Thursday, May 17, 2018

Yet another bank discounts variable mortgage rate

HSBC says it is discounting its variable mortgage rate starting Thursday to a level that undercuts the recently discounted rates of other major banks, as competition in the space intensifies.
The bank says it will offer a five-year variable closed rate of 2.39 per cent, down from 2.49 per cent and 1.06 percentage points below its prime rate. It says there's no end date but that the rate could change at any time.
HSBC's lowered rate comes after TD Bank and Bank of Montreal started offering five-year variable closed rates of 2.45 per cent in recent days at a heavy discount to their prime rate until the end of May.
Scotiabank says it has also started lowering its rate to match the limited-time offer of its competitors.
The moves come amid slowing mortgage growth. The Canadian Real Estate Association said Tuesday that national home sales volume sank to the lowest level in more than five years in April, falling by 13.9 per cent from the same month last year. The national average sale price decreased by 11.3 per cent year-over-year.
Home sales have slowed due to various factors, including measures introduced by the Ontario and B.C. governments to cool the housing market, such as taxes on non-resident buyers.
Other headwinds for mortgage growth include higher interest rates and a new financial stress test that makes it more difficult for would-be homebuyers to qualify with federally regulated lenders, such as the banks.
The tighter lending rules are making it harder for homebuyers to qualify for uninsured mortgages and shrinking the pool of qualified buyers for higher-priced homes, CREA's chief economist Gregory Klump said in April.
Meanwhile, Canada's largest lenders all raised their benchmark posted five-year fixed mortgage rates in recent weeks as government bond yields increased, signalling a rise in borrowing costs.
In turn, the central bank's five year benchmark qualifying rate _ which is calculated using the posted rates at the Big Six banks _ increased last week to 5.34 per cent. This qualifying rate is used in stress tests for both insured and uninsured mortgages, and an increase means the bar is now even higher for borrowers to qualify.

Tuesday, May 15, 2018

A lender discounts five-year variable mortgage rate amid heated competition

TD Bank is looking to attract more homebuyers with a hefty discount to its variable mortgage rate as competition among Canada's biggest lenders heats up.
The Toronto-based lender decreased its five-year variable closed rate to 2.45 per cent, or 1.15 per cent lower than its prime rate, for the month of May.
TD's special rate offer comes roughly one week after the Bank of Montreal discounted its variable mortgage rate to 2.45 per cent until the end of May.
Mortgage planner Robert McLister said last week that BMO's special discounted variable rate was the biggest widely advertised discount ever by a Big Six Canadian bank.
TD spokeswoman Julie Bellissimo says its special five-year variable closed rate discount applies to new and renewed mortgages, as well as the variable rate term portion of certain TD home equity lines of credit.
The moves come amid slowing mortgage growth. The Canadian Real Estate Association says national home sales sank to the lowest level in more than five years in April, falling by 13.9 per cent on an annual basis. The national average sale price decreased by 11.3 per cent year-over-year.

by Canadian Press

Monday, May 14, 2018

Home price appreciation to fall 80% this year says RBC

The national rate of home price appreciation has averaged more than 10% in the past 2 years but that’s set to change significantly.
In its latest housing market forecast, RBC Economics predicts a rise in home prices of just 1.8% for 2018 as policy actions and interest rates conspire to cool the market.
Economists are also expecting that home resales will be weaker in 2018 than 2017 (down 4.5% following a 4.3% drop in 2017) making the second year of annual declines, something not seen in Canada since the mid-90s.
But while price appreciation is to soften, RBC Economics does not see a significant correction nationwide; this risk, it says, is contained.
Supply-demand balance is expected to be seen in most major markets including Ontario and British Columbia, with steady support coming from economic fundamentals.
The mortgage stress test’s long-term impact
The tighter lending rules created by the new mortgage stress tests introduced by OSFI at the start of 2018 “will ultimately dampen homebuyer demand in Canada” RBC Economics senior economist Robert Hogue believes.
He adds in the report that the stress test will impact homebuyers’ budgets leading to growth for the lower-priced housing types at the expense of pricier units. This, he notes, is already being seen in Toronto and Vancouver and is expected to extend to other cities.
Interest rates will also continue to impact the market, with four more hikes forecast through to mid-2019 taking the rate to 2.25%. Hogue says that this will start to have more pronounced impact later in 2018.
Healthy correction
Overall, the RBC Economics’ forecast is for Canada’s housing market to face significant headwinds in 2018 but that the easing of markets represents a “healthy correction” over the past two years from 2016’s “unsustainably strong” conditions.

