Five-year mortgages holding firm, but just wait

Article Source: http://www.applymortgageonline.ca/

Five-year fixed mortgage rates tend to roughly track the yields on five-year government of Canada bonds, because those influence the cost of the funds that the banks obtain to lend out. Yields on five-year government of Canada bonds have fallen. They ended last year at 1.95 per cent, and this week were below 1.50 per cent.

“If you went back to the start of the year, there was an absolute consensus that bond yields were going to head higher,” explains Toronto-Dominion Bank chief economist Craig Alexander. “Not dramatically, but there was an absolute consensus that bond yields would be increasing through the course of 2014. So, one of the big surprises this year has been the drop in bond yields.”

Canadian bond yields tend to mirror those in the U.S. because the market views the securities as alternatives to one another.

“One of the things that happened at the start of this year was, initially, there were some concerns about emerging markets and the angst over the slowdown in China,” Mr. Alexander adds. “But then we started to get very weak economic data out of the United States, and there was news that the U.S. economy outright contracted, and you saw broad-based scaling back of expectations about global growth. So, while some of the fears about emerging markets diminished, it happened at the same time that people found something new to worry about.”

So, a more negative outlook for economic growth in the U.S. and elsewhere turned into good news for Canadian home buyers.

But Mr. Alexander thinks the U.S. economy is on pace to grow faster than most other advanced countries in the second half of this year. “As a consequence, I think that the rally in bonds that we’ve had since the start of the year is likely to be reversed, from an economic fundamentals point of view it’s only a matter of time. The thing that economists are notoriously bad at is timing.”

In other words, economists are still expecting five-year fixed mortgage rates to creep up, they just don’t know exactly when. Mr. Alexander now expects five-year bond yields to creep back up to about 1.95 – where they were at the end of 2013 – by the end of this year. He then sees them rising by about 90 basis points next year, largely during the second half of the year.

Focus On These Tips For Credit Improvement

Article Source: http://bestmortgagebrokers.net/

If you have issues with your credit, you may feel trapped by your low credit score. Digging yourself out from the credit problem can feel like a daunting task, but it is possible. Read through the following article for tips on how to repair your credit, and you will find simple methods to pull yourself back up.

Keep all of your credit card accounts open, provided there are no fees to do so, in order to keep your credit score up. Closing a credit card account may hurt you in the end, so if your credit score is fragile and you need to build it up, keep your accounts open, particularly if they have a balance currently.

Buy a car and make your monthly payments on time to improve your credit score. Your credit score will be checked when you apply for a car loan. But if you build up a good score with a cheap car, a few years later you could easily apply for a new loan and get a better car.

If a company tells you they can create a new credit file for you, run the other way. Creating a second credit file is illegal because it involves creating a new identity for you. If any company offers you this, you should, stop doing business with them even if they just offer it as an option. Otherwise, you would be working with a company that engages in illegal practices.

If you know that you are going to be late on a payment or that the balances have gotten away from you, contact the business and see if you can set up an arrangement. It is much easier to keep a company from reporting something to your credit report than it is to have it fixed later.

As the article stated at the beginning, credit issues can feel like you are trapped in the rubble. Applying the advice given in the article helps you learn how to quickly release yourself from your credit struggle, and give you the tools you need to move up and out of disrepair.

CANADIAN RENOVATION SPENDING WILL STAY STRONG FOR YEARS

News Source: http://www.canadianmortgageupdates.ca/

If you're getting your house ready to sell, chances are good that you'll be spending some money to fix it up and make it more attractive to buyers. If you just bought a house, you're likely going to spend some money to decorate it and change a few things that you don't like. When the resale housing market is booming, so is Canada's renovation industry.

Residential renovation in Canada employs 454,000 people making $24 billion in wages, says the Canadian Home Builders' Association. Renovation provides $60.6 billion in investment value annually, the "largest single wealth-builder for a majority of families," says the association.

Two recent reports suggest that while residential renovation is poised to slow down during the next few years due to higher interest rates and a more stable real estate market, spending will still continue to increase. Scotiabank economist Adrienne Warren says two per cent growth in inflation-adjusted expenditures is likely. TD Economics expects growth to be closer to three to five per cent this year and in 2014, followed by a "modest" dip in 2015.

"That said, the $45 billion in total renovation activity expected in that year will still be more than double its level of a decade ago," says TD Economics.

The TD paper, written by economist Diana Petramala, says during the 1900s, home renovations accounted for about 25 per cent of total residential investment but now that share is almost 40 per cent.

These numbers do not include regular maintenance and repair. Renovation, as defined by Statistics Canada, includes structural additions to properties; alterations such as remodelling rooms, adding or replacing doors and windows, renovating exterior walls and upgrading insulation; and installation or replacement of equipment such as a heating system, roof or carpet.

The numbers also do not include work done in the "underground economy", where jobs are paid for in cash to avoid paying taxes.

