18 Sep

Should we stay or should we go

General

Posted by: Alisa Aragon

 If you’re founding your family has grown out of your current home or your house could use a makeover to better fit your changing needs, renovating is a great option to examine. Instead of putting your home on the selling block and heading out shopping for a new home right away, it may be worth considering using some of your home equity to renovate so you can remain at your current address.

The first consideration is whether your home can be adjusted to meet your needs. Is your lot big enough for an addition? Will your foundation handle the weight of an extra floor? Does the tired look of your home require a major over houl? Will the renovations add value to the home?

Plan out the changes you would like to make and speak to professional renovators to seek several quotes before making your decision.

Next, depending on the complexity of the project, you have to decide if it’s worthwhile for you in your family to live in a construction zone for several weeks or even months while improvements are being made to your home.

Finally, unless you have a lot of money saved up, you have to weigh your finances to determine what makes the most financial sense to you and your family in the long run.

WING ON YOUR FINANCES

Now is a great time to think about making renovations to your existing home to create your dream home. With mortgage rates still sitting at historic lows, it makes sense to use some of your home equity to put to words renovations that could help you remain in the house you love, in the neighborhood you desire that’s close to work, school and amenities to which you’ve grown accustomed.

Other possibilities include a home equity line of credit (HELOC) – where you can access money as required for each stage of your renovation – or it may be a construction mortgage may be your best bet. The key is to talk to an independent Mortgage Expert who has access to multiple financial institutions and products to ensure you get the most bang for your Buck.

It’s important to weigh the renovation costs with the potential for your home to increase in value as well.

Moving can also be quite expensive. Possible costs to consider when moving include:

  • real estate fees (upon selling your existing home)
  • legal fees
  • property transfer tax
  • moving expenses
  • decorating the new home
  • mortgage penalty

OTHER CONSIDERATIONS

The decision between renovating and updating to a new house is not solely financial. You should also consider your time, energy and peace of mind.

Each choice has advantages and disadvantages. When determining the best option for you and your family, consider the pros and cons of both renovating your existing home and moving to a new home.

By taking into account what do you want to do, why you want to do it, the cost of the renovations and upgrades, and the value of your renovated home in relation to other homes in your neighborhood versus the costs of buying a new home, you can determine which option is best for you.

Written by:

Alisa Aragon, Mortgage Expert

Published: 22 HOME DÉCOR AND RENOVATIONS JUL – AUG 2014

9 Sep

Bank of Canada Holds Overnight Rate Steady Amid Uncertainty

General

Posted by: Alisa Aragon

This article addresses the overnight rate steady Amid uncertainty. The Bank of Canada held the target overnight rate at steady at 1.75% for the seventh consecutive decision date but will monitor closely the impact of the US-China trade war on economic activity around the world and in Canada. The second-quarter growth–posted at 3.7%–exceeded the Bank’s forecast in the July Monetary Policy Report (MPR), but the Bank expects the economy to slow from that pace in the second half of the year.

Q2 Was boosted by stronger energy production and robust export growth, both recovering from a weak Q1 performance. But evidence suggests that export growth slowed in July and could weaken further as the global economy slows. Canada bears the brunt of Chinese trade restrictions on Canadian agricultural imports. Housing activity also boosted the expansion in the second quarter as resales and housing starts picked up. Falling longer-term interest rates have driven down mortgage rates. The Bank asserted that “this could add to already-high household debt levels, although mortgage underwriting rules should help to contain the buildup of vulnerabilities.”

Wages picked up further last quarter, boosting labour income, yet consumption spending was unexpectedly soft. Canadian consumer confidence recorded its most significant monthly drop this year in August amid growing concerns about the global economic outlook. The setback reflects waning optimism about Canada’s economy and effectively reverses the pick-up in sentiment earlier this summer.

The deterioration in confidence coincides with the escalation of the U.S.-China trade war. Many Canadians increasingly worried they’ll soon feel a bigger impact. Consumers aren’t the only ones feeling the uncertainty as business investment weakened sharply in the second quarter. Trade tensions have hit farmers and manufacturers hardest. The U.S. implemented additional tariffs on China September 1 and have slated more on December 15. These include duties on clothing and electronics, will pinch US consumers where it hurts, in the pocketbooks. These moves will sideswipe Canada.

