The initial Bank of Canada rate cuts this past summer did not spur housing activity as anticipated, but potentially more on the way will continue to affect the housing market outlook. New listing levels are expected to rise as sellers who may have held back enter the market with the hope that lower mortgage rates will attract additional buyers.

While the current Bank of Canada rate of 4.5% may still not be enough to make a dent in home affordability, it does provide a glimmer of hope for potential buyers as interest rates continue to fall.

Canadians across the country are anxiously awaiting additional rate cuts, promoting future home affordability. While consumer confidence is beginning to rise, mortgage affordability will need to be balanced with rising unemployment to reduce the number of households with strained budgets.

In addition, while home prices have cooled a bit, home prices in Canada remain among the highest in the world’s most advanced economies (Japan, France, Germany, Italy, and the UK). These still -high prices have resulted in many potential first-time home buyers to withdraw for now. Higher property taxes, higher qualifying stress-test rates, and the current wave of mortgage renewals will also factor into how successful the Fall market will be.

In 2023 alone, the country saw an influx of 46% of new Canadians, which also contributes to housing demands and pricing. As rates continue to drop, the hope is that prices will stabilize owing to increased supply as demand rises.

If you are looking to get into the housing market as a buyer or seller, or simply have questions so you can best prepare yourself for a future move, don’t hesitate to reach out to me!

All eyes were on The Bank of Canada last month as they cut interest rates by 25 basis points again during their July 24th meeting, thereby taking the overnight policy rate down to 4.5%.

We believe that owing to a sustained deceleration in inflation, the central bank will continue its monetary easing at the September and December meetings and well into next year.

The policy rate will likely fall to 2.75% next year, reducing the burden of higher monthly mortgage rates on renewals in the next 18 months.

The influx of roughly 2 million immigrants to Canada has raised overall consumer spending, averting a recession this year, but GDP per capita continues to decline.

Labour markets continue to soften as job vacancies have fallen sharply, and the jobless rate has risen from 4.9% to 6.4%. The latest business and consumer surveys have suggested that inflation expectations have fallen and wage inflation—a lagging indicator—will soon decline. Companies expect to cut their spending on machinery and equipment, and commercial real estate valuations have fallen owing to the sharp rise in office vacancy rates.

Housing market activity has slowed with the run-up in interest rates from March 2022 until June 2024. Lower interest rates will spur transactions and increase new listings next year. Housing affordability will improve as price pressures remain muted. The housing shortage, however, will likely mitigate the improvement, particularly as the shortage of experienced construction workers impedes rapid housing supply increases.

When it comes to homeownership, many of us dream of the day we will be mortgage-free. While most mortgages operate on a 25-year amortization schedule, there are some ways you can pay off your mortgage quicker!

Did you know? There are a few ways you can help pay off your mortgage faster.

For example - switching to an accelerated bi-weekly payment schedule, increasing your monthly mortgage payments to pay more to the principal, making extra payments on your mortgage, negotiating a better rate, or refinancing to a shorter amortization period!

Let’s take a look at the options and how they work:

1. Review Your Payment Schedule: Taking a look at your payment schedule can be an easy way to start paying down your mortgage faster, such as moving to an accelerated bi-weekly payment schedule. While this will lead to slightly higher monthly payments, the overall result is approximately one extra payment on your mortgage per calendar year. This can reduce the total amortization by multiple years, which is an effective way to whittle down your amortization faster.
2. Increase Your Mortgage Payments*: This is another fairly simple change you can execute today to start having more of an impact on your mortgage. Most lenders offer some sort of pre-payment privilege that allows you to increase your payment amount without penalty. This payment increase allowance can range from 10% to 20% payment increase from the original payment amount. If you earned a raise at work, or have come into some money, consider putting those funds right into your mortgage to help reduce your mortgage balance without you feeling like you are having to change your spending habits.
3. Make Extra Payments*: For those of you who have pre-payment privileges on your mortgage, this is a great option for paying it down faster. The extra payment option allows you to do an annual lump-sum payment of 15-20% of the original loan amount to help clear out some of your loans! Some mortgages will allow you to increase your payment by this pre-payment privilege percentage amount as well. This is another great way to utilize any extra money you may have earned, such as from a bonus at work or an inheritance.
4. Negotiate a Better Rate: Depending on whether you have a variable or a fixed mortgage, you may want to consider looking into getting a better rate to reduce your overall mortgage payments and money to interest. This is ideally done when your mortgage term is up for renewal and with rates starting to come back down, it could be a great opportunity to adjust your mortgage and save! This may be done with your existing lender OR moving to a new lender who is offering a lower rate (known as a switch and transfer).
5. Refinance to a Shorter Amortization Period: Lastly, consider the term of your mortgage. If you’re mortgage is coming up for renewal, this is a great time to look at refinancing to a shorter amortization period. While this will lead to higher monthly payments, you will be paying less interest over the life of the loan. If you’re interested in this, connect with me today so we can calculate if it is worthwhile for you to take advantage! Knowing what you can afford and how quickly you want to be mortgage-free can help you determine the best new amortization schedule.

