The Royal Bank of Canada and the Bank of Nova Scotia has increased their residential mortgage rates once again. Only two weeks ago, a five-year closed fixed-rate home loan was 5.25%, but starting tomorrow RBC and Scotia’s five-year closed will increase to 6.10%.
From Vancouver Sun, April 13th, 2010
by Derrick Penner
VANCOUVER - March Real estate sales in British Columbia were 43 per cent higher than the same month last year, when the market was just emerging from the housing downturn, the British Columbia Real Estate Association reported Tuesday.
Sales cleared through the Multiple Listing Service, however, continued to ease off the hot pace they had reached by the end of 2009.
The BCREA recorded 7,110 sales province wide in March, which is higher than the same month a year ago, but association chief economist Cameron Muir said they are six per cent off the pace of sales experienced in December 2009 when seasonal factors are accounted for.
“Home sales have moderated since the beginning of the year,” Muir said in a press release.
“Despite an improving provincial economy, higher mortgage interest rates and tighter credit conditions for low-equity homebuyers and investors will squeeze some prospective buyers out of the market this spring.”
The average price paid for a home in March hit $516,970 in March, up 21 per cent from March of 2009.
© Copyright (c) The Vancouver SunFrom CBC.ca
Prices for all key housing types were up more than 10 per cent across Canada in the first quarter on a national basis, according to the Royal LePage survey released Thursday.
But Vancouver and Toronto prices rose much more dramatically — about 20 per cent in some cases — and the head of Royal LePage Real Estate Services suggested they may have risen too far in those local markets.“House sale data from the past two-year period shows tremendous variances in terms of how different cities reacted to the recession,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services”In Vancouver and Toronto, for instance, the dramatic unit sales fluctuations exhibit a significant degree of market irrationality: inordinately fearful when faced with poorer markets; and overly enthusiastic when the tables turned.”The Royal LePage survey found the average price of detached bungalows in Toronto climbed to $459,107 in the first quarter, up 13.3 per cent from a year ago.Standard two-storey homes in Toronto were up 13.2 per cent, rising to $562,150 while condo prices rose a more moderate 10 per cent to $317,579.In the Vancouver area, detached bungalows climbed an eye-popping 21.8 per cent to $906,045 while two-storey homes were up 19.2 per cent to $987,500 and standard condos were up 15.7 per cent from early 2009, rising to $470,000.Montreal: a ‘more stable’ market
In contrast, Soper described Montreal as “an example of a city where the market has been much more stable and homeowners there seem quite happy with the relatively slow pace of change.”The average price of a bungalow in Montreal climbed by 7.2 per cent to $249,172, the price of a standard two-storey house increased by 7.6 per cent year over year to reach $355,109, while the average price of a condominium increased by 7.6 per cent, to $222,244, Royal LePage said.The survey found that on a national basis, the average price of a detached bungalow in Canada rose to just over $329,000 in the first three months of this year — up 11 per cent from the first quarter of 2009.Standard two-storey homes rose 10.3 per cent, to about $365,000, while condominium units increased by 10.9 per cent to just under $229,000.MARKET Avg. two-storey house price
Canada $365,000
Vancouver $987,500
Toronto $562,150
Montreal $355,109
Our monthly sales statistics have been updated. Please click here to view the latest trends for the Greater Vancouver area.
By Derek Scott, The Canadian Press
VANCOUVER, B.C. - Buying a house in the hot housing markets of Vancouver, Toronto and other major cities in recent years has been a possible dream for some first-time homebuyers only because many of those houses had suites they could rent out.
But new rules coming into effect April 19 will all but wipe out that advantage in the eyes of banks handing out mortgages.
“It makes it much more difficult for people with rental properties to qualify for their own mortgage on their personal residence,” said Vancouver mortgage specialist Patrick Mulhern.
The new regulations are designed to prevent speculation in the market, said Jack Aubrey, of the Canada Mortgage and Housing Corporation.
But Vancouver mortgage agent Mike Averbach said the new rules will do little to prevent investors from gambling in the housing market.
“They haven’t decreased risk,” he said. “They’re just not allowing you to use the income.”
Currently, landlords can use 80 per cent of their rental income to offset monthly mortgage payments. That means, if they receive $1,000 per month in rental income, they can use $800 to offset a $1,200 mortgage payment, leaving only $400 to be debt financed.
But under the new rule, only 50 per cent of a landlord’s rental income will be used. Even then, that money will not be used to offset their monthly mortgage payment. It will be added to their total income, forcing them to qualify for the entire monthly mortgage.
