Big Mortgage Changes: New Rules, Rate Cuts, What They Mean for You and lots more

📊 Rate Watch: Navigating Rate Cuts: Fixed vs. Variable Mortgages and Smart Renewals

First things first, we’ll start with mortgage rates, what we’re seeing in the market right now and how we’re advising and helping our clients to navigate rates. Here goes:

• Bond yields over the last couple of weeks have been range bound, meaning fixed rates haven’t dropped too much. Where they have (3 yr insured fixed for e.g.) it’s usually banks finally passing on lower rates to customers. However the overall trend is expected to keep going lower.

• The recent US Fed rate cut and Bank of Canada’s messaging show rate cuts are here, and will most likely accelerate. Canadian bond markets are pricing in a further cut of about 1.25% from current rates by next year. In reality, as things stand, it’s quite likely Bank of Canada will cut rates by even more to at least 1.75% lower than today.

• For mortgage advice we’ve already started talking to clients more about considering variable mortgages. Even with a 125 bps cut, variables will overperform today’s fixed rate mortgages. Therefore, the premium of higher rates now could be justified depending on client’s profile.

• For risk averse clients, fixed rates with shorter terms (2 or 3 years) are still good. We’re still not recommending 5 year fixed rates, as they’re still too high. While signing up with fixed rates, please be careful to read the terms carefully. The penalties and other terms vary widely between lenders.

• Renewals are heating up. We’re seeing very good deals with lenders trying to capture as much new business as possible. With stress test on renewals now being done away with (it’s covered in Maple Pulse section below), it makes no sense for any client to accept their existing lender’s renewal offer without shopping around.

As always for all your mortgage queries please don’t hesitate to reach out to us at www.ronmortgages.com 

Real Estate Radar: Rent Growth Slows as Canadian Rental Market Adjusts

We’re covering the current rentals landscape across Canada in this edition’s Real Estate Radar. The Canadian rental market saw notable changes in August 2024, with rent growth slowing to the lowest rate in nearly three years. Here’s a breakdown of the key trends shaping the market:

National Rent Overview

• Average asking rents for all residential property types increased by 3.3% year-over-year in August, reaching $2,187 per month.

• This marks the slowest rate of growth since 2021, a sign of market stabilization.

Purpose-Built and Condominium Rentals

• Rents for purpose-built and condominium apartments rose by 4.7% annually, with purpose-built apartment rents climbing 6.2% to an average of $2,118.

• Condominium apartment rents saw minimal growth, rising only 0.1% to $2,308, while studio condominium rents dropped 3.3% to $1,825.

Provincial Shifts

• B.C. and Ontario continue to have the highest rents, despite both provinces experiencing annual rent declines of 5.2% and 4.3% respectively.

• Saskatchewan led rent growth, surging by 21.4% year-over-year, with rents averaging $1,338.

City Highlights

• Among major cities, Edmonton saw the only rent increase, with a 9.2% rise to $1,579.

• Toronto experienced the steepest decline, with a 6.9% drop bringing average rents down to $2,697.

• Vancouver recorded apartment rents of $3,116, continuing its nine-month streak of declines but showing signs of stabilization.

This moderation in rent growth can be attributed to a combination of increased supply and shifts in population trends.

🍁 📊 Maple Pulse: Mortgage Rules Revamped, Flipping Stays Hot, CIBC Fined $42M

Hectic few days for real estate professionals like us, as the govt made major announcements that will impact mortgages directly. Here’s an overview of those stories along with other major stories impacting real estate, the economy and home buying in Canada.

• Federal Government Releases Key Details of New Mortgage Rules: In a follow-up to last week’s announcement, the federal government has outlined its latest mortgage rule changes, effective December 15, 2024. Updates include raising the insured mortgage price cap from $1 million to $1.5 million and extending 30-year amortizations for first-time buyers and new builds. Buyers can now qualify for mortgage insurance with a 5-10% down payment, significantly lowering upfront costs. These measures aim to boost housing affordability and demand, particularly in high-priced markets like Toronto and Vancouver.

• OSFI Relaxes Stress Test for Uninsured Mortgage Renewals with New Lender

  In a policy shift, the Office of the Superintendent of Financial Institutions (OSFI) will no longer require borrowers switching lenders at mortgage renewal to undergo the stress test for uninsured mortgages, provided the loan terms remain unchanged. Previously, borrowers faced the stress test only when switching lenders, creating a competitive disadvantage. OSFI’s change, effective November 2024, aims to promote better rate options for borrowers while ensuring financial stability, as prudential risks from this rule have been minimal.

