Archive for January, 2018

“Big Six” banks have raised mortgage rates as Bank of Canada decision looms tomorrow

Tuesday, January 16th, 2018

The “Big Six” Canadian banks have now all hiked mortgage rates ahead of a Bank of Canada policy announcement on Wednesday.

Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto-Dominion Bank raised mortgage rates last week, citing “recent activity by competitors” and “Bank of Canada rate changes” as some of the factors that go into an increase.

Bank of Nova Scotia has now hiked as well, increasing its posted five-year fixed-rate mortgage rate to 5.14 per cent from 4.99 per cent. The lender also boosted its one-year, two-year, three-year, four-year, seven-year, and 10-year fixed-rate mortgages by 20 basis points.

“Our number one focus is providing value for our customers — we manage our pricing very actively to do just that,” said Scotiabank spokesman Lukas Gerber on Monday in an email. “We use a variety of market benchmarks to set rates.”

Bank of Montreal has likewise lifted rates, raising its posted five-year, fixed-rate mortgage to 5.14 per cent from 4.99 per cent, as well as hiking its posted four-year fixed-rate 55 basis points  to 4.79 per cent, among other adjustments.

National Bank Financial analyst Gabriel Dechaine said last week in a note on the banks that approximately 80 per cent of outstanding mortgage debt is made up of fixed-rate loans, “of which we believe the majority has five-year terms.”

Montreal-based National Bank of Canada, the sixth-largest bank in the country, has also increased its posted five-year fixed rate mortgage by 15 basis points to 5.14 per cent and bumped its four-year fixed loan to 4.59 per cent from 3.89 per cent.

Laurentian Bank of Canada’s five-year fixed mortgage is also up  15 basis points to 5.14 per cent.

“These changes reflect an increase in the cost of funds and are in line with the rates offered by the market,” said Laurentian spokesperson Benjamin Cerantola in an email.

The Bank of Canada is set to make its next policy announcement on Wednesday, with the potential for an interest rate hike having increased in recent weeks thanks to strong economic data. Another rate hike could provide a boost to bank margins, according to National Bank Financial’s Dechaine.

“2017 provided not only surprise rate increases from the Bank of Canada, but a steady increase in the key five-year benchmark bond yield,” he wrote. “Both trends have contributed to an early turnaround in the trend of shrinking bank margins.”

Source: Geoff Zochodne, Financial Post/Postmedia

Hoping to buy a home in B.C.? Sorry, it’s not likely to get much cheaper

Tuesday, January 2nd, 2018

If your New Year’s dreams include buying a home in B.C., don’t expect it to get much easier in 2018, according to one expert.

“The best guess for where prices are going to be a year from now is about where they are today,” said Tom Davidoff, associate professor at the University of B.C.’s Sauder School of Business

Davidoff says there are some changes coming that could slow things down — stricter mortgage regulations that take effect  Jan. 1, for one — but overall he predicts prices will keep climbing.

“Fifty years from now, I would be very surprised if Vancouver is anything other than an extremely, extremely difficult place to buy or to rent,” he said.

“You have to think supply is pretty constrained by geography. We can build more condos, but it’s hard to add land. We’re hemmed in by oceans and mountains and those are beautiful oceans and mountains, and rich people all over the world keep getting richer and a lot of them want to come to Canada.”

In the short run, though, Davidoff says there could be a some relief.

“There’s a lot of construction going on,” he said.

“Some people believe it’s international flippers buying these condos. They may not want to hold them once the building’s complete. If we see the flippers actually flip these new units before they’re completed, as they start to come online, that could create lower prices and lower rents as people move in.”

He argues that communities around the Lower Mainland need to maintain such construction in a variety of neighbourhoods.

“Adding more townhomes and apartments in neighbourhoods where there’s single family homes would really help in coming years,” he said.

He’d also like to see the province make more of an effort on tax reform.

​Although housing affordability was a key election issue, Premier John Horgan has admitted his new government hasn’t made much movement on this — yet.

But Horgan is promising there will be progress with the government’s budget in February.

Davidoff says the way people are taxed in B.C. needs to change if we want to become a more affordable place to live.

Property taxes are going up in Vancouver in 2018, but Davidoff says they’re still much too low.

“Our property tax rate is something like four-tenths, maybe three-tenths of a per cent in the City of Vancouver. It would not be uncommon to see one-and-a-half or even two per cent in other big North American cities,” he said.

Davidoff would like to see that reversed.

“Send the message — we want you to live and work here. So we’re going to have high property taxes, low income and sales taxes. Hopefully the NDP moves in that direction,” he said.

For any younger people considering trying to buy into the Vancouver market, Davidoff warns spending everything you have on a down payment for a highly leveraged asset is risky, but not crazy — especially if you’re very attached to the city.

“In the long run it’ll probably work out, it might even be a great idea in the short run, but there’s certainly a possibility that you’re going to feel very stupid if prices fall 20 per cent right after you’ve bought,” he said.

Still, he says, if you feel like your job prospects or quality of life might be better elsewhere, packing up might be the way to go.

“The option to leave is really an important option.”

Source: Stephanie Mercier, CBC News

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