10 Jan

How to keep a vacation property within the family utilizing the CHIP Reverse Mortgage

General

Posted by: Mike Hattim

For many people, a cottage is a place of tranquility and escape from the fast-paced city life. The warmth and coziness of cottages also create the perfect atmosphere for socializing and making memories with loved ones.

Unfortunately, cottages are also getting more expensive to maintain, renovate, and pay property taxes. Those living off their retirement income may own the cottage, but many face cash-flow issues as interest rates rise. Families need help finding the money to do necessary upgrades and preserve the vacation property for future generations to enjoy.

However, using the equity built up in your client’s primary residence can be a handy way to keep a beloved vacation property in the family. The CHIP Reverse Mortgage can give your client(s) access to up to 55% of their home equity in tax-free cash and use these proceeds to keep their family cottage.

Meet Mary and John Smith

Mary and John are in their late 70s. Their principal residence is in Scarborough, Ontario (an Eastern suburb of Toronto), but they have a beautiful cottage in the Kawartha Lakes region north of the city. Like many Canadians on a fixed income, with high interest rates and rising cost of living, they are experiencing an income shortfall. A friend recommended selling their cottage to alleviate their financial strain and to free up some cash. But for Mary and John, the cottage is very important as it serves as the gathering place for their family. The memories created there, from shared family meals and board games to strolls outdoors, are irreplaceable to them.

After consulting with their realtor, Mary and John were recommended to explore the CHIP Reverse Mortgage by HomeEquity Bank.

Despite the initial evaluation of their principal residence in Scarborough falling short of their expectations, HomeEquity Bank facilitated a blanket mortgage (inter-alia) on both properties, granting them enough money to pay out the cottage mortgage that required high payments. The CHIP Reverse Mortgage enabled Mary and John to keep their beloved cottage, allowing them to continue creating happy memories with their family for many years to come.

The CHIP Reverse Mortgage Solution

HomeEquity Bank is Canada’s only reverse mortgage provider to offer blanket mortgages (inter-alia).

The unique solution of the CHIP Reverse Mortgage allows Canadian homeowners aged 55 and above to unlock up to 55% of their home’s value, converting it into tax-free cash without the need to relocate or sell their home.

Since the money your clients receive from the CHIP Reverse Mortgage is a loan, it is not added to their taxable incomes. Moreover, with the CHIP Reverse Mortgage, they don’t have to worry about making monthly mortgage payments, freeing up extra funds for maintaining and preserving their cherished properties, like cottages.

Source CMP
By HomeEquity Bank

9 Jan

Is the worst over for the Canadian economy?

General

Posted by: Mike Hattim

After a year that might charitably be described as an up-and-down one for Canada’s mortgage market, homeowners and buyers alike are hoping for a sunnier outlook in 2024.

Rising interest rates helped further squeeze housing affordability for new buyers and pummelled the budgets of many existing owners during the past 12 months, with the Bank of Canada’s war on stubbornly high inflation helping contribute to a gloomy market throughout the year.

Still, there was some room for optimism at year-end, with three consecutive rate holds by the central bank – following an aggressive 16-month campaign of hikes – fuelling speculation that rates will begin to fall in the coming year.

While that might see hopes rise for a resurgence in Canada’s housing and mortgage markets, it’s important not to lose sight of the likelihood that the economy will remain sluggish for much of this year, according to a leading economist.

Speaking to Canadian Mortgage Professional in December, Bank of Montreal (BMO) chief economist Doug Porter said that the Bank of Canada’s rate increases throughout 2022 and 2023 would probably continue to stymy chances of a significant economic upswing.

“We think a good way to look at it is [that] over the last six or seven months, the economy really hasn’t grown at all,” he said. “We think that’s going to be the story for the next six to nine months as well. It’s going to be a challenge to grow.

“The reality is the economy and the mortgage market have not completely digested the rising interest rates we’ve seen to date. We think it will weigh on the economy further. It’s possible that we are looking at a shallow recession.”