For instance, a person earning $100,000 per year in regular income plus $12,000 per year in rental income will have a total income of $106,000 with which to qualify for a mortgage on their own home.
Rental income is essential for many of his clients, Averbach said.
In cities like Vancouver, where the average home price in February was more than $662,000, rental offset is the only way many people can qualify for a mortgage and the new rules will keep many of his clients in condos rather than houses, he said.
“Putting a renter in your basement is not speculative, it’s reality,” he said. “It helps you pay your mortgage.”
The rule changes also make it more difficult for people to buy a property separate property to use as a revenue generator.
CMHC will no longer offer high-ratio financing on rental property not lived in by the owner. That means someone looking to buy a house as a rental investment will have to come up with a 20-per-cent down payment on the property, as opposed to five per cent before the rules changed.
The changes haven’t worried groups advocating for tenants.
Jeordie Dent, of the Federation of Metro Tenants’ Association in Toronto, where vacancy and availability rates have dropped over the last year, said he doesn’t see a negative impact on renters.
Instead, he said his group welcomes the changes.
Dent said too many people become landlords without the financial or intellectual wherewithal to properly manage their properties.
“Anything that strengthens mortgage rules, from our perspective, is a good thing.”
From Vancouver Sun, April 1st, 2010
by Derrick Penner
Metro Vancouver’s cheap-mortgage-fuelled real estate market has overshot its previous peak for prices with indications it will keep going, albeit more slowly, before cooling with the rise in interest rates.
February saw the average property price hit $662,741 in the area of Metro Vancouver within the Real Estate Board of Greater Vancouver. (The board does not cover Surrey, Langley or White Rock.)
That is well above the previous $624,639 peak price, which the region saw in May 2008.
Now, the Teranet-National Bank housing price index, a more complicated measure of property prices that analyses data from the repeat sales of homes, also indicates that all the deflation of home prices that occurred during the recession had been regained by January, and will keep going, but more slowly.
The Teranet-National Bank index, which runs a couple of months behind the reports of real estate boards, found January was the ninth month in a row that the national price index increased, though it did so by the smallest margin in the past nine months.
“Even in Vancouver, we’ve gained back everything we lost,” Simon Cote, an analyst at the National Bank of Canada said in an interview. “The pace might be slowing a bit, but they are still going up.”
Metro Vancouver prices, on the Teranet-National Bank index, reached their recession trough in May 2009, but rose 11.7 per cent between May and January.
Metro Vancouver prices rose .9 per cent between December and January, the biggest gain among the six major markets included in the Teranet-National Bank index.
National Bank analyst Marc Pinsonneault, in a note to clients, said the January price increases can still be considered “vigorous, especially in Vancouver and Toronto,” but that developments in most markets back up National Bank’s view that increases will slow down.
Pinsonneault said that after eight months of briskly rising prices, Metro Vancouver’s market has “shifted from a favourable-to-sellers market to a balanced market.”
Cote added the bank is “expecting that the increase in supply, both of new construction and more homes coming to the [resale] market, will bring the market back into equilibrium.”
Mortgage rates will also be a factor. Canada’s major banks raised their posted rates on five-year fixed mortgages .6 of a percentage point on Monday and Tuesday to 5.85 per cent, which will squeeze some buyers out of the market, according to Cameron Muir, chief economist for the B.C. Real Estate Board.
“What it means for purchasers is that it erodes their purchasing power” by reducing the size of mortgages buyers are capable of carrying, he said.
For a family with a household income of $70,000, Muir said, this week’s bump in five-year rates for buyers seeking five-year terms reduces the final amount they can pay for a home by $35,000.
The increase, he added, “is a fairly hefty lift.”
From: Vancouver Sun, March 30, 2010
By Kim Covert
OTTAWA — With a late-day announcement on Tuesday, Bank of Montreal became the last of Canada’s major banks to raise its mortgage rates this week.
BMO hiked its five-year fixed-rate closed-term mortgage by 60 basis points to 5.85 per cent, matching increases announced earlier in the day by Canadian Imperial Bank of Commerce, Bank of Nova Scotia, National Bank and Desjardins Group.
Royal Bank of Canada, Toronto-Dominion Bank and Laurentian Bank announced on Monday that their benchmark five-year rates would also increase to 5.85 per cent.
“The era of historically low mortgage rates is coming to an end,” said Sal Guatieri, senior economist, BMO Capital Markets.