Despite all of this gloom, the central bank held off from signalling explicitly any immediate need to cut interest rates. While growth has been stronger than expected, inflation has remained on target.

“In sum, Canada’s economy is operating close to potential and inflation is on target. However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies,” the central bank said in its statement. “In this context, the current degree of monetary policy stimulus remains appropriate.”

Market Interest Rates Are Tumbling

The Bank prefers to wait for more concrete evidence that the economy is in need of additional stimulus. Despite this, market interest rates have fallen to record lows in Canada and elsewhere and the yield curve is inverted. Government of Canada 5-year yields have slid from 1.85% to 1.15% this year, an incredible 38% decline. Ten-year returns are down from 1.92% to 1.13% (lower than the 5-year yield), and the 30-year bond yield has plunged from 2.13% to 1.40%.

Short-term interest rates are higher than longer-term yields. The overnight rate, controlled by the Bank of Canada, is 1.75%–well above all of these long-term yields. The 3-month bill rate is at 1.62%, almost 50 basis points higher than the 5-year yield.

The posted mortgage rate is the qualifying rate for mortgage borrowers. It has barely moved this year, down only 15 basis points to 5.19%. Its stickiness at elevated levels has prevented many borrowers from taking advantage of today’s low contract mortgage rates.

Mortgage Rates Have Fallen Even More Than Bond Yields

According to Rate Spy, the best high-ratio 5-year fixed mortgage rate is at 2.25%, down 94 basis points from the 3.24% rate posted at the beginning of the year. Conventional high-ratio 5-year fixed mortgage rates are down 95 bps and refinance 5-year fixed rates have fallen 118 bps. Much of this phenomenon might be lenders playing catch-up as they were slow to cut fixed rates when interest rates began to fall at the end of last year.

9 Aug

Are you a first time Homebuyer?

General

Posted by: Alisa Aragon

Here are 4 costs to consider if you are a first time homebuyer.

Oftentimes even the most organized and detail oriented first-time homebuyer can overlook some unexpected costs that come with the purchase of their new home. We are outlining 4 of the costs that we most commonly see overlooked by home buyers in hopes that we can better prepare you—and save you from a few surprises!

1. Closing Costs.

Congratulations! Your offer was just accepted on your new home, you’re one step closer to adding a major asset to your portfolio! We don’t want to shock or dampen the excitement of this moment. However, it’s important that you factor in closing costs right at the beginning of your purchase.

The best time to do this is before even applying for your pre-approval or making any offers on a home. Closing costs may include:
>insurance
>taxes (Land Transfer, Property, and others depending on what province you are in)
>legal/notary fees
>inspection/appraisal fees.

A general rule of thumb is to set aside 1.5% of the purchase price to account for the closing costs above. To plan ahead, consider speaking to a mortgage broker and your realtor. They can help you determine just how much you should set aside to accommodate those additional closing costs.

2. Utility Bills.
If you’ve gotten used to living in a small space, such as a condo or an apartment, you may be surprised how much more water, heat, and energy you consume in a larger space such as a detached home or a townhouse.

It’s important to prepare for these as you do not want to have a “surprise” when your bill arrives in the mail and it’s nearly double what you are used to spending!

Factoring in these bills is also crucial if you are going from renting to owning! Often times the landlord will cover a portion of your utility bills or your cable/internet depending on the contract you had with your landlord. Of course, once you are a homeowner, you are covering the entire cost! Ask family members, friends, even your mortgage broker or realtor what is a realistic cost for things such as cable and internet, water, heat, etc. You’d be surprised how fast they can add up!

3. Renovations and Updates.

Unless you bought a newly built, brand new home, there is undoubtedly going to be future renovations and updates that you will need to do on your home. They may not need to happen right when you move in, but sometimes the unexpected does happen and having money set aside can make a world of difference! When you have your home inspection completed, make a prioritized list of what will need to be fixed/updated first and set aside money each month for it.

In addition to the “must do” updates/renovations, new property owners may also want to make aesthetic improvements, whether they mean to reside there or not. Naturally, a homeowner wants to make the place feel more like their own, and investors want to add value their investment or make adjustments to make the asset more aesthetically pleasing.