Thursday, May 10, 2018

It just got harder to qualify for a mortgage

An important number that affects the ability of millions of Canadians to qualify for a mortgage has changed.
The Bank of Canada has raised its conventional five-year mortgage rate from 5.14% to 5.34%.
The rate is the one used for stress tests under the B-20 mortgage lending guideline so any borrower with less than a 20% down payment seeking mortgage insurance must be able to afford payments.
For those who do not require mortgage insurance, the rate is one of the two stress test benchmarks used, the other being the contractual mortgage rate plus two percentage points.
The Canadian Press says that the rate increase coincides with an estimated 47% of mortgages that are due for refinancing in 2018, based on a CIBC Capital Markets report.
The big five banks have also recently increased their 5-year FRM rates. When Toronto Dominion increased its rate is was called the “biggest move in years”.
by Steve Randall

Wednesday, May 9, 2018

Expert sheds light on where Vancouver detached home prices are headed in 2018

As detached home sales continue to see sharp drops in the City of Vancouver, prices are beginning to experience declines as well. And one Vancouver-based realtor expects prices will keep falling in the coming months.
In a recent blog post, local realtor Steve Saretsky wrote about the City’s record-low 173 detached home sales recorded in April, a 31 per cent year-over-year drop.
It was the lowest detached home sales total for the month of April on record.
Meantime, detached home prices also dropped in the city last month to $2,397,464, a 5 per cent decline from a year ago, according to the latest data from the Real Estate Board of Greater Vancouver (REBGV).
“Anytime you have really weak sales combined with rising inventory, that tends to lead to price reductions and that’s really what we’re seeing right now,” Saretsky tells BuzzBuzzNews.
Saretsky attributes the drop in detached sales to a combination of factors, including the stress test implemented on January 1, along with rising interest rates and new BC housing policies announced in February.
The comprehensive provincial housing plan includes an increase to the existing foreign buyer tax to 20 percent, along with a new speculation tax slated to start this fall.
Saretsky also argues that diminishing foreign capital in Vancouver is another contributor to declining detached sales and prices.
“I think when you add those [factors] that are still coming down the road, I don’t see how that’s going to be bullish for detached house prices. I think we’re going to continue to see more downward pressure in that space,” says Saretsky.
With the speculation tax looming on the horizon, Saretsky adds that more sellers will likely list their detached homes, and in turn, weak sales will persist and prices will continue to dip in the near-term.
“There’s an imbalance which is going to lead to buyers having a lot of choices and wanting lower prices. Buyers are really in the upper hand and that’s going to lead to more price reductions,” he says. 
Kerrissa Wilson

Monday, May 7, 2018

Spring listings improved in the Fraser Valley but sales were soft

The spring home buying season in the Fraser Valley was softer in April 2018 than a year earlier.
Despite a rise in inventory, the Fraser Valley Real Estate Board reported 1,708 processed sales, up 2.6% from March but down 23.4% year-over-year.
Townhouses and apartments accounted for 53% of overall sales.
There was a rise in active inventory of 18.2% month-over-month and 15.3% year-over-year to 5,667.
“While it’s great to see the increase in inventory we were looking for, both buyers and sellers remain careful as pricing continues to climb,” said John Barbisan, Board President.
New listings increased by 3,429, a 19.7% month-over-month and 16.2% year-over-year.
“This isn’t the same spring market we saw each of the last two years, but listings that are selling are still going fast,” added Barbisan.
HPI® Benchmark Price Activity
  • Single Family Detached: At $1,009,200, the Benchmark price for a single-family detached home in the Valley increased 0.8 per cent compared to March 2018 and increased 13.5 per cent compared to April 2017.
  • Townhomes: At $549,900, the Benchmark price for a townhome in the Fraser Valley increased 1.5% compared to March 2018 and increased 23% compared to April 2017.
  • Apartments: At $447,500, the Benchmark price for apartments/condosin the Fraser Valley increased 1.6% compared to March 2018 and increased 45.8% compared to April 2017.
REP Canada

Wednesday, May 2, 2018

Flipping houses or condos? CRA reminds you that all profits are fully taxable

Canada’s taxman is reminding house and condo flippers that all profits made buying and reselling homes in a short period of time are fully taxable.
This also includes pre-sale flips, where a property is bought and sold before its construction is complete, a process also called an “assignment sale”, according to the Canada Revenue Agency media release issued last week[1].
Earnings from “shadow flipping,” where a speculator buys a property and then, for a profit, assign the right-to-sell clause that is in the contract to another speculator or the final buyer”, are also fully taxable, according the tax agency.
The CRA is emphasizing that “the principal residence exemption does not apply to property flipping” and “these transactions may also be subject to GST/HST which you would be responsible for remitting to the CRA.”
“The CRA acquires and analyzes third-party data and has found that some flips are not being reported or are being reported incorrectly,” the taxman says. “The profits from flipping real estate are generally considered to be fully taxable as business income.”
And you don’t get a free pass for being a non-resident. Irrespective of your citizenship and residency status, you must report and pay taxes for profits made from flipping property, the CRA says.
“A non-resident who invests in property in Canada is liable to pay tax on gains that arise from the sale of that property and is generally not eligible for the principal residence exemption,” according to the tax agency[2]. “There are rules[3] related to the disposition or acquisition of certain Canadian property that require non-residents who sell Canadian property to notify the CRA and to pay an amount to cover their estimated Canadian tax liability. This protects the Canadian government’s ability to collect tax that would otherwise be payable on the sale of a property.”
From April 2015 to December 2017, the CRA audited 4,951 files in British Columbia and assessed $140.0 million as a result of these audits.
The penalties for non-compliance are harsh.
“The CRA will apply a penalty equal to 50% of the additional tax payable if a taxpayer knowingly makes a false statement when filing a return,” the CRA says. “During the period of April 2015 to December 2017, the CRA applied 1,254 penalties, totaling $38.6 million. The highest penalty was almost $2.5 million.”
By ThinkPol