*These options are only available for some mortgage products. Check your mortgage package or reach out to me to ensure these options are available to you and avoid any potential penalties.

If you’re looking to pay your mortgage off quicker, don’t hesitate to call me to go over your options in more detail today!

The Bank of Canada finally began an easing cycle on June 5, taking their overnight policy rate down 25 bps to 4.75%--the first major central bank to do so. The housing market has languished over the past year with extremely weak affordability.

The Multiple-Listing Service Home Price Index fell again in May and is now down 2.4% year-over-year and is off 14.4% from the early 2022 peak when the overnight rate was a mere 25 basis points. Average transaction prices are down 4% y/y and off nearly 15% from the high.

Except for Calgary, housing markets across the country are in a buyers’ market as inventories of active listings have risen and sales have slowed. Calgary prices were up just under 10% y/y in May, pushing new record highs by the month. In the meantime, Vancouver, Toronto, and Montreal prices are all flat or down from a year ago, and they are still tucked below the levels seen at the early 2022 high.

The significant drivers in Calgary’s outperformance have been more substantial population growth (juiced by interprovincial inflows), better affordability, and valuations that might make some sense for investors.

Even with their lackluster performance since the Bank of Canada began hiking interest rates in March 2022, home prices are still high, having tripled in the past two decades, posting an average 5.7% annual rise, while inflation averaged only 2.2% per year over the same period.

Moreover, the total return on the Toronto Stock Exchange over the same period has been much higher still, averaging 7.9% annually over the past two decades. Despite the recent mini selloff in stocks, the TSX has boasted a more robust return than housing over time. And the US stock market has significantly outperformed the TSX.

Of course, there are significant differences between these two asset classes. Stocks are passive investments that do not provide a place to live or require repairs and maintenance. Housing is more than just a financial investment; it is a lifestyle choice that provides the necessary shelter.

The Bank of Canada will continue to lower interest rates as inflation reaches its 2% target. We expect the overnight rate to fall to about 3% by the end of the easing cycle. But even with only one quarter-point rate cut, bond yields have already fallen significantly in anticipation.

Many mortgage lenders, including three of Canada’s Big Six banks, are slashing fixed mortgage rates, a welcome development for those facing renewal in the coming months. Lenders have already started trimming rates in the wake of a nearly 40-basis-point drop in bond yields, which typically leads fixed mortgage rate pricing.

Over 70% of outstanding mortgages will be renewed within two years. Falling mortgage rates could help soften the payment shock expected for the estimated 2.2 million mortgages that will be renewing at higher rates in the next two years.

But just because rates are falling doesn’t mean all lenders will offer equally low rates in their renewal letters. Typically, they don’t just hand out their especially low rates. That’s where a mortgage broker provides real value, educating borrowers about alternative options, which can be used to haggle a better rate even if they decide not to switch lenders.

For insurable mortgages, the borrower does not need to re-qualify when switching lenders. However, for uninsured mortgage switches, OSFI head Peter Routledge recently rejected renewed calls to remove the mortgage stress test for federally regulated lenders. Knowing your options to improve your bargaining power with your existing lender still pays.

There is a record number of resale condos on the market, and new construction is at a record high. While there remains a longer-term shortage of affordable housing for rent and purchase, it will probably be another year before markets equilibrate and sellers have the advantage.

Housing activity has likely bottomed and will increase as interest rates fall.