2024’s Finale: Variable Mortgages Shine, Ontario Rents Drop, and Big Changes Ahead!

📊 Rate Watch: Rate Trends: Why Variable Mortgages Are Stealing the Spotlight

• Our latest standard rates are available in the graphic above. As always, please be aware that the actual rates we’re getting for almost all our clients is significantly lower than the rates mentioned above. (We don’t mention them, as we can’t guarantee the lower rates for everyone but we are getting them for most of our clients.)

• Even in a falling rate environment, interest rates don’t come down in a straight line. The last couple of weeks’ data proves this. Although rates, mercifully, haven’t risen their drop has stalled. The reason is the increase in bond yields.

  

  CA 5Y bond yields showing an 8.36% jump from 8 Nov to 21 Nov

• There are multiple reasons why bonds rose - but the key thing to remember here is that the trend is still towards a falling interest rate regime. Bank of Canada is on track to lower interest rates by atleast another 1.25% if not slightly more over the next several months (next rate update is in Dec 2024).

• Our bias is now favoring variable rate mortgages for a majority of our clients as locking in a fixed rate right now will cause them to lose lower rates in just a few months.

• In fact we’re working closely with several of our past clients who are looking to refinance their existing fixed rate mortgages in the 5% and above range and unlock a lot of savings in terms of monthly cash flows and lower interest payments. The savings by refinancing, in most cases, are significantly higher than the penalties to break existing mortgages. (If you have a current mortgage over 5%, please reach out to us - we might be able to help you save in monthly payments.)

Managing Expectations Regarding Mortgage Interest Rates:

• Not All Rates Are Created Equal: If you hear about someone getting an ultra-low rate, even if it is true, it doesn’t mean that rate is available to everyone. Rates depend on many factors like credit, income, down payment, property type, and how much you’ve invested with the bank. In a wildly fluctuating interest rate environment, it also depends on when the other person got his/her final rates.

• Your Profile Matters: The rate you qualify for is based on a full assessment of your financial profile. This includes a detailed review of your credit score, income stability, and other personal details, after verifying the information with supporting documentation. A quick conversation with a mortgage professional or online quote won’t give you the full picture.

• Relationship with a Lender Won’t Guarantee Lower Rates: Even if you’ve banked with a lender for years, that alone won’t necessarily get you a better rate. What matters more is the strength of your overall profile as assessed by the lender.

• Beware of Pre-Approval Rates: Rates provided in a pre-approval letter are often not the final rates you’ll receive. Most lenders don’t do a full underwriting review until a property is identified and an offer is signed. Without this, the quoted rate is just a starting point.

• Ask the Right Questions: Before accepting a quoted rate, ask:

  • Has the lender reviewed all of my financial documents?

  • Have they done an in-depth analysis of my mortgage needs? If the answer to these is “no,” take the rate with a grain of salt—it may change once your profile is fully reviewed.

• How to Improve Your Rate: While some factors are out of your control, you can take steps to improve your chances of a better rate. Focus on maintaining a solid credit score, saving for a larger down payment, and being prepared with all necessary documentation.

Real Estate Radar: Ontario Rent Trends – November 2024

The latest Rentals.ca report reveals significant trends in Canada’s rental market, with Ontario showing both relief and continued affordability challenges.

National Overview

• Average asking rents in Canada dropped by 1.2% year-over-year, hitting $2,152 in October 2024.

• This marks the first annual rent decline since 2021.

Ontario Highlights

• Ontario remains one of Canada’s most expensive rental markets, despite a 5.7% annual drop in average rents to $2,350.

• Larger cities experienced noticeable decreases:

  • Toronto: Two-bedroom rents fell 9.7% annually to $3,091.

  • Mississauga: One-bedroom rents dipped 1.9% to $2,308.

• Mid-sized cities also saw declines:

  • Kitchener: Rents dropped 1.5% year-over-year to $1,886 for one-bedroom units.

  • Oshawa: One-bedroom rents declined 0.8% to $1,831.

Exceptions to the Trend

• Some cities recorded rent increases:

  • Barrie: One-bedroom rents rose 8.4% to $2,080.

  • Ottawa: Two-bedroom rents climbed 0.8% to $2,521.

Key Takeaways for Ontario

• Rent reductions are providing some relief, but Ontario remains one of the least affordable provinces in Canada.

• Persistent affordability challenges and tight housing supply continue to dominate the market.

• Renters and investors may find opportunities in cities with softening rents or steady growth.