4. Ongoing Maintenance
Home’s require maintenance—all the time! Ask any homeowner and they will tell you that there is always home maintenance in one form or another happening. A few common home maintenance costs may include:
• Gutter cleaning
• Roof repair/maintenance
• Drywall repair
• Furnace cleaning
• HVAC and Duct cleaning
• General plumbing and electrical fixes
Every home is different in regards to how much you should budget annually for regular maintenance. It will depend on the age of your home, square footage, climate in your region, and overall condition of your home.

In closing, property ownership shouldn’t be dampened by financial rules caused by lack of preparation. All of these costs, as well as additional other costs, are easy to plan ahead for and to ensure that you have budget set aside each and every single month to make sure that you stay on track. As a rule of thumb, the CMHC states that your housing costs including mortgage payment should not exceed 39% of your monthly income. Treat this number as a point of reference when you’re doing your budget and consider leaving room for the unexpected. It’ll give you peace of mind on the long run and allow you to actually enjoy your new home!

 

Geoff Lee,

Dominion Lending Centres

19 Jul

Rate Falls Since B-20 Intro: For Qualifying Mortgage

General

Posted by: Alisa Aragon

The interest rate used by the federally regulated banks in mortgage stress tests has declined for the first time since 2016, making it a bit easier to get a mortgage. This is particularly important for first-time homeowners who have been struggling to pass the B-20 stress test. The benchmark posted 5-year fixed rate has fallen from 5.34% to 5.19%. It’s the first change since May 9, 2018. And it’s the first decrease since Sept. 7, 2016, despite a 106-basis-point nosedive in Canada’s 5-year bond rate since November 8 (see chart below).

Five-Year Canadian Bond Yield

The benchmark qualifying mortgage rate is announced each week by the banks and“posted” by the Bank of Canada every Thursday as the “conventional 5-year mortgage rate.” The Bank of Canada surveys the six major banks’ posted 5-year fixed rates every Wednesday and uses a mode average of those rates to set the official benchmark. Over the past 18-months, since the revised B-20 stress test was implemented, posted rates have been almost 200 basis points above the rates banks are willing to offer, and the banks expect the borrower to negotiate the interest rate down. Less savvy homebuyers can find themselves paying mortgages rates well above the rates more experienced homebuyers do. Mortgage brokers do not use posted rates, instead offering the best rates from the start.
The benchmark rate (also known as, stress test rate or “mortgage qualifying rate”) is what federally regulated lenders use to calculate borrowers’ theoretical mortgage payments. A mortgage applicant must then prove they can afford such a payment. In other words, prove that amount doesn’t cause them to exceed the lender’s standard debt-ratio limits.

The rate is purposely inflated to ensure people can afford higher rates in the future.

The impact of the B-20 stress test has been very significant and continues to be felt in all corners of the housing market. As expected, the new mortgage rules distorted sales activity both before and after implementation. According to TD Bank economists in a recent report, “The B-20 has lowered Canadian home sales by about 40k between 2017Q4 and 2018Q4, with disproportionate impacts on the overvalued Toronto and Vancouver markets and first-time homebuyers…All else equal, if the B-20 regulation was removed immediately, home sales and prices could be 8% and 6% higher, respectively, by the end of 2020, compared to current projections.”

According to Rate Spy, for a borrower buying a home with 5% down, today’s drop in the stress-test rate means:

  • Someone making $50,000 a year can afford $2,800 (1.3%) more home
  • Someone making $100,000 a year can afford $5,900 (1.3%) more home
    (Assumes no other debts and a 25-year amortization. Figures are rounded and approximate.)

For a borrower buying a home with 20% down, today’s drop in the stress-test rate means:

  • Someone making $50,000 a year can afford $4,000 (1.4%) more home
  • Someone making $100,000 a year can afford $8,300 (1.4%) more home
    (Assumes no other debts and a 30-year amortization. Figures are rounded and approximate.)

Bottom Line: Almost no one saw this coming due to the stress test rate’s obscure and arcane calculation method (see Note below). This 15 basis point drop in in the qualifying rate will not turn the housing market around in the hardest-hit regions, but it will be an incremental positive psychological boost for buyers. It should also counter, in some small part, what’s been the slowest lending growth in five years.

Note: Here’s the scoop on why the qualifying rate fell. According to the Bank of Canada:
“There are currently two modes at equal distance from the simple 6-bank average. Therefore, the Bank would use its assets booked in CAD to determine the mode. We use the latest M4 return data released on OSFI’s website to do so. To obtain the value of assets booked in CAD, simply do the subtraction of total assets in foreign currency from total assets in total currency.”