Home sales uptick provides BoC with food for thought

December saw home sales post a surprising spike across many major Canadian markets, a development Porter noted this week may be greeted with dismay by observers hoping for imminent rate cuts by the central bank.

“While it’s always dicey to read much into housing activity in the middle of winter, even a flash of strength on this front could revive bad memories for the Bank of last spring’s surprising snap-back in home sales and prices,” he wrote.

The Bank will be viewing sales activity with great interest in the opening months of this year, Porter said, as it weighs up whether the economy has cooled sufficiently to open the door for a rate drop. “Activity is still quiet, but even a hint of a firmer demand/supply balance amid pending rate cuts could readily fire the sector back up again.”

Wage growth, meanwhile, continued at a noteworthy clip in December, coming in at 5.8% for the month despite a higher unemployment rate on a year-over-year basis.

Still, “mixed” labour market data provided just enough indication that the economy was still soft in the fourth quarter, according to Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen.

He said in a note that while “the bottom wasn’t falling out from under Canadian labour markets in December” the unemployment rate had still risen noticeably in recent months and hours worked outright continued to fall.

“The Bank of Canada will still be cautious about pivoting to rate cuts too quickly – and wage growth is still running above the pace historically consistent with their 2% inflation target,” he said.

“But our own expectation is that the economic backdrop is soft enough for inflation to continue to move lower and that the BoC will start to push the overnight rate lower around mid-year this year.”

How significantly could Canada’s economy slow in 2024?

Fears of a sharp and protracted downturn for Canada’s economy have thus far proven ill-founded, with the labour market and overall output remaining steady, if muted, last year in the face of central bank rate hikes.

A meltdown is unlikely to occur in 2024, Porter told CMP in December, although that’s not to say it’ll be plain sailing all the way.

“I’m often asked: ‘Will this be a soft landing or a hard landing?’ I say it’s going to be a bumpy landing,” he said. “Maybe not hard. But there are some challenges, and we’ve already had a big bump with the unemployment rate going up a fair bit last year and that negative quarter of GDP [gross domestic product] in the third quarter. It shows the economy already is struggling.”

Source CMP
By Fergal McAlinden

8 Jan

December Jobs Report In Canada Not As Weak As Headline Suggests

General

Posted by: Mike Hattim

Brisk Wage Gains in December Will Keep The BoC Watchful

Today’s StatsCanada Labour Force Survey for December was a mixed bag and far more robust than the weak headline figure suggests. Total employment in Canada barely budged, rising by a mere 100 jobs in the final month of last year. However, the labour force participation rate fell, leaving the unemployment rate at 5.8%. Most economists had been expecting considerably more robust job growth and a rising unemployment rate.
Canada has one of the world’s fastest-growing populations owing to high immigration levels. However, employment growth has been slower than labour force growth in recent months.

The employment rate–the proportion of the working-age population with jobs–trended downward in 2023 among core-aged men and women (aged 25 to 54).

The participation rate—the number of employed and unemployed people as a percentage of the population aged 15 and older—fell in December (-0.2 percentage points) to 65.4%. This was down from a recent peak of 65.7% in June. Most of the decline from June to December was attributable to a drop in the youth participation rate, which decreased 2.1 percentage points to 63.5% over the period. On a year-over-year basis, the labour force participation rate fell 3.3 percentage points to 85.4% among youth not attending school. At the same time, it declined 1.0 percentage points to 46.4% among youth who were students (not seasonally adjusted).

The participation rate held steady among those in the core-aged group (88.7%) and people aged 55 years and older (36.9%), compared with June 2023 and December 2022.

Total hours worked rose 0.4% month-over-month in December and 1.7% from a year earlier. That followed a 0.7% month-over-month drop in November.
Employment in professional, scientific and technical services increased by 46,000 (+2.4%) in December, following little change in the three previous months. This was the second monthly increase in the industry in 2023, the first having been a rise of 52,000 in August. On a year-over-year basis, employment in this industry was up by 78,000 (+4.2%) in December.

