Rate Shake-Ups, Buyer’s Breaks, and Thanksgiving Treats for Homeowners

Rate Watch - Mortgage Rate Pulse: The Good, the Bad, and the Trends

• There’s good news and bad news when it comes to mortgage interest rates.

• The bad news is that in the short term, bond yields shot up - about 25% from the lows at the end of Sept, so quite a bit actually. Banks, of course, immediately put a pause on offering big discounts on fixed rates. The reasons for this rise are covered more in the Maple Pulse section below but the short version - Middle East crisis causing oil to spike, the US economy doing much much, better than expected - more job creation, US CPI coming higher etc.

• The good news is that this is most likely a temporary blip and the larger trend of interest rates going down is expected to continue. This actually brings variable mortgages back in vogue, but that’s a one-on-one discussion with clients to ensure they’re comfortable with the product.

With that being said, we’ve realized that there’s a lot of misconception regarding mortgage interest rates, particularly since Bank of Canada started lowering interest rates. Therefore we’re going to keep adding these interest rate disclaimers on going forward.

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 - Buyer’s Market Beckons: GTA Real Estate Trends for September 2024

Real Estate Radar: Greater Toronto Area - September 2024 Snapshot

• The benchmark home price in the Greater Toronto Area (GTA) for September 2024 stood at $1,068,700, reflecting a 4.6% decline year-over-year. The average home price in the GTA was $1,107,291, down 1.1% from September 2023 but up 3.1% compared to August 2024.

• Detached homes averaged $1.42 million, marking a 1.2% decline year-over-year, while semi-detached homes averaged $1.09 million, down 0.3%. Freehold townhomes experienced the largest decrease, with an average price of $982,656, down 5.8% year-over-year. Condo apartments averaged $682,543, a decrease of 3.5% from September 2023 but up slightly by 1.2% month-over-month.

• The market saw a substantial increase in inventory, with 25,612 active listings, a 35% rise year-over-year, pushing the market into buyer’s territory with a sales-to-new-listings ratio (SNLR) of 28%.

• Home sales in the GTA rose by 7.6% compared to the previous year, with 4,996 transactions, but the surge in new listings has tempered demand.

• TLDR - sales are up, prices are down, market is in buyer’s territory, esp. with further easing in mortgage rules by the government kicking in from Dec 15, 2024.

🍁 Maple Pulse: Unlocking Savings: OSFI Reforms, Rate Volatility, and New Federal Support for Homeowners

• U.S. Job Surge Halts Decline in Canadian Mortgage Rates: A surprise gain of 254,000 jobs in the U.S. in September has caused a spike in U.S. bond yields, closely tied to Canadian five-year bond yields. This correlation has pushed Canadian five-year yields up 26 basis points in three days, raising concerns among mortgage lenders and pressuring profit margins, especially for discounted fixed rates. While rates could still fall later, the volatility makes securing a rate hold crucial for Canadians needing a fixed mortgage in the next few months.

• OSFI to Remove Stress Test for Uninsured Mortgage Switches: Starting November 21, 2024, the Office of the Superintendent of Financial Institutions (OSFI) will eliminate the Minimum Qualifying Rate (MQR) for straight switches of uninsured mortgages. This change allows borrowers to switch lenders at renewal without proving affordability at a higher rate, easing financial pressure. Previously, the stress test ensured borrowers could manage rate increases. OSFI's policy shift aims to promote competition, address market fairness, and provide more options for homeowners seeking better rates during renewals. Mortgage industry leaders see this as a win for borrowers.

• OSFI Drops Stress Test for Mortgage Renewals with New Lenders: Starting November 21, 2024, OSFI will eliminate the mortgage stress test for homeowners switching lenders at renewal, easing financial burdens. Previously, borrowers had to qualify at the higher of 5.25% or two points above their offered rate, limiting options for better rates. This change aligns the rules for uninsured mortgages with those of insured ones and is intended to boost competition among lenders. Ottawa is also loosening conditions, including 30-year amortizations for first-time buyers starting December 15, 2024.

• New Federal Mortgage Refinancing Product for Secondary Suites Announced: The Canadian government has introduced an insured mortgage refinancing option for homeowners adding secondary suites, effective January 15, 2025. This product allows eligible borrowers to access up to 90% of their property's value, including the value of new suites, with a property value cap of $2 million. Borrowers can extend amortizations up to 30 years. Deputy PM Chrystia Freeland emphasized that this initiative aims to support "gentle density" by making it easier to create additional housing units like basement flats or laneway homes. The announcement is part of broader federal housing initiatives.

• FINTRAC’s New AML Regulations Take Effect for Mortgage Industry Starting October 11, 2024, FINTRAC’s enhanced anti-money laundering (AML) rules will apply to mortgage brokers, lenders, and administrators in Canada. These regulations require the establishment of compliance programs, client identification, transaction monitoring, and detailed record-keeping. Mortgage entities must report suspicious activities, large transactions over $10,000, and more. While industry leaders support the aim of reducing money laundering risks, concerns about compliance costs and administrative burdens remain. The new rules align the mortgage sector with existing requirements for banks, emphasizing transparency and accountability to strengthen Canada’s financial system.

Mortgage Mastery - Cracking the Code: Essential Tips for Self-Employed Canadians Seeking Mortgage Approval in Ontario

Navigating mortgage approval as a self-employed individual can be challenging, especially in Ontario's competitive real estate market. Here are some key considerations and tips to increase your chances of approval:

Income Documentation: What Lenders Want to See

• Two Years of Income History: Lenders typically require proof of income for the past two years, such as Notices of Assessment (NOAs) and tax returns.

• Business Financials: Be ready to provide business bank statements, profit and loss statements, and any corporate tax filings.

• Consistent Income is Key: A stable or increasing income trend over two years can strengthen your application.

Improve Your Mortgage Eligibility

• Larger Down Payment: A down payment of at least 20% can help mitigate the perceived risk for lenders, especially if your income fluctuates.

• Build a Strong Credit Profile: A healthy credit score (preferably 680+) can improve your eligibility for better interest rates.

• Lower Your Debt-to-Income Ratio: Reducing personal debts, such as credit cards or car loans, can help show you have the financial capacity to handle mortgage payments.

Consider Alternative Lenders

• B Lenders and Private Mortgage Options: These lenders often have more flexible criteria for self-employed applicants, albeit with higher interest rates.

• Mortgage Brokers Can Help: A broker can connect you with lenders specializing in self-employed mortgages, providing more tailored options.

Self-employed mortgages may require more preparation, but with the right documentation and strategies, homeownership in Ontario is within reach.

The Lighter Side of Loans... and a Little Self-Reflection