"Over the last 10 years, a number of economic factors have contributed to the strength in renovation spending, including a robust labour market, strong income gains and an aging housing stock," says Petramala. "The average home in Canada was built in the 1970 to 1980 period and was likely due for some upgrading. Still, the most important factors have been the availability and the falling costs of credit as well as a record-setting decade in the resale housing market."

She says the "wealth effect associated with robust home price gains" has also become an important driver in renovation growth. "Increases in home valuations makes households feel wealthier and more willing to go out and spend. Studies show that for every $1 increase in wealth due to home price appreciation, households go out and spend an additional nickel - some of which ends in renovations."

But Warren's report says Canadians are now being more careful about increasing debt, despite continuing low borrowing costs. While large renovation jobs are often financed through mortgage financing or consumer lending, both of those credit categories are now growing at the slowest pace in more than a decade, she says.

"Canada's housing stock has expanded by more than 15 per cent (or about two million units) over the past decade, mirroring strong growth in household formation," says Warren. "A record high homeownership rate of almost 70 per cent is supportive of renovation spending, with owners more likely to undertake upgrades compared with renters and landlords. An aging population and government rebates should continue to support demand for accessibility and energy efficiency related upgrades and retrofits."

Another Scotiabank study found that two-thirds of homeowners say they are likely to consider making their home more energy efficient by incorporating "green" home renovations. Fifty-two per cent of those surveyed say that green renovation choices will lower the operating cost of their home in the long run.

The TD report says that retail spending at building material and supply stores has stagnated since 2007, while renovation-oriented wholesalers have enjoyed above-average growth of three to four per cent. "This trend would suggest that more and more households have been turning to contractors for work rather than doing it themselves," says Petramala.

In the Toronto area, a massive new home improvement mall is under construction that will bring together 400 home improvement retailers under one roof, on more than 320,000 square feet of space spanning 21 acres. The developers of the Improve Canada site say they are bringing together three key concepts - using a mall as a traffic magnet; grouping competitive suppliers together and concentrating only on home improvement retailers; and offering a permanent home show environment. The developers say the retail space is 90 per cent sold. The building is scheduled to open in 2014.

Looking ahead, Petramala says that although all the spending on renovation has left Canada's housing stock "in the best condition in decades," the sector is "likely to remain a bright spot amid a slowing housing sector and declining new home construction."

sector and declining new home construction."

Housing Market Had Major Correction, Nobody Noticed: Royal LePage

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What if Canada had a housing market correction and no one noticed? That’s what real estate expert Phil Soper says has played out over the past year: the sharpest decline in home sales since the Great Recession. “Canada experienced a significant housing market correction over the last four quarters that most in the nation missed entirely," Soper, president and CEO of Royal LePage, said in the company’s third-quarter report. "Many regions experienced dramatic slowdowns in the number of homes trading hands, but news of double-digit unit sales declines went largely unnoticed, over-shadowed by a macabre fascination with the prospect of a U.S.-style home price collapse, which of course never transpired.” Until recently, Toronto and a number of other major markets experienced a sales slump, but little to no decline in prices. The number of homes for sale also dropped during that time as sellers also stepped aside, keeping pricing stable. “That’s not uncommon for corrections, if you look back over the decades it’s actually really rare to see house prices on a national basis decline,” Soper said. “What made this past correction particularly interesting and frustrating for people in the industry was there was so much focus on the prospect of a crash in Canadian home prices that all eyes seemed to be focused on that.” Home price appreciation did fall below the long-term average of five per cent, Soper said, but that doesn’t grab headlines the same way an outright decline would. The Canadian Real Estate Association (CREA) says some 325,180 homes have changed owners so far this year, about three per cent less than during the same period of 2012. CREA’s 2013 forecast pegs sales at 449,000, their lowest levels since 2010 CIBC economist Benjamin Tal agrees that there has been a marked slowdown in activity, but he would call it “an adjustment” rather than a correction. “The main reason why people did not notice it is due to the fact that prices did not go down. As far as the market goes a correction is only when prices go down,” he said. “The main reason why prices did not go down is that alongside the softness in demand we have seen a notable softness in supply of units for sale, so with both demand and supply softening, prices did not go down.” The correction over the past year was fairly major, with most parts of the country experiencing double digit declines at some point, Soper said. But, he added, unlike other industries people tend to focus on prices rather than unit sales in the housing market. “When it comes to houses, because 70 per cent of Canadian families own one, the focus is on price and so it is very, very hard to get the conversation off price.” But that focus could have unintended consequences on the market because rising prices could mask a major correction, signalling the sector is stronger than it actually is and prompting unnecessary mortgage rule changes to calm the market, Soper said. During the third quarter, sales volumes surged and the average year-over-year price increased 3.7 per cent to $418,686 for standard two-storey homes, the Royal Lepage report notes. Buyers returned to the market after sitting on the sidelines for more than a year, partially due to the impact of tighter mortgage rules that left some delaying home purchases to save up larger down payments. In many cities the number of properties on the market fell short of demand, resulting in a steady rise in prices for the first time this year, the report said. Toronto, Vancouver, Calgary and Edmonton all posted double digit sales increases in August, signalling that the market is once again heating up. “Our over-heated real estate market of 2011 and early 2012 drove some to the sidelines. Home price appreciation ground to a halt for a year – a necessary breather and predictable market response," Soper said in the report. The real estate firm expects momentum in the market to continue into the spring of 2014, driven by pent-up demand, increasing consumer confidence and low interest rates. Soper predicts a more robust Canadian economy and an “era of renewed prosperity” ahead, good news for the consumer-oriented real estate sector. But some economists from Canada and around the world are still predicting a harder landing for Canada, pointing to indications including high consumer debt loads, low wage growth and the record number of jobs dependent on the real estate sector as trouble signs for the economy.