Following four months of little change, employment in health care and social assistance rose by 16,000 (+0.6%) in December, building on increases in June (+21,000) and July (+25,000). On a year-over-year basis, health care and social assistance employment increased by 124,000 (+4.8%) in December. According to the most recent data from the Job Vacancy and Wage Survey, the job vacancy rate in healthcare and social assistance was 5.3% in October 2023, down from a peak of 6.3% in April but still the highest rate across all sectors.

In December, employment fell in wholesale and retail trade (-21,000; -0.7%) for a third consecutive month. From August to December, work in the industry decreased by 80,000 (-2.7%). This followed gains from December 2022 to August 2023, when employment increased by 108,000 (+3.7%).

Employment rose in British Columbia (+18,000; +0.6%), Nova Scotia (+6,300; +1.3%), Saskatchewan (+4,800; +0.8%), and Newfoundland and Labrador (+2,400; +1.0%) in December, while it declined in Ontario (-48,000; -0.6%). Employment in other provinces was primarily unchanged.

The most concerning thing for the Bank of Canada was the acceleration in wage inflation to 5.4% y/y last month, compared to 4.8% in the prior two months. With Canadian productivity falling, this is particularly troublesome for the overall inflation outlook. For this reason, the Bank of Canada will continue to be cautious.
Bottom Line

The next Bank of Canada confab is on January 24, before which we will see the December inflation data on January 16. Given the mixed labour force survey, particularly the wage spike, the Bank of Canada will remain cautious. They will wait until inflation is sustained meaningfully before 3% before cutting the overnight policy rate for the first time this cycle.
Dr. Sherry Cooper
5 Jan

Is the Toronto housing market set for a rebound?

General

Posted by: Mike Hattim

Home sales in Greater Toronto in December 2023 jumped 11.5% year over year. This comes as the Toronto Regional Real Estate Board says that 2024 will bring a rebound in activity following year-long low housing affordability.

However, inventory remains higher than usual, resulting in a decrease in prices, according to a Reuters report. Annual home sales were down 12.1% to 65,982 overall, compared to 2022. According to a Canadian Press report, Toronto Regional Real Estate Board (TRREB) data suggests this was likely caused by high mortgage rates throughout 2023.

“High borrowing costs coupled with unrealistic federal mortgage qualification standards resulted in an unaffordable homeownership market for many households in 2023,” said Jennifer Pearce, president of the TRREB, in a press release.

“With that said, relief seems to be on the horizon. Borrowing costs are expected to trend lower in 2024. Lower mortgage rates coupled with a relatively resilient economy should see a rebound in home sales this year.”

The Bank of Canada has indicated rate cuts may be on the horizon in 2024 if inflation comes down as projected. It has kept its benchmark rate at 5% since July last year.

Across Greater Toronto, December home sales increased in all categories year over year, except for condo apartments, which decreased by 1.4%. Semi-detached homes jumped 36.7% in sales, while sales of townhouses rose 19.8%. The average home price at the end of the year was $1,084,692, up 3.2% year over year.

New listings declined by 6.5% in December to 3,886 compared to the same month in 2022.

Jason Mercer, the board’s chief market analyst, said those who were able to participate in the market last year benefitted from more options, giving them a chance to negotiate lower prices.

“Assuming borrowing costs trend lower this year, look for tighter market conditions to prompt renewed price growth in the months ahead,” he said.

Source CMP
By Jonalyn Cueto

3 Jan

RBC on what will happen to Canada housing affordability in 2024

General

Posted by: Mike Hattim

The observable struggle in demand-supply conditions is now pulling down property values, a trend that will likely extend into the first half of 2024, according to RBC Economics.

During the third quarter, RBC’s aggregate affordability measure for Canada spiked by 2.8 points to settle at 62.5%. This increase marked a reversal from the modest improvement registered in Q2.

RBC said that several markets, including Vancouver, Victoria, and Toronto, were grappling with near-record lows in affordability. Ottawa, Montreal, and Halifax were also found to be labouring under challenging affordability conditions.

