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Bank of Canada increases overnight rate target to 1 ¾ per cent

The global economic outlook remains solid. The US economy is especially robust and is expected to moderate over the projection horizon, as forecast in the Bank’s July Monetary Policy Report (MPR). The new US-Mexico-Canada Agreement (USMCA) will reduce trade policy uncertainty in North America, which has been… [more]

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Annual inflation rate accelerates to 2.2%

Canada’s Inflation Rate Higher than Expected

A recent iPOLITICS article reports the annual inflation rate accelerated to 2.2%, which is above the Bank of Canada’s expected target. Stephen Poloz, the Bank of Canada’s governor, stated that despite the three interest rate hikes since last summer he maintained the current rate as the Bank watches the current trade related uncertainties out of the USA.

Read the full article by Andy Blattchford published on Mar 23, 2018

In other news…

Real estate sales are cratering around the GTA. And perhaps all of Ontario.

The tide seems to be turning in the GTA from a seller’s market to a buyer’s market. Some real estate brokers have reported that houses are staying on the market longer. Stubborn sellers, holding out for higher prices, are starting to realize they better take what they can get now rather than less later.

After years of rising prices and a several months of total insanity across Ontario, the housing market seems to be stabilizing. In January 2018 home sales in Canada dropped rapidly by 14.5% compared to the previous month. This was the biggest single-month decline in almost a decade. The drop was mainly caused by actions in the GTA where home sales fell off 26.6%. This drop has been similarly reflected in other communities across Ontario.

Will this downward turn in prices continue into a long term slump or rebound? The experts have their opinions one way or the other. But the fact is prices today are lower and may present a buying opportunity for home buyers that just was not available a few months back.

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Bank of Canada Raises Over-Night Rate: Jan 2018

Today, the Bank of Canada elected to increase its target for the overnight rate to 1.25%, up from 1%. Why? The economy is near full capacity, we are near the target inflation rate, and  recent financial data suggests it’s time to slow down.

With estimates by the Bank that the GDP growth in 2017 reached 3.0%, the Bank feels this will drop in 2018 and thus the overnight rate may remain stable for a while and perhaps even fall if predictions come true later in the year.

The current state of the NAFTA negotiations is also causing some concerns relative to future economic predictions. A down tick in trade could vastly impact business investment in Canada. Even with this uncertainty there is positive news. The lower business capital gains rate in the US has freed up cash for more investment by US companies and Canada stands to gain from export opportunities.

With all the uncertainty, the Bank of Canada recognizes however that higher interest rates may be warranted over time if warranted. The Bank however does not want to be the cause of any stagnation over time or cause the inflation rate to falter.

The Bank states it will “remain cautious in considering future policy adjustments” carefully analyzing the data to evaluate “the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.”

The Banks of Canada’s next interest rate statement is set for March 7th. You can read the full Bank of Canada rate hike announcement here.

I welcome any questions about how these recent interest rate changes can possibly impact your home buying or mortgage needs, so please don’t hesitate to give me a phone call or drop me an email. I’m here to help you.

At Your Service,

Michael J Preston

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SETTING THE STAGE FOR A PERFECT HOME SALE – STAGING YOU HOUSE

You only get one chance to make a great first impression. Staging Your House Right is Key!

When you put your home on the market, your goal is to sell it quickly and for top dollar. Properly staging your house right from day one will create an amazing impression that will generate a huge buzz!

Staging isn’t so much an expense as it is an investment. Not only is your home likely to sell for a higher price but it will probably sell much faster which is important because homes that sit on the market can quickly lose their value.

Staging your house starts with an ultra clean, de-cluttered and de-personalized home. Buying a home is an emotional decision so buyers must be able to envision themselves living there which is why photographs, trophies and kids’ artwork have to go.

A stager also ensures your home is inviting to buyers by enhancing the functionality and flow of each room. They can remove and store furniture so the house looks as spacious as possible and use lighting and other tricks to warm up the feel of your home. A properly staged home will also look much more appealing to those browsing online which will generate more showings.