The BoC explains further:

“Prior to July 15th, we were using April’s asset data to determine the typical rate as that was what was published on OSFI’s website. On July 15th, OSFI published the asset data for May, and that is what we used yesterday to determine the 5-year mortgage rate. As a result, the rate changed from 5.34% to 5.19%.”

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

30 Jun

Wading through today’s soft real estate market

General

Posted by: Alisa Aragon

New Home Condo Guide, May 2019 issue, I, Alisa Aragon was interviewed by Stephanie MacDonald. Here is the article, it has some useful tips that maybe helpful.

Next Home New Home + Condo Guide sat down with mortgage specialist Alisa Aragon to hear her views on today’s real estate market.

New Home + Condo Guide: We’ve been hearing how the real estate market is depressed, but is the news all doom and gloom?

Alisa Aragon: Well, we just have to deal with whatever comes our way, don’t we? The Bank of Canada acknowledged that the slowdown in the economy was a bit more than they expected, and that the new “stress test” has had the effect of softening the real estate market, so they decided to not raise the interest rate. That’s one thing. This is still a buyers’ market, and I have seen a lot of my clients taking this opportunity to move up from a condo to a town home, or into a house. Sure, you will be selling lower, but you will also be buying at a lower price as well, and most people have built up equity they can use towards their next home.

NHCG: What about for first-time buyers?

AA: The new mortgage rules have definitely made it more difficult for first-time buyers to get into the market. Some people have access to lending from their parents or getting an “early inheritance” to make up a down payment, but that doesn’t change the fact that Vancouver is still very expensive. A few of my clients have chosen to invest in properties in the interior of the province, rent them out, and continue to rent in Vancouver, building equity out of town. With an investment property, you need at least a 20 per cent down payment, but the properties cost a lot less, so it can be an affordable option.

NHCG: What kind of mortgage makes sense now?

AA: It is going to be different for everyone. I do tell people that the interest rate is not necessarily the most important thing. When I bought my first condo years ago, I signed for the mortgage, got the rate that was advertised, but when I sold the condo to buy a house, I had to pay huge penalties. So, in some cases, the terms of the mortgage are more important than the interest rate.

Alisa Aragon has a mortgage license from the University of British Columbia. In 2017, she started Bridgestone Financing Pros. She is also on the board of directors of the Home builders Association of Vancouver (HAVAN).

by Stephanie MacDonald.

Link to the article: Click Here, pg. 54

15 Jun

Another Strong Employment Report Signals Rebound In Canadian Economy

General

Posted by: Alisa Aragon

It appears that the Bank of Canada’s optimism that the Canadian economy’s growth will pick up in the third and fourth quarters of this year is well founded. Not only was the employment report very robust for two consecutive months, but the jobless rate has fallen to its lowest level since at least 1976.

Also, Canada’s trade deficit, reported today, hit a six-month low in April, as exports continue to rebound from a recent slump. Consumer spending and business investment are also making a big comeback. Household spending has accelerated, despite concerns over bloated debt loads, assisted by easing rates on loans, substantial jobs gains, stabilizing housing markets and improving financial markets.

The Bank of Canada forecasts that growth will accelerate to an annualized 1.3% in the second quarter–following the meagre 0.4% expansion in Q1–and pick up further in the second half of this year, before accelerating back to above 2% growth by 2020. This comeback begs the question–why were markets expecting a rate cut by the bank in December? That expectation may well change after this morning’s Statistics Canada releases. Of course, one caveat remains, which is the uncertainty surrounding a trade war with China and Mexico. If the trade situation were to worsen, Canada’s economy would undoubtedly be sideswiped.

Canadian employment rose by 27,700 in May, bring the number of jobs created over the past year to a whopping 453,100. The jobless rate plunged to 5.4%, from 5.7% in April, the lowest in data going back to 1976. Economists had been forecasting employment to rise by only 5,000 last month after Canada recorded a record gain of 106,500 in April. The loonie jumped on the news.

The composition of the job gain was particularly heartening, as the rise was all in full-time employment. On the other hand, jobs by those who are self-employed increased by 61,500–the gig economy is alive and well.