“There’s a very long way to go before affordability is meaningfully restored,” RBC said. “Buyers in many of Canada’s large markets will contend with extremely difficult conditions for some time. We expect home resale activity to stay especially quiet in Ontario and British Columbia until interest rates fall materially.”

Any subsequent recovery is likely to be gradual at first.

“Buyers in other markets may respond more quickly to easing rates,” RBC said. “Those in the Prairies (including Calgary) still display strong confidence levels at this juncture.”

However, despite these prevailing challenges, RBC said that there are faint glimmers of optimism on the horizon.

“The good news is the latest bout of housing affordability deterioration has likely run its course and the third quarter will prove to be the cyclical-worst point for RBC’s affordability measure. We see the situation improving from now on as home prices drift lower or stabilize in the majority of markets, and household income continue to grow at a solid pace.”

RBC also anticipates that the Bank of Canada’s policy decisions to be a decisive factor in price dynamics.

“The trend will become even friendlier once the Bank of Canada starts cutting rates—around mid-year in our view,” RBC said.

Source CMP
By Ephraim Vecina

3 Jan

What are Canada’s safest cities to live in?

General

Posted by: Mike Hattim

Toronto was deemed the safest city to reside in within Canada, according to the latest Canadian Crime Index survey conducted by Money.ca.

Taking into account occurrences of arson, burglary, robbery, and impaired driving, the poll gauged the safety levels of various Canadian cities.

The study found that Toronto sees only a minimal 286.9 offenses per 100,000 people. This figure is markedly lower than that of Lethbridge, which was determined as the city most affected by crime (1,190 offenses per 100,000 people).

Money.ca’s compilation of the top 10 safest Canadian cities was as follows:

  1. Toronto – 286.9 offenses per 100,000 people
  2. Quebec – 301 offenses per 100,000 people
  3. Ottawa-Gatineau, QC – 318.8 offenses per 100,000 people
  4. Sherbrooke – 327.4 offenses per 100,000 people
  5. Ottawa-Gatineau, ON – 333.9 offenses per 100,000 people
  6. Montreal – 356.7 offenses per 100,000 people
  7. Barrie – 356.7 offenses per 100,000 people
  8. Trois-Rivières – 366.2 offenses per 100,000 people
  9. Saguenay – 396.3 offenses per 100,000 people
  10. Hamilton – 420.6 offenses per 100,000 people

Money.ca said that these safety ratings can significantly mirror housing values and the attractiveness of different areas for individuals and families.

“The rates of safety can affect housing prices and the appeal of various areas when looking to move or raise a family, with investment from individuals and government bodies alike needed to ensure more comfortable living among neighbourhoods,” Money.ca said.

“For those looking to invest in real estate in Canada, this study offers an interesting look into where may be the most appropriate place to put their money into, and what this in turn, might mean for the housing market long term.”

Source CMP
By Ephraim Vecina

2 Jan

When is the right time to buy a house?

General

Posted by: Mike Hattim

In terms of buying a home, the time to make a move is now.

That’s what some in the mortgage business are saying on the heels of the Fed’s decision to leave the interest rate alone at its December meeting. That lack of action on the Fed’s part telegraphed the likelihood of rates coming down by next year and even the idea of cutting the interest rate – not increase as had been done repeatedly to tamp down inflation.

“It’s an exciting time,” Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage told Mortgage Professional America during a telephone interview.

But let’s slow our roll here

Yet she also sought to temper the enthusiasm: “Mortgages are so specific to the situation and individual, so not everybody’s rate drops by half a percentage point overnight,” she said. “A lot of the savvy buyers understanding that we’re looking at rates that are going to be closer to the middle 6s know that it’s totally advantageous to actually buy now.”

She anticipates a mass influx of potential homebuyers given the likelihood of a changed rates scenario in 2024: “As rates come down, the expectation is that there’s a ton of people coming back into the market,” Alvarez said. “I can speak personally to that; I’ve heard from a lot of people even in the past week. People are usually checked out right now,” she said in reference to the holiday season. “But people are pretty excited about the headlines.”