If you want to stage your home yourself, you’ll have to go beyond the basics. Start cleaning up the front yard, the porch, the garage and don’t forget the back garden. Buyers have a tough time visualizing themselves in unfurnished rooms so turn your craft room back into a bedroom or transform an awkward nook into a reading spot by setting out a comfy chair and lamp.

Lighting is Very Important

Great lighting will create a warm and welcoming ambience so make sure you update your light fixtures, lamps and light bulbs. Buyers will also be snooping through your cupboards and closets as storage space is often an important factor so don’t forget to stage those areas as well.

Remember, staging your house right it is much more likely to make a great first impression and capture the hearts of home buyers. Whether you pay a professional to stage your home or do the work yourself, staging is a worthwhile investment that will massively increase the odds of your home selling quickly and for top dollar.

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2018 Mortgage Rule Changes in Canada.

Tighter Rules Could Mean No Mortgage for Some Canadians.

The new mortgage “stress test” came into effect on Jan. 1, 2018 in Canada requiring virtually all prospective home buyers to meet tighter lending restrictions. According to some estimates, the tighter qualifying standard could shut out some 10% of lower down payment buyers compared to regulations in 2017.

Toronto and Vancouver will likely see the biggest impact from the new restrictions but the effects will no doubt ripple into smaller communities.

The new “stress test” will affect home buyers applying for mortgages that are less than 80 per cent of the value of the property they wish to purchase. Borrowers will have to qualify for rates that are higher than the contractual mortgage rate they would actually be eligible to assume. This effectively reduces the buying power of a consumer with an uninsured mortgage by about 20 per cent, according to some industry experts.

The Office of the Superintendent of Financial Institutions Canada (OSFI) published the final version of Guideline B-20 − Residential Mortgage Underwriting Practices and Procedures.

OSFI is setting a new minimum qualifying rate, or “stress test,” for uninsured mortgages.

  • Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.

These rules assure that all mortgage holders can cope with any unforeseen rising interest rates and are now similar to those rules already in effect for borrowers with down payments under 20 per cent.

Many concerns were submitted as comments and responses were issues by OSFI on topics such as mortgage renewal qualifications. These comments can be reviewed here on the OFSI website.

“These revisions to Guideline B-20 reinforce a strong and prudent regulatory regime for residential mortgage underwriting in Canada,” said Superintendent Jeremy Rudin.

Paul Taylor, President and CEO of the Mortgage Professionals Canada, is concerned about how much these changes will impact the real estate market and suggests that it could stress smaller communities. Taylor says, “Reducing the number of people who can afford those homes now is only going to exacerbate the problem,” He goes on to say, “When house prices come down, you can potentially create a recessionary environment in pockets across the country.”

Time will tell, probably sooner than later, what effects these mortgage qualification rules will bring about for Canadians.

If we can help you with obtaining a mortgage please contact Michael J Preston at 705-309-1747.

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Staging Your House for Maximum Value

Staging is all about highlighting a home’s best features in order to ensure it appeals to as wide of an audience as possible. This month’s article shows why a properly staged home will sell faster and for a higher price.

There’s also some great advice on how to enjoy a better night’s sleep as well as a unique gift idea that helps people in need from all around the world build successful businesses.

Thanks so much for checking out this month’s newsletter. Please get in touch if you have any questions or comments regarding the articles, or real estate in general — it’d be great to hear from you!

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BDC: Global growth brings good news for Canadian entrepreneurs in 2018 Economic Outlook

2018 Economic Outlook: Economies everywhere are having a banner year, and there’s more to come…

Canada had solid economic growth of 2.9% in 2017, having weathered the oil price shock of the past two years. Our economy is on a solid footing. The expansion has been broad-based, with all sectors of the economy contributing. Our goods exports are up 8.7% year over year. Business investment, which is absolutely critical to continued growth, has also improved. At the same time, Canada’s labour market has been thriving, adding 343,000 jobs year to date, with nearly all in full-time employment.

Canada should have a solid growth of 2% in 2018.

