Finance

Bank Of Canada - Continues To Hold Interest Rate At 1.75%

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Once again, the Bank Of Canada has left the benchmark interest rate unchanged at 1.75%, blaming “escalating trade conflicts” that they find are taking a toll on Canada’s economy. The last rate change was in October 2018, which was the fifth time since the summer of 2017 that the BoC had decided to raise the rate.

The BoC also noted that the Canada’s exports are continuing to grow, the housing market is showing signs of a rebound, and that wages are also picking up. All factors that they believe show a strengthening economy, however are keeping a close eye on “global developments and their impact on Canadian growth and inflation”, such as the trade conflict between United States and China.

What does this mean? The BoC’s rate directly affects the rate that you will get from a retail bank for lending (mortgages and lines of credits) and savings products. When the rate is low, it means that it is cheaper to borrow money, but not as lucrative to save.

The BoC has eight fixed dates each year on which it announces whether or not it will change the policy interest rate. The announcement dates are January 9th, March 6th, April 24th, May 29, July 10, September 4th, October 30th, and December 4th.

First Time Home Buyers Incentive - Full Details Announced

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Earlier this year, the government announced a plan to help first time home buyers enter the market and help reduce their monthly mortgage carrying costs. There was no in depth information provided, and a large amount of speculation about what exactly it could include or who would be eligible.

This week, the government provided all of the details. Launching September 2nd, 2019, the first time home buyer plan is aimed at providing a 5% or 10% shared equity mortgage with the Government, which will act as part of the deposit.

More in-depth
- Total qualifying income must be no more than $120,000 and your total borrowing is limited to four times the qualifying income.
- At least one of the persons on title must be a first-time buyer (keep in mind this is also valid for those who did not own within 4 years)
- Total borrowing (including the incentive amount) is limited to four times the qualifying income.
- The incentive will be a second mortgage that is registered on the title of the property.
- There will be no regular principal payments, it is not interest bearing, and a maximum term of 25 years.
- The incentive is offered at 5% or 10% for a new construction home or condo, or only 5% for a existing re-sale home or condo.
- Property must close on or after November 1st, 2019
- Property can be a 1-4 unit residential property (hello investors), and must be available for full-time, year-round occupancy (no cottages).
- The first time buyer will be required to repay the incentive after 25 years or when the property is sold (or sooner without penalty). Refinancing will not trigger re-payment.
- Repayment is calculated at property’s fair market value at time of re-payment. If you took a 5% incentive, you would pay back 5% of the homes value at the time of repayment.

Example

Olivia wants to buy a new condo for $400,000.

Under this incentive, Olivia can apply to receive $40,000 in a shared equity mortgage (10% of the cost). This is on top of the minimum required downpayment of 5% ($20,000) that she must provide from her savings.

This lowers her monthly expenses, and the amount that she is borrowing. As a result, Olivias mortgage is now reduced by $228 less per month or $2,736 a year.

When Olivia sells her home for $420,000 she would have to pay back the incentive of 10% which is now $42,000.

Do we like it?
This is a great tool for someone who wants to lower their monthly carrying costs. It might not be a great tool for someone in a larger market with higher average prices. Every situation is different and even if you qualify, this might not be a good fit.

Do you have questions about if the new first time home buying incentive is a good fit for you? Let’s chat. Call, txt, email, or fill out the form below.

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Bank Of Canada - Continues To Hold Interest Rate At 1.75%

BoC-Interest-Rate-Update Ottawa Condo.jpg

Again, for the fifth straight announcement, the Bank Of Canada has left the benchmark interest rate unchanged at 1.75%. The last rate change was in October 2018, which was the fifth time since the summer of 2017 that the BoC had decided to raise the rate.

What does this mean? The BoC’s rate directly affects the rate that you will get from a retail bank for lending (mortgages and lines of credits) and savings products. When the rate is low, it means that it is cheaper to borrow money, but not as lucrative to save.

The BoC has eight fixed dates each year on which it announces whether or not it will change the policy interest rate. The announcement dates are January 9th, March 6th, April 24th, May 29, July 10, September 4th, October 30th, and December 4th.

Bank Of Canada - Holds Interest Rate At 1.75%

BoC-Interest-Rate-Update Ottawa Condo.jpg

Again, for the fourth straight announcement, the Bank Of Canada has left the benchmark interest rate unchanged at 1.75%. The last rate change was in October 2018, which was the fifth time since the summer of 2017 that the BoC had decided to raise the rate. This was the first announcement that did not include any mention of a need for future increases, which signals that the BOC is in no hurry to move the rate (unlike past announcements where it was mentioned). The BOC is projecting growth of only 0.3% in the first quarter of 2019, with a slightly more positive projection on the second quarter.