• Canadian Real Estate Flipping Activity Remains Near Record Levels: Despite a market slowdown, Canadian real estate flippers remain highly active. In Q2 2024, 2.42% of transactions involved properties bought and sold within 12 months, just shy of record highs from Q1 2023. Falling interest rates and policies that incentivize investment have fueled this trend. Notably, 1.2% of homes were flipped within six months, representing half of all flips. Speculative investors, less sensitive to employment trends, continue to dominate the market, driving demand despite efforts to curtail flipping through tax changes.

• U.S. Regulators Fine CIBC US$42 Million for Employee Communication Violations: U.S. regulators have fined CIBC US$42 million for failing to prevent employees from using unapproved communication methods. The fine for CIBC was the largest in the US proble. The penalties include US$30 million from the Commodity Futures Trading Commission (CFTC) and US$12 million from the Securities and Exchange Commission (SEC). The violations, dating back to at least 2018, involved senior-level officers. Other Canadian banks, including RBC and BMO, have also been penalized for similar violations in recent years.

• Canadian Economy to Rebound in 2025 After Slow Growth, Says Deloitte: After two years of sluggish growth, Deloitte Canada forecasts the economy will "hit its stride" in 2025, fueled by rising consumer spending, a housing market recovery, and continued rate cuts by the Bank of Canada. The central bank is expected to lower its policy rate to 2.75% by mid-2025, bolstering consumer confidence. However, risks remain, including geopolitical tensions and high mortgage costs. Deloitte highlights that stable employment and wage growth are critical for sustaining the recovery.

Mortgage Mastery: Unlocking First-Time Home Buyer Incentives

In this edition’s mortgage mastery we’re covering the incentives a first time home buyer has access to. These incentives do move the needle a bit and help first time buyers enter the market.

Becoming a homeowner for the first time is an exciting milestone, but it can also feel financially overwhelming. Fortunately, both federal and provincial incentives are available to help first-time buyers reduce upfront costs and ease the transition into homeownership. Here’s an overview of some key programs available in Ontario.

Provincial Incentive: Ontario Land Transfer Tax Refund

In Ontario, the Land Transfer Tax Refund offers significant savings to first-time home buyers. Key features include:

• Buyers can receive up to $4,000 back, which covers the entire land transfer tax on a home priced up to $368,000.

• For homes priced above $368,000, the refund reduces the total land transfer tax owed.

• To qualify, you must not have owned a home before and the home purchased must be your primary residence.

Federal Incentive: RRSP Home Buyers' Plan (HBP)

The Home Buyers' Plan (HBP) allows first-time buyers to withdraw from their Registered Retirement Savings Plan (RRSP) to help fund a down payment. Key details include:

• Eligible buyers can withdraw up to $35,000 tax-free (or $70,000 for couples) from their RRSP.

• The funds must be repaid to the RRSP over 15 years, beginning two years after the withdrawal.

• The withdrawn amount can only be used for buying or building a qualifying home, and the buyer must intend to occupy the home as their primary residence.

Federal Incentive: First-Time Home Buyers' Tax Credit

The First-Time Home Buyers' Tax Credit (HBTC) offers tax relief to first-time buyers by providing a non-refundable tax credit. Key points include:

• The credit allows eligible buyers to claim $5,000 on their income tax return, resulting in up to $750 in tax savings.

• To qualify, you must not have owned a home in the last four years, and the home must be your principal residence.

GST/HST New Housing Rebate

The GST/HST New Housing Rebate allows buyers to recover a portion of the federal Goods and Services Tax (GST) or Harmonized Sales Tax (HST) paid on a newly constructed or substantially renovated home. Key features include:

• Buyers can receive a rebate of up to 36% of the GST or HST paid, depending on the price of the home and the province in which it is located.

• The rebate applies to new homes, homes that have undergone major renovations, and even homes rebuilt after destruction.

By taking advantage of these incentives, first-time home buyers can save on upfront costs, reduce tax burdens, and make their path to homeownership smoother.

Waiting for Rates and Approval—Both Could Keep You Stuck!