As with the other banks, BMO is also raising its three-year fixed-rated, closed-term mortgage, in this case by 20 basis points to 4.35 per cent, and its four-year, fixed-rate closed-term rate will increase by 40 basis points to 5.34 per cent.
BMO said in a release it will still offer its lowest five-year fixed-rate mortgage at 3.75 per cent. Canadians who want a fixed-rate mortgage should lock in now “as pressure builds for rates to rise,” the bank said.
Scotiabank is raising its four-year closed-term mortgage by 40 basis points to 5.34 per cent, which is also in line with the other banks, but a 20 basis point increase to its three-year closed-term mortgage brings that rate to 4.5 per cent, higher than the other banks, though lower than the 4.7 per cent posted by TD.
Desjardins Group said it would increase its four-year rate to 5.35 per cent, up 41 basis points, while its three-year rate increases 40 basis points to 4.55 per cent. It also lowered its six-month closed rate and its one-year closed rate by five basis points to 3.45 per cent.
All of the increases announced on Tuesday take effect on Wednesday, while the rate hikes announced Monday took effect on Tuesday.
National Bank, which lowered its five- and four-year fixed rates earlier this month, was the only bank to announce a change to a variable-rate mortgage, with its five-year variable-rate, closed-term mortgage now at 5.85 per cent.
Anticipation over the Bank of Canada raising its overnight lending rate, possibly ahead of schedule, is pushing up bond yields, said Benjamin Tal, senior economist with CIBC World Markets on Monday. Rising yields put pressure on fixed-rate mortgages.
The central bank has said it will maintain its key rate at a record low 0.25 per cent until mid-2010 unless inflation becomes a concern.
RBC and TD also hiked four-year term closed mortgage rates by 40 basis points to 5.34 per cent.
RBC’s three-year product rose by 20 basis points to 4.35 per cent, while the equivalent at TD gained 40 basis points to 4.7 per cent.
From Financial Post, March 29, 2010
by John Morrissy
Mortgage rates are on the upswing in Canada, with Royal Bank of Canada, TD Canada Trust and Laurentian Bank raising rates they charge on certain fixed mortgages, including the benchmark five-year mortgage.
“It’s probably an early sign of what we’re going to see in the next few months and further down the road when the Bank of Canada starts tightening,” said BMO Capital Markets economist Robert Kavcic. “It’s the beginning on an upward trend.”
Five-year closed mortgages jump 60 percentage points to 5.85 per cent effective Tuesday, the banks said in separate statement Monday. Four-year term closed mortgages rise by 40 basis points to 5.34 per cent.
Royal and Laurentian’s three-year product rises by 20 basis points to 4.35 per cent, while at TD, it gains 40 percentage points to 4.70 per cent.
Kavcic said buyers shouldn’t panic at the thought of higher rates.
Buyers are currently rushing to execute purchases ahead of rising borrowing costs and the implementation of the harmonized sales tax in British Columbia and Ontario in July, Kavcic said.
This is pulling demand forward and making prices expensive by most measures, he added. But it could also lead to a softer market, and softer prices, going ahead.
“So even if we get a modest increase in mortgage rates, the benefit of lower prices and less heated competition for houses out there will probably offset the cost of higher mortgage rates.”Mortgage rates are on the upswing in Canada, with both Royal Bank and TD Canada Trust raising rates they charge on certain fixed mortgages, including the benchmark five-year mortgage.
Five-year closed mortgages jump 60 percentage points to 5.85 per cent effective Tuesday, the banks said in separate statement Monday.
Four-year term closed mortgages rise by 0.40 percentage points to 5.34 per cent.
Royal’s three-year product rises by 0.20 percentage points to 4.35 per cent, while at Canada Trust it gains 40 percentage points to 4.70 per cent.
From Canadian Mortgage and Housing Corporatation
SAANICH, BRITISH COLUMBIA, March 26, 2010
The Government of Canada announced today that the District of Saanich has been approved for two infrastructure loans as part of Canada’s Economic Action Plan.
The announcement was made by the Honourable Gary Lunn, Minister of State (Sport) and Member of Parliament for Saanich – Gulf Islands on behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC).
“Our Government understands the importance of infrastructure in maintaining strong and prosperous communities,” said Minister of State Lunn. “This program is opening the door for municipalities to meet their housing-related infrastructure needs. Canada’s Economic Action Plan will continue to create jobs, provide economic stimulus for communities in all corners of the country, and support Canadian workers and families.”