The most substantial job gains were in Ontario and BC.

Wage growth continued to be strong in May as pay gains for permanent workers sere steady at 2.6%.

In direct contrast, the US jobs report, also released today, was weaker than expected. US payrolls and wage gains cooled as Trump’s trade war weighed on the economy. US employers added the fewest workers in three months, and wage gains eased, suggesting broader economic weakness and boosting expectations for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on growth

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

3 Jun

Property taxes are due on Tuesday, July 2nd

General

Posted by: Alisa Aragon

 

Please remember to apply for the BC Homeowners Grant if you are eligible. To apply for the grant, you have to complete the application sent with your tax bill and return to local municipality. In most municipalities, you are able to apply for the Home Owner Grant online. It is as simple as visiting your municipality’s website and look for the link to apply for your Home Owner Grant. You will need your Folio number and access code that can be found in your property tax notice.

If your lender is collecting the property taxes for you, you are still required to apply for the grant. Your municipality will charge you by a 5% penalty if you don’t pay your property taxes or claim the grant by July 2nd, 2019.

If you have any questions or need to find out information on the amount of money that has been collected by your lender to pay towards your property taxes, please contact your lender directly or feel free to contact me and we will be more than pleased to help.

As always, please don’t hesitate to contact me should you have any questions.

— Alisa Aragon, Financing Expert

24 May

Developers step up quirky incentive game to lure new condo buyers

General

Posted by: Alisa Aragon

As seen in Vancouver Courier

The trend for quirky new-home buyer incentives is continuing after developer Woodbridge Homes recently offered a year’s worth of avocado toast to buyers of homes at its West Coquitlam development KIRA.

Today, developer Wesgroup is throwing down the gauntlet and telling its competitor, “We’ll see your avocado toast and raise you a glass of wine.”

This new incentive offers buyers a year’s worth of wine if they buy a home at Wesgroup’s MODE development in Vancouver’s River District. The exact offer is a $1,500 gift card for a nearby wine store, equal to roughly one bottle of wine a week for a year, with each purchase of a home in the new riverfront development.

Brad Jones, vice-president of development at Wesgroup, told Glacier Media, “Our offer is kind of cheeky, in response to another developer’s incentive of avocado toast. But we did this in addition to what is already a really strong incentive package for MODE, which is a discount of $10,000 off a one-bedroom home, $15,000 off a two-bed, and $20,000 off a three-bedroom home. And we’re already offering great value for a new home in Vancouver.”

It’s not just condo purchases that are being incentivized. On one of its new rental developments, Wesgroup is offering an incentive of similar value to the wine, this time paying for packing and moving costs. Those who rent a two-bedroom home at The Westminster in New West qualify for its Moving Made Easy incentive, which pays for a full-service move from a reputable local moving company and is valued up to $1,500.

Ryan Thé, vice-president of development for The Westminster, told Glacier Media, “We wanted to offer something that addresses the practical needs of renters. We know it’s hard to find rental homes with our vacancy rates so low. It’s already stressful enough to find a place, so we wanted to make life that bit easier for renters. It’s been going for about a month and we’ve had quite a lot of uptake on that.”

Making a difference

These attractive offers might seem like luxuries a buyer might otherwise have to give up, or ways to make moving less stressful. But one mortgage broker warned buyers not to be too easily swayed by quirky incentives that may not add up to much.

Alisa Aragon of Bridgestone Financing Pros, powered by Dominion Lending Centres, told Glacier Media, “With new home sales slowing, developers are getting creative with their incentives. But what’s ultimately the most important thing is whether this is the right home for you. A gift card worth $1,200 or so is great, but it won’t make much difference to your monthly costs. Make sure you’re taking into account all the costs, including mortgage payments, strata fees and property taxes, and what you’re getting for those costs.”

But as home-buying continues to be out of reach for many and sales continue to slow, developers such as Woodbridge Homes, Wesgroup and Intergulf are also offering more substantial incentives that could make a real difference to a buyer.

In addition to the year of avocado toast, Woodbridge’s KIRA development also gave buyers a limited-time opportunity to put just a 10 per cent deposit down, instead of the usual 20-25 per cent deposit on pre-sale homes.