What does this mean? The BoC’s rate directly affects the rate that you will get from a retail bank for lending (mortgages and lines of credits) and savings products. When the rate is low, it means that it is cheaper to borrow money, but not as lucrative to save.

The BoC has eight fixed dates each year on which it announces whether or not it will change the policy interest rate. The announcement dates are January 9th, March 6th, April 24th, May 29, July 10, September 4th, October 30th, and December 4th.

Breaking News - Federal Budget + First Time Buyers

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The Federal Government has announced the budget which includes a number of incentives targeted at housing affordability and helping first time buyers.

The budget includes two main changes, with a number of details still unclear.

The first incentive is the amount that an eligible first time buyer would be able to withdraw from their registered retirement savings plan (RRSP). The Home Buyers’ Plan will allow $35,000 (was previously $25,000) to be withdrew from the RRSP without having to pay tax on the withdrawal.

The second incentive is the introduction if the First-Time Home Buyer Incentive which would allow eligible buyers to finance part of their downpayment through a shared-equity mortgage with CMHC. This would be for eligible first time buyers that are making a downpayment of less than 20 per cent. CMHC would offer 10 per cent shared equity mortgage for new construction homes and condos, or 5 per cent for existing (re-sale) homes and condos. It is expected to start in September and last for three years minimum.

There are lot of details that are still unclear (shared equity? what about losses when properties sell? first time buyers - its not that simple! how much will they make when a buyer sells? etc.).

Any questions on how it could affect you or an upcoming purchase? Fill out the form on the bottom of the page and let’s chat.

Bank of Canada - Interest Rate Holds at 1.75%

BoC-Interest-Rate-Update.jpg

Once again, the Bank of Canada has released that it will keep its benchmark interest rate unchanged at 1.75%. The last rate change was in October 2018, which was the fifth time since the summer of 2017 that the BoC has decided to raise the rate. In the fall, there was a high guarantee that the rate would rise numerous times in 2019, however, with the economic slowdown that began in the fall (compounded by the slowdown in Canada’s oil sector), has led many to believe rates will hold or drop throughout the year.

What does this mean? The BoC’s rate directly affects the rate that you will get from a retail bank for lending (mortgages and lines of credits) and savings products. When the rate is low, it means that it is cheaper to borrow money, but not as lucrative to save.

The BoC has eight fixed dates each year on which it announces whether or not it will change the policy interest rate. The announcement dates are January 9th, followed by March 6th, April 24th, May 29, July 10, September 4th, October 30th, and December 4th.

Bank of Canada - Interest Rate Holds at 1.75% again

BoC-Interest-Rate-Update.jpg

Once again, the Bank of Canada has just released today that it will keep its benchmark interest rate unchanged at 1.75%. The last rate change was in October 2018, which was the fifth time since the summer of 2017 that the BoC has decided to raise the rate.

What does this mean? The BoC’s rate directly affects the rate that you will get from a retail bank for lending (mortgages and lines of credits) and savings products. When the rate is low, it means that it is cheaper to borrow money, but not as lucrative to save.

The BoC has eight fixed dates each year on which it announces whether or not it will change the policy interest rate. The next announcement will be on January 9th (followed by March 6th, April 24th, May 29, July 10, September 4th, October 30th, and December 4th).

Bank Of Canada - Interest Rate Holds at 1.75%

BoC-Interest-Rate-Update.jpg

The Bank of Canada has revealed that it will keep its benchmark interest rate unchanged at 1.75%. This comes from the previous raise in October, which was the fifth time since the summer of 2017 that the BoC has decided to raise the rate.

What does this mean? The BoC’s rate directly affects the rate that you will get from a retail bank for lending (mortgages and lines of credits) and savings products. When the rate is low, it means that it is cheaper to borrow money, but not as lucrative to save.

The BoC has eight fixed dates each year on which it announces whether or not it will change the policy interest rate. The next announcement will be on January 9th (followed by March 6th, April 24th, May 29, July 10, September 4th, October 30th, and December 4th).

How does the latest BOC rate increase affect you?