The District of Saanich has been approved for almost $10.2 million in low-cost loans from CMHC’s Municipal Infrastructure Lending Program (MILP) to upgrade storm sewer drain systems. The upgrades will benefit residents by replacing old pipes that will prevent future failures in the storm sewer drain system.
“We are very pleased to partner with the federal government to use this low-cost loan to improve our community,” said Mayor Frank Leonard. “These significant projects will have a tremendous positive impact for our citizens and their quality of life.”
Canada’s Economic Action Plan provides up to $2 billion in direct low-cost loans to municipalities, over two years, for housing-related infrastructure projects through the MILP. Municipal infrastructure loans are available to any municipality in Canada and provide a new source of funds for municipalities to invest in housing-related infrastructure projects. These low cost loans can also be used by municipalities to fund their contribution for cost-shared federal infrastructure programming.
Eligible projects include infrastructure related to housing services such as water, power generation and waste services, as well as local transportation infrastructure within and into residential areas, such as roads, sidewalks, lighting and green space.
As Canada’s national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable homes — homes that will continue to create vibrant and healthy communities and cities across the country.
More information on this and other measures in Canada’s Economic Action Plan, a plan to stimulate the economy and protect those hit hardest by the global recession, can be found at: www.actionplan.gc.ca.
From Financial Post, March 24, 2010
by Paul Vieira
OTTAWA — Canadians could face higher interest rates within the next few months, Bay Street economists said Wednesday after Bank of Canada Governor Mark Carney said inflation is “slightly firmer” than expected and that the promise to hold rates at record lows until July was only conditional.
Mr. Carney’s comments during an Ottawa luncheon speech — in particular how he emphasized, against a backdrop of improving economic conditions, that his rate commitment was “expressly conditional” — led analysts to revisit their rate outlook, and pencil in the possibility of a move as soon as June.
The central bank’s next rate announcement is April 20, followed two days later by its updated economic forecast. After that, there are rate announcements June 1 and then July 20.
The consensus among private-sector economists was for the central bank to honour its pledge and begin rate hikes in July. Now, some aren’t sure. Bond traders, meanwhile, Wednesday pushed up yields on two-year notes in anticipation of rate hikes in the coming months.
The governor’s remarks “failed to quell the market’s speculation that a June rate hike may be in the cards,” said Eric Lascelles, chief economics and rates strategist at TD Securities. “In fact, [Carney] goes to quite some length to emphasize the conditionality of the commitment not to raise rates before mid-2010, damning it with faint praise.”
In the speech, Mr. Carney said inflation has been higher thanks to “transitory factors,” most notably the Olympic Games in Vancouver last month, and a higher-than-expected level of economic activity. Later, speaking to reporters, the governor added first-quarter annualized growth is “looking stronger” than the central bank’s projection of 3.5%. That would follow robust expansion of 5% in the final three months of 2009.
The Bank of Canada’s last economic outlook, tabled in January, envisaged core inflation to average 1.6% in the first quarter and 1.7% in the second quarter. But in January, core inflation came in at 2%, and last month advanced 2.1% year-over-year.
The central bank sets its policy rate with a goal of hitting, and maintaining, 2% inflation.
The inflation outlook would be updated in April. At that time, the central bank would “take judgments on the appropriateness” of its conditional pledge, the governor told reporters.
“I cannot imagine a lower inflation forecast being unveiled come April,” said Derek Holt, vice-president of economics at Scotia Capital, “but I can easily see a forecast for core inflation to remain at the 2% target that would imply earlier than anticipated hikes.”
Mr. Holt said the central bank could raise its benchmark rate either in April or June, with an increase of 50 basis points to “punctuate” its seriousness in containing inflation and move away from emergency-level rates.
In April of last year, Mr. Carney cut the bank’s key lending rate to its lowest possible level, 0.25%, and pledged to keep it there until the end of the second quarter in 2010. This was in an effort to pull the economy out of a deep recession, and get inflation up toward to the bank’s preferred 2% target by mid-2011.
In recent weeks, however, data suggest the economic recovery is moving at a roaring pace, far exceeding expectations.
Another factor that could prompt an earlier-than-expected rate hike is an increase in M3, a key measure of money supply, said Stewart Hall, economist at HSBC Securities Canada. So far, month-over-month growth rates are tracking higher than the pre-crisis 12-month average.
“All that liquidity that has been injected into the financial system, rather than gathering dust, is now beginning to make it into the economy,” Mr. Hall said. “And perhaps more than some slight upside on core inflation, it may be M3 growth that may be causing the central bank some angst with regards to their inflationary outlook.”