Wesgroup is offering those stepped discounts from $10,000 to $20,000, depending on the size of unit, at MODE. And in North Vancouver, developer Intergulf is allowing all buyers to put down 15 per cent deposit on a new home at Hunter at Lynn Creek.

More developments offering low-deposit and other incentives include:

  • Court by Heinrichs Development: 10 per cent deposit and live free for the first six months
  • Luxia at Yorkson by Isle of Mann: 5-10 per cent deposit and a $5,000 gift card from Urban Barn with a purchase of a home.
  • 27 North by Intragulf and Tatla: 10 per cent deposit plus choice of ski pass and skis for all the family, free golf for a year, free mountain bikes for the family, or the cash equivalent.

And these are just a small snapshot of the value-added incentives being offered around the region’s housing projects, as developers attempt to lure buyers in a challenging market. Many companies won’t advertise it, but would offer a “decoration allowance” that can amount to tens of thousands of dollars returned to the buyer on completion, while still selling the home at full price on paper. Other developers will negotiate other aspects of a pre-sale home, such as throwing in upgrades, or an additional parking stall, or offering a discount to take no parking stall.

An alternative approach

Taking a different approach to getting people into its homes, and as part of its “Locals First” policy, Panatch Group is operating a rent-to-own scheme at its Port Moody development 50 Electronic Avenue. This program allowed 30 eligible households (first-time buyers who live and work in Port Moody), selected by lottery out of hundreds of applicants, to rent a home at less than market value for up to two years. Within this time, the participating households get the option to purchase their unit and will then have their accumulated rent, which has been collated in a trust, paid towards a purchase price that was locked in at the contract date.

Kush Panatch, president of Richmond-based, family-owned Panatch Group, said, “For a lack of a better name, it’s basically taking 30 families or people in Port Moody and providing them with what I call a pathway to home ownership.”

He added, “The housing challenge is very real.”

– Joannah Connolly, Vancouver Courier,
May 24, 2019 06:00 AM

15 May

Bank of Canada Reduces Prospects of a Rate Hike

General

Posted by: Alisa Aragon

A greater-than-expected slowdown in global economic activity has triggered a slowdown in the pace of interest rate normalization by many central banks. In response to these central bank policy changes and perceived progress in U.S.-China trade talks, global financial conditions and stock market sentiment have improved, pushing up oil and other commodity prices.

Oil prices have risen since January in response to improved market sentiment, a greater-than-expected output cut in Saudi Arabia and risks of falling production in Iran, Venezuela and Libya. In its projection, the Bank assumes that the prices of Brent and WTI oil will remain close to their recent average levels. Uncertainty around the future path for global oil prices, however, remains elevated. The most important considerations relate to OPEC policy and geopolitical risks to production. As well, U.S. shale output could increase at a faster pace than expected.

In Canada, growth during the first half of 2019 is now expected to be slower than was anticipated in the January Monetary Policy Report (MPR). In another very dovish statement, the Bank of Canada acknowledged this morning that the slowdown in the Canadian economy has been more profound and more broadly based than it had expected earlier this year. The Bank had forecast weak exports and investment in the energy sector and a decline in consumer spending in the oil-producing provinces. However, as indicated by the mere 0.1% quarterly growth in GDP in the fourth quarter, the deceleration in activity was far more troubling. Investment and exports outside the energy sector have been negatively affected by trade policy uncertainty and the global slowdown. Weaker-than-anticipated housing and consumption also contributed to the downturn.

As was unanimously expected, the Bank maintained its target for the overnight rate at 1-3/4% for the fourth consecutive time. As well, the Bank dropped any reference to future rate hikes, bringing its policy in line with the Federal Reserve and other major industrial central banks.

“The Bank expects growth to pick up, starting in the second quarter of this year. Housing activity is expected to stabilize given continued population gains, the fading effects of past housing policy changes, and improved global financial conditions. Consumption will be underpinned by strong growth in employment income. Outside of the oil and gas sector, investment will be supported by high rates of capacity utilization and exports will expand with strengthening global demand. Meanwhile, the contribution to growth from government spending has been revised down in light of Ontario’s new budget.”

Overall, the Bank projects real GDP growth of 1.2% in 2019 and around 2% in 2020 and 2021. This forecast implies a modest widening of the output gap, which will be absorbed over the projection period. Inflation is close to the 2% central bank target.

