best team we can for our clients is staying aware of what questions can we easily answer and help with. The biggest topic we see searched is for mortgage calculators. We have an app that can help with that!

The My Mortgage Toolbox application was designed to make it simple for people like you to manage the mortgage process and access all the information you need!

Some of the great features included in this pocket-sized mortgage toolbox are:

• Payment Calculator
• All Possible Payment Frequencies
• Historical rates
• Stress Test Rules and Qualification
• Minimum Down Payment Calculator
• Total Monthly Ownership Calculator
• Closing Cost Calculator
• Affordability Calculator
• Maximum Loan Calculator
• Extra Payments Calculator
• Beautiful graphs and illustrations
• And more!

To download this app, you can visit My Website and click on the app link. You can also download it directly from the Apple App Store or Google Play.

If you have any questions, please let me know!

Have you been considering purchasing a home on a leasehold property? Living in Vancouver the market can be expensive, this is an option to owning with a smaller purchase price. There are drawbacks to this route. Like anything its always good to read the fine print.

A leasehold property means that the owner owns the house/townhouse/condo itself but not the land it is built on. That land is leased to the home owner by the land owner. Leasehold land is basically a plot of land that has been rented out to a developer, who then builds on the land and rents the property for a certain sum of money (or a portion of it as with an apartment building or condo). The leases on the plots of land are typically for extended periods of time (think up to 100 years or more), very often pre-paid up front, and often belong to either the City, or in many cases a corporation, a University or are First Nations Reserve lands.

Can I Get a Mortgage on a Leasehold Property?

Unfortunately there is no easy answer to this question. Generally speaking, however, leaseholds are more challenging. To begin with, most lenders will not approve a mortgage for a term or an amortization that is longer than the lease itself, which, depending on the lease’s expiration date can be problematic.

Any time the property is not a freehold strata there will be limits, but some lenders will be more open to the possibility. Your options will be reduced for a First Nations reserve leasehold, and private leaseholds are the most challenging. In many cases the only option may be a private lender but even that is not a guarantee.

When looking for mortgage on a leasehold property, the lender will look at everything: income, credit score, down payment, and of course the property itself. Because leasehold land is less expensive than freehold land for similar properties, you may be able to find homes in areas where you would not have been able to find anything similar at that same price point.

If you choose a leasehold property, you will be limited as to the lenders and mortgage rates. But to put things into perspective, as with any home that you buy there will be lenders that like it and lenders that won’t.

Read the fine print, make sure you know what you’re getting yourself into. We are always available to answer more questions on this topic.

With multiple offers and bidding wars now the new norm, our clients find themselves, in the heat of the experience, contemplating a subject-free offer.

Most of our clients are totally qualified. They have well established careers and businesses, amazing credit ratings, large down payment funds, etc. They are the type of clients who will almost certainly receive mortgage financing… no problem!

But there’s often an unanticipated hitch: the property itself.

No banker or Broker can give a client 100% assurance of financing without factoring in the actual property details. Until an appraisal is reviewed and approved, the application is not complete. There are some properties that some lenders simply will not lend against.

There are the obvious examples that lenders tend to exclude;

• Properties containing Asbestos, Aluminium wiring, Underground Oil tanks
• Re-mediated former grow-ops
• Re-mediated drug labs.

There are also less obvious ones;

• live-work units
• row-homes (attached non-strata properties)
• properties smaller than 450 sq ft
• properties on lease land, Government, First Nations, or Private.

When it comes to the appraisal process, there is more than the value to be considered.

Another major piece of the appraisal lenders look at is the ‘Remaining Economic Life or REL’ (as opposed to the ‘physical life’) of the home. This refers to how long this specific house is likely to remain standing on this property under the current care it is receiving.

Example: We have a perfectly habitable home for decades to come ─ lots of remaining ‘physical life’. The problem is that lenders are looking for remaining ECONOMIC life rather than the remaining physical life. The question is not “How long can that house be standing there?” it is “How long does it make economic sense for that house to be standing there given current market conditions?”

What if it is located in a neighbourhood where lots of the homes around it are older homes that are being purchased to be demolished and replaced with multimillion dollar homes. That could be a problem.

The REL is calculated by subtracting the Effective Age from the Total Economic Life.

65 years – 30 years = 35 years Remaining Economic Life (REL)

FEW lenders will lend on a home with a remaining REL of less than 15 years. Also, the effective amortization will be set at the REL minus five years, which drives payments sky high, and often leaves client unable to qualify for such large mortgage payments should they even want to sign on for them.

Clients would be wise to also minimize risk, by either writing offers that contain a ‘subject to inspection’ and a ‘subject to financing’ clause, or by having a conversation with one of us well in advance of writing a subject-free offer.