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This week, the Bank of Canada increased the trendsetting interest rate to 1.5 percent. This was the fourth rate increase in the past 12 months. Knowing this is good, but we keep getting asked how it affects us (as a condo buyer or owner in Ottawa who has a mortgage, etc). We reached out to Mathieu Nesbitt, who is the Manager of Mobile Mortgages in Ottawa for TD Bank, to explain exactly what it means and if we should even care! 


For the fourth time in the past 12 months the Bank of Canada has increased its key monetary policy interest rate, the last increase went to 1.25% from 1.00% [January 2018].  Each increase can have an effect on your monthly mortgage interest cost which will affect your overall cost of borrowing.  There is good news though, there are ways you can protect yourself to prepare for those interest rate increases.  If you build a buffer by increasing your regular payments by 10% to 20% you will be paying mortgage loan quicker which also reduces your amortization.  Because most mortgages calculate interest based on the daily balance by paying down the principal quicker interest rate increases won't impact your cost of borrowing as much.

This also brings me to another point, if you have a pre-approval in place an interest rate increase can affect the amount of money you have been approved to borrow.  You will need to check in with your lender to see if your pre-approved dollar amount has changed.

For those who are looking at getting into the housing market, you need to know that TD bank can do a mortgage approval for you and hold your interest rate for 120 days on resale purchases.  For new build purchases, we can go up to 24 months which will protect you from interest rate increases. 

For those who are already making mortgage payments, there are some options for you to help when rates increase.  If you've chosen a fixed rate mortgage your interest rate is fixed for the term of your mortgage so a rate increase will not affect your payments until your mortgage term ends.

On the other hand, if you are in a variable rate mortgage it can change at any time during the term of your mortgage, therefore, changing your monthly mortgage payment.  One way to prepare yourself for an increase is to make an inflated mortgage payment, increasing your payment to more than you are actually obligated to pay.  The benefit of this is the excess payment amount goes directly to the principal portion of your mortgage, reducing the total interest paid on your mortgage as well as shortening your amortization.  So if rates do go up and your payment increases making your cash flow tight, either eliminate or reduce the extra principal reduction payment to either offset or help with the increase should it happen.

While some of this can seem overwhelming or confusing it is what I specialize in and I welcome the opportunity to provide you with advice and help, making your mortgage needs simple and comfortable.

-- Mathieu Nesbitt is the Manager for Mobile Mortgages with TD Bank and works outside normal banking hours to provide the best service for clients. You can connect with him directly at 613-868-9197. CLICK HERE to contact Mathieu Nesbitt.

Breaking News - More Changes To Mortgage Lending - 10/2016

Earlier today the government announced more changes to mortgage lending to ensure that buyers are not taking on bigger mortgages that they can afford. Let me break down the change and how it will affect buying a house or condo here in Ottawa. Keep in mind there were four major changes, but I am going to focus on the "Stress Test" change.

The "Stress Test" Change

If you (buyer) are using less than 20% downpayment, you will need to be approved using the posted rate (currently 4.64%) not the actual rate of the mortgage. This posted rate is typically going to be higher than what your rate will be, so it will lower the overall amount that you are approved for. This doesn't change the rate or the payment, just lowering the approved amount for borrowing. Before this change, you would have been pre-approved using the rate you were paying - allowing your budget to be much higher.

Who will this affect?

Unlike previous changes (for those borrowing over 1M), this affects anyone who was pushing the top end of their budget and had less than 20% downpayment. This change essentially lowers the amount you will be approved for by on average 20-25%, or less depending on the price point. It is said that this change should impact between 7% and 10% of buyers.

When?

You have until October 17th to get your purchase and sale agreement in writing and mortgage application in to get qualified under the old rules. 

Why is being changed?

Really it lowers the risk that our country is taking on with people that really shouldn't be buying. I can't count the number of times that a buyer here in Ottawa has told me that the amount they were approved for was way more than they could afford. If you were pushing that to the highest amount it is riskier and this looks to help reduce the risk. What if rates rise during your term and when you go to renew the rate is 1% or 3% higher? 

Examples

Before: Income of $100,000 with a downpayment of $40,000, five-year fixed rate of 2.17% would qualify to purchase an Ottawa home worth $665,435 (including tax of $400 and heating of $150 /month).
Now: You would be qualified at 4.64% (todays rate) not 2.17% interest rate, and it would drop your purchase price to $505,762 - a difference of 24% or $159,673. 

If you are thinking of buying or are looking to learn more about how these changes affect you specifically, let's chat!