The central bank clearly stated that given all of these economic conditions, an accommodative policy interest rate continues to be warranted. The policy statement added that the Governing Council “will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive. In particular, we are monitoring developments in household spending, oil markets, and global trade policy to gauge the extent to which the factors weighing on growth and the inflation outlook are dissipating”.

Bottom Line: The Bank of Canada has revised down its estimate of the neutral nominal policy rate. The neutral rate is defined as the sum of two components: i) the real rate that is consistent with output at its noninflationary potential level, and ii) 2% to account for the target inflation rate. The Bank now estimates the neutral rate to be about a quarter percentage point lower than assessed in April of last year, in a range of 2.25% to 3.25%. The midpoint of the range for potential output growth is now estimated to be slightly lower than in the April 2018 MPR, at 1.8% on average between 2019 and 2021 and at 1.9% in 2011. It is likely that these reassessments are consistent with unchanged policy interest rates for the remainder of this year.

Housing Market Details in the April Monetary Policy Report

While housing is expected to stabilize at the national level, the Bank is aware of the risks to the outlook, particularly in the Greater Vancouver Area. For instance, the effects on growth of the revised B-20 guideline are expected to dissipate in many markets, although they could persist longer in areas with high house prices and that have been subject to other changes to housing policies. The stabilization of expectations for house prices in British Columbia and Ontario may indicate a forthcoming stabilization and subsequent increase in resale activity (see Chart 13 below).

The changes to local and provincial policies to address speculation, combined with the B-20 revisions, are having more pronounced effects in the Greater Vancouver Area (GVA) than in the Greater Toronto Area. Thus, while stabilization of activity is expected this year in the base-case projection, there is a risk that it could be delayed in the GVA.

Meanwhile, ongoing challenges in the oil industry are expected to continue to weigh on the Alberta housing market. In contrast, a strong economy and investor interest are expected to boost the market in Montréal.

The First-Time Home Buyer Incentive introduced in the 2019 federal budget is expected to support housing demand and may also lead to improving sentiment in the housing market. However, delays in purchases by homebuyers who want to take advantage of the new measure could influence the timing of resale activity in 2019.

After declining for two years, residential investment is expected to expand modestly in 2020 and 2021. Given the trend reduction in housing affordability, construction of multi-unit residences is expected to resume its trend increase to meet demand for less-expensive homes.

Dr. Sherry Cooper, Chief Economist-DLMV
15 Apr

How a side hustle can change your home-buying outlook

General

Posted by: Alisa Aragon

So you want to buy a house, but you’re short on the down-payment. Have you ever considered getting into some sort of “side hustle.”

The term side hustle describes something you do to make extra cash outside your full-time job.
Anyone can make a hundred bucks on the side by literally doing anything – mowing lawns, walking dogs, shoveling snow, babysitting, tutoring, making deliveries, becoming an Uber driver, selling products on Amazon, participating in focus groups, blogging, vlogging, marketing – truly an infinite number of things you can do.

Even though a side hustle is extra income, it will be difficult to use when qualifying for a larger mortgage since brokers need to see a two-year history of that income first.
What that extra cash can help you with is for a downpayment and hustle income is super charged. Why? Lets find out.

Option #1:
You work your regular 40-hour work week and during your off time you like to indulge. This means eating out at restaurants/take-out, shopping, going to the movies, clubbing, etc. We’re talking about $200 a week on these activities.

Option #2:
You work your regular 40-hour work week and during your off time you work towards developing your side hustle. Let’s assume you are able to work a few nights a week and make $200 a week extra income. Obviously you still want to have some fun, so on your “off time” you only spend $100 a week on these activities.

Let’s look at the scenarios after one full year of working.
In this case, your full-time job pays $40,000 a year after tax.

Option #1:
You have made $40,000 but spent $10,400 on fun. Now you are left with $29,600 to live off of while also saving for a down payment.

Option #2:
You have made $40,000 from your full-time job and $10,400 from your side hustle but spent $5,200 on fun. Now you are left with $45,200 to live and try and save for a down payment.
That puts an extra $15,600 in your life that can be utilized on paying down debt and/or saving for down-payment.

Now that you have the idea that a side hustle may work in your favour, brainstorm some ideas and start making that extra money! If you have any questions, contact your local Dominion Lending Centres mortgage professional.

Chris Cabel, DLMV