Alvarez provided some hypothetical scenarios to illustrate her point about the impact of falling rates. “In terms of looking at rates, if you had a million-dollar loan – so that’s 80% of buying for $1,250,000 – at 7.5%, your monthly pricing and interest is going to be right around $7,000. When it’s down at 6.5%, that payment is down almost $700.”

Buy now! Escape the madness

So, it’s all about striking while the iron is hot, Alvarez suggested: “Being able to get into the door and buy the house that you want before it kind of reverts to some of the madness we’ve seen in the past in terms of a busy market – that’s a big premium. And with the general expectation too of houses appreciating, you’re looking at the opportunity down the road to do a refi and bring down your monthly payment as opposed to perhaps getting priced out of the home you really love.”

Of course, it’s not going to be a seamless, laughter-filled sleigh ride. Not after a year like the industry has had. “On the flip side, there’s the question about inventory and we are in a market where we continue to see limited inventory,” Alvarez noted in showcasing a spoiler. “So in some sense, there are those who may be waiting a little bit longer. It’s hard to say if we’ll ever really see the previous norm of having inventory available.”

Alavarez’s colleague, William Raveis Mortgage regional vice president Melissa Cohn, agreed with the assessment that now might be a good time to buy in anticipation of lowered rates. “We’re probably where the rates have come down enough that more buyers are coming back into the marketplace, and prices have certainly not gone up – and they’re not going to go up until next year because we’re in the holiday season,” she said. “As such, now’s the time to start making a move.”

A recent report from UrbanDigs buttresses the point further in confirming a “buyers’ market” status.

“The only element missing is supply,” researchers wrote. “This cycle is driven by forces other than an expansion of the sell-side pool, as panicked sellers feel isolated and limited.”

And then, researchers lower the boom: “Nevertheless, make no mistake: This is a buyer’s market and likely will remain one as we head into 2024.”

Source CMP
By Tony Cantu

2 Jan

Estate Planning: Are You Covered?

General

Posted by: Mike Hattim

“New Year, new you” may be a cliché but it is for a reason! The New Year always has us thinking about where we are now, and where we want to end up. When it comes to your personal goals, a review of your finances and estate should be at the top of your list.

Proper estate planning can ensure that you have a stress-free year knowing you are covered!

Is your will up-to-date?

The purpose of a will is to outline your assets and determine how they will be distributed, as well as who will be in charge of managing affairs. Some key components to include in this document are:

  • Up-to-date list of your significant assets; note the location if outside your province or outside Canada.
  • Who will inherit your assets? And which?
  • Outline of where you want assets to pass outside your estate to avoid probate fees (e.g., an insurance policy, an RRSP)? Do this via beneficiary designation.
    • If they are minors, do you have a trust or other provisions in place?
  • Is the list of beneficiaries in your will up to date? Have there been recent births, deaths or marriages in your family?
  • Have you included alternates in case your named beneficiaries predecease you?
  • Do you want to give to charities or other organizations?
  • If you have children, have you indicated a guardian and spoken to them?
    • Did you include an alternate in case the guardian you chose is unable to commit?
    • Have you reviewed your choice of guardian as your child grows older?
  • Your executor who will carry out your wishes after you die. You can name one executor or two or more co-executors. Be sure to name one or more alternates as well.

Have you assigned a power of attorney?

Another important (and often overlooked!) aspect of estate planning involves naming a power of attorney. This individual is someone you trust to make decisions for you should you become unable to do so due to injury or illness, whether temporary or otherwise.  Power of attorney documents are created for you by a wills and estates lawyer (or notary in Quebec) as part of your estate plan.

Do you have mortgage protection insurance?