While growth of the Canadian economy will slow to about 2% in 2018, this is still decent growth. (read more of this 2018 economic outlook report by BDC…)

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The Canadian Housing Market: When the Fog Clears by Benjamin Tal

Benjamin Tal, the chief analyst recently wrote about the Canadian housing market saying,”The level of activity is likely to stabilize and perhaps soften in the coming quarters as markets adjust to recent and upcoming regulatory changes. But when the fog clears it will become evident that the long-term trajectory of the market will show even tighter conditions. The supply issues facing centres such as Toronto and Vancouver will worsen and demand is routinely understated. Short of a significant change in housing policies and preferences, there is nothing in the pipeline to alleviate the pressure.”

Housing market Correlated CitiesCertainly, in 2017, the Toronto and Vancouver housing market has been the driving force behind the economics in recent years with no real change in store. Tal goes on to say, “The affordability issue in those cities that are leading to the “drive until you qualify” phenomena works to amplify their influence on neighbouring real estate markets.” In other words, more and more homebuyers are looking further and further outside of Toronto and Vancouver for more affordable real estate options. This only drives up prices not only in the suburbs but in towns and cities within 1 to 2 hours drive of the major centres.

The knock-on effect relative to Toronto is that homebuyers are looking to our region in and around Orillia, Barrie and Midland. These buyers are typically well paid and can afford to pay more for a home than their counterparts who live and work in the region. This complicates and inflates the cost of living for many more local residents looking to either get in or move up in the home buying market. This is continuing good news for home sellers in our region but not at all good for many families looking to buy.

A qualified real estate representative who is on top of the local and national market trends is still the best choice to provide homebuyers with accurate data to buy or sell in this foggy market. We at Lakeview Realty Inc. would be pleased to discuss your real estate needs.

Benjamin Tal’s complete article on the Canadian housing market can be read at CIBC World Market In Focus.

 

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Major Changes to Canada’s Housing Mortgage Rules

percent sign - mortgagesIn an effort to keep Canadians from taking on a larger mortgage than they can afford the Liberal government has announced significant changes to the mortgage qualification rules. Finance Minister Bill Morneau also noted these changes should help stem some of the concerns about foreign buyers buying and flipping houses such that they drive up housing costs for Canadians.

Beginning on October 17, 2017, the stress test used to approve high-ratio mortgages will be applied to every new insured mortgage, including buyers who have more than 20% down payment. This change assures lenders that the borrower will still be able to afford the mortgage payments even if the interest rate increases

Another aspect of the change requires that the home buyer will be spending no more than 39% of their income on house-related costs like the mortgage payments, heat, and taxes. The TDS ratio must not be more than 44%.

The home borrower would not only have to qualify at the lenders’ interest rate but also at the Bank of Canada’s five-year fixed posted mortgage rate, which is an average of the posted rates of the big six banks in Canada.

These changes affect a broad range of mortgage consumers assuring safety for both the borrowers and lenders in the midst of the current low-interest rate market.

Further changes are outlined in the Globe and Mail article here

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ECONOMY NEARS FULL EMPLOYMENT IN 2017

Excerpt on Economy Posting by DR. SHERRY COOPER,
Chief Economist, Dominion Lending Centres

“The Canadian economy has grown at a stronger-than-expected annual rate of 3.7% in the past year, taking the jobless rate down to its lowest level in nearly a decade. With Canada’s economy the strongest in the Group of Seven countries, Ottawa now projects much smaller deficits than it did in March. The Liberal government cut its deficit projection for the fiscal year that ends March 31 to just under $20.0 billion, down from $28.5 billion in the March budget. It now expects a cumulative deficit over the coming five fiscal years of $86.5 billion, compared with $120 billion previously.

Finance Minister Bill Morneau announced new spending today totalling $7.7 billion over six years, bringing the total new spending since the March budget to $19.1 billion over six years. This additional stimulus comes as the economy is running far faster than its long-run potential noninflationary pace, rapidly approaching full capacity.” Read More