🍁 📊 Maple Pulse: Mortgages, Markets, and Economic Gaps: Canada’s 2025 Outlook

• OSFI Ends Stress Test for Mortgage Switches: Greater Flexibility for Homeowners: Starting November 21, 2024, OSFI has removed the stress test requirement for straight switches of uninsured mortgages. This means borrowers can transfer their mortgage to another lender without requalifying at a higher rate, providing more flexibility to secure better terms. With about 70% of mortgages up for renewal by 2026 and payment increases looming, this change is expected to intensify competition among lenders. Industry leaders hail it as a win for consumers, promoting fairness and greater choice, though lenders must now work harder to retain clients.

• Toronto Housing Market Poised to Boom in 2025, Set to Surpass Vancouver:
  Royal LePage CEO Phil Soper predicts Toronto will become Canada’s most expensive housing market in 2025, overtaking Vancouver. Declining interest rates are expected to drive a resurgence in demand, particularly among first-time buyers and investors. Soper highlights long-standing underbuilding, rising immigration, and higher construction costs as key contributors to the housing crisis. While affordability challenges persist, Toronto’s high incomes and interest in homeownership sustain demand. The condo market, currently slow, is poised for recovery in early 2025, fueled by falling rates and increased buyer activity.

• Fixed Mortgage Rates May Stay High Despite Bank of Canada Cuts: Fixed mortgage rates may not decline significantly despite the Bank of Canada’s rate cuts, warns economist Don Drummond. Unlike variable rates, which track the bank’s overnight rate, fixed rates follow bond yields. Drummond expects yields to remain steady, keeping fixed mortgage rates around 4.9%-5%. He also criticized past ultra-low rates for inflating housing prices without improving affordability. Additionally, Drummond flagged Canada’s lagging productivity and GDP growth, emphasizing the need for better business investment. He noted immigration-driven population growth outpacing housing supply, exacerbating housing shortages.

• Realtor Numbers Decline at Toronto Real Estate Board Amid Industry Challenges: The Toronto Regional Real Estate Board (TRREB) saw an 8% drop in membership at the start of 2024, marking its steepest decline since 1991. Higher fees, lower transactions, and a challenging market are pushing many seasoned agents to retire while part-time realtors are entering the field. TRREB, with over 73,000 members, represents 45% of Canadian realtors, but nearly 30,000 conducted no transactions last year. Industry professionals highlight issues like high entry barriers and a growing divide between full-time agents and those treating real estate as a side gig.

• Canada’s Economic Gap with the U.S. Expected to Widen Amid Diverging Policies: Canada's GDP per capita lags 43% behind the U.S., and this gap could reach 50% in 2024, warns economist Trevor Tombe. Contributing factors include Canada's slowing economy and the U.S.’s projected boost under Donald Trump’s policies, including tariffs and corporate tax cuts. These measures may indirectly harm Canada’s competitiveness. Meanwhile, Canada's immigration cuts, higher mortgage renewals, and slower growth outlook add to its challenges. RBC forecasts Canada’s interest rates to drop to 2% by 2025, further diverging from the U.S. Federal Reserve’s higher rates amid a stronger U.S. economy.

Mortgage Mastery: Unlocking Homeownership: Rent-to-Own Programs in Ontario

Rent-to-own agreements are gaining traction as a viable path to homeownership for those unable to secure a mortgage immediately. Here’s a closer look at how these programs work, legal considerations, and their market relevance in Ontario.

What is Rent-to-Own?

Rent-to-own agreements allow tenants to lease a property with the option to purchase it later. A portion of the monthly rent is typically credited toward a future down payment.

How It Works

• Lease Agreement: Tenants pay rent to occupy the property.

• Option to Buy: An additional fee or portion of rent goes toward securing the right to purchase.

• Purchase Price: Agreed upon at the start or based on future market value.

Legal Considerations

• Clear Contracts: Ensure contracts detail purchase timelines, price, and penalties.

• Regulatory Compliance: Ontario law protects renters but also holds them accountable for agreed terms.

• Professional Guidance: Consult lawyers and financial advisors to avoid pitfalls.

Market Trends in Ontario

• Rising Popularity: With high home prices, rent-to-own programs are an attractive alternative.

• Caution Advised: Market volatility may affect future affordability and agreements.

Rent-to-own programs can be a stepping stone to homeownership, but due diligence is key. Connect with experts to explore if it’s the right fit for your journey!

👻 Mortgage Monsters & 💡 Leadership Lessons

Remember, whether you're tackling 'scary' mortgage myths or inspiring others to rise, the best leaders lift everyone up. Let's create more leaders in our community—one step at a time!