Through Manulife Mortgage Protection Plan (MPP), you have the opportunity to add a portable insurance policy to your mortgage that helps protect your loved ones and your home should something unexpected happen to you.  Unlike bank insurance, MPP is a portable life and disability product that you can take with you, from lender to lender and property to property.  This gives you the utmost future flexibility and is unlike bank insurance products which tie you down exclusively to them.  To ensure you get the best rate at renewal, you must have invested in an insurance product like MPP that will give you the freedom to move!

Mortgage life insurance will protect your family’s future by paying out your mortgage should the mortgage holder pass away. Manulife will also make your mortgage payments while your claim is being adjudicated, so there is no added stress for a loved one at an already difficult time.  Mortgage disability insurance will take care of your mortgage payments plus property taxes if you become disabled.  Disabilities from sickness and accidents are relatively common and will affect 1 in 3 borrowers throughout their mortgage amortization.  Manulife provides budget-friendly payment options, the ability to top-up your coverage and so much more.

These are all important aspects to consider to ensure your estate and family will be provided for should something happen. While never a fun topic, it is an important one and the better prepared you are, the better off your loved ones will be.

I would be happy to discuss coverage with you to ensure peace of mind for your family and their future.

2 Jan

Pantone of the Year

General

Posted by: Mike Hattim

As we enter the New Year, it’s always fun to reflect on the previous twelve months and take a look at what is trending as we move forward.

If you’re unfamiliar with the Pantone of the Year, it is more than just a colour to paint your walls.

Since 2000, the Pantone Colour Institute has been indicating a colour of the year and, for many, this is seen as a representation of the current moment in time helping us to reflect on the culture and state of the world. Think of it like a snapshot in time!

For 2024, the Pantone color of the year is “Peach Fuzz”; which is notably a warm and cozy hue to feed and nourish the soul.

During this post-pandemic period of turmoil around the economy, mortgage industry, and housing market, many of us are currently in need of more nurturing and comfort. This colour signifies the importance of caring and community even more as we enter 2024.

As the calendar turns over, take inspiration from Pantone to make the New Year one of comfort, healing and peace for yourself and those around you. With interest rates forecasted to drop towards the later half of 2024, housing and job markets set to stabilize and inflation slowly reducing to normal, we have some stability to look forward to.

To ensure you can make 2024 as comfortable as possible, don’t hesitate to reach out to me for mortgage advice. Managing your finances can be a great way to reduce stress and leave time for more important things! Renewals are on the rise, and this can be a great opportunity for you to rebalance your mortgage contract, review your interest rate and terms, and update your payment schedule to make the most of your monthly cashflow.

2 Jan

Economic Insights from Dr. Sherry Cooper

General

Posted by: Mike Hattim

With the release of the November inflation data, some were disappointed that inflation remained at 3.4% year-over-year—the same as in October.

However, without the base effects of year-ago energy price declines, inflation would have been less than 3%.

December’s inflation data will be similarly skewed higher. Still, there is ample reason to suggest that interest rates have peaked, and the Bank of Canada will begin to ease monetary policy next year.

The economy has slowed significantly, and the unemployment rate is rising. Consumer spending will continue to slow as monthly mortgage payments rise at renewal. Excess demand is now gone, and housing markets have slowed considerably. Although the road to 2% inflation will be bumpy, the central bank now believes that the overnight policy rate is high enough to return inflation to its target.

Core inflation has been sticky, and wages continue to rise, playing catch-up to past inflation, but events are trending in the right direction. While not even the Governing Council knows when they will begin to cut interest rates or how quickly the process will proceed, policymakers and regulators are worried about the dampening effects of significant increases in monthly mortgage payments for the 60% of loans that will be renewed or refinanced in the next three years.

Just as overstaying their aggressive easing of monetary policy caused inflation, on the flip side, keeping monetary policy this tight for too long could damage the livelihoods of many Canadians, triggering potential financial instability and significant layoffs. These concerns have precipitated a dramatic decline in market-driven interest rates worldwide.

There are many reasons to believe the Bank of Canada will begin to ease monetary policy in 2024. Bond and money markets are building in this expectation.