Canada’s New Home Prices See Moderate Gains In December

New home prices in Canada climbed 0.1 percent in December from November, as expected, for an average annual increase in 2013 of 1.8 percent, the slowest since 1999, according to Statistics Canada data released on Thursday.

The monthly advance matched the median forecast in a Reuters poll of analysts and reinforces the view that the country’s housing market is stabilizing after a recent boom.

The closely-watched Toronto-Oshawa region was the top contributor to the monthly advance in the new housing price index with a gain of 0.2 percent in December and of 1.4 percent year-on-year.

Vancouver, another hot market for real estate, saw a 0.1 percent monthly decline in prices and a 1.1 percent decline from a year earlier.

Nationwide, prices rose 1.3 percent in the 12 months to December, down from 1.4 percent in November and the fifth straight month of slowing growth.

Overall, prices were unchanged in 11 metropolitan regions, down in five and up in five.

The Canadian government has intervened in the mortgage market several times since 2008 to cool the sector, and most economists expect a gradual softening rather than a U.S.-style crash.

The new housing price index excludes condominiums, which the government says are a particular cause for concern.

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B.C. Property Market Hazy After 'Millionaire Visa' Scrapped

Real estate agents in Vancouver say property prices could take a hit, after Canada scrapped a program which allowed wealthy immigrants to fast-track the visa process.

The Immigrant Investor Program, launched in 1986, offered visas to business people with a net worth of at least $1.6 million who were willing to lend $800,000 to the Canadian government — for investment across Canada — for a term of five years.

By 2012, the scheme had to be temporarily frozen due to a huge backlog of applications from wealthy mainland Chinese hoping to come to B.C. Now, the government has announced it will end the program for good and scrap all 59,000 applications backlogged worldwide.

The decision came less than a week after the South China Morning Post published a series of exclusive investigative reports into the controversial scheme.

Property prices could take a hit

In West Vancouver, real estate agent Clarence Debelle is still receiving offers from mainland China for luxury property, but he's concerned the end of the investor program will have an impact on the local economy and the high-end housing market.

"I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself," said Debelle.

"Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver."

Immigration lawyer Richard Kurland agrees.

"When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that's down," said Kurland.

Market impacted by more than investors

Others aren't so sure. Even with the investor program frozen, housing prices continued to rise.

Tom Davidoff with UBC's Sauder School of Business says the market is driven by other things like low interest rates and the local and global economies.

"Given that in the last couple of years, we haven't seen the market cool off, it's hard to believe that freezing the investor market is going to kill even the high-end in Vancouver," said Davidoff.

The government has also announced the end of the Entrepreneur Program, a smaller scheme for business people who plan to own and manage a business in Canada.

However, wealthy investors can still come to Canada through the Start-up Visa Program, which encourages immigrant entrepreneurs to partner with private sector organizations to invest in local start-ups.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Toronto House Prices Could Slip In 2015, TD Bank Predicts

Report estimates Toronto, Vancouver real estate markets are 10 to 15 per cent overvalued, compared to 10 per cent for rest of country
Barely has the year — and a whole new round of bidding wars — begun and the first of the big banks has weighed in with a warning that Toronto’s housing market is 10 to 15 per cent overvalued.

So is Vancouver’s, says TD Economics in a report released Monday, noting that both cities have been seeing “frothier conditions” than the rest of the country, where house prices remain about 10 per cent overvalued, largely because of low interest rates.

“Toronto and Vancouver make up 40 per cent of the Canadian housing market, so that’s what’s really driving the overvaluation measure,” said TD economist Diana Petramala in an interview.

A spike in interest rates or a “negative economic shock” could potentially send resale home prices tumbling by 25 per cent, Petramala notes. But it’s far more likely there will be a “gradual unwinding of excesses” in the Canadian market as interest rates slowly rise, along with incomes, over the next few years.

It’s likely to be 2015 until Toronto, and much of the country, start to see any real downturn in sales and prices, according to TD.

While Toronto home prices jumped 6.8 per cent in 2012 and 5.4 per cent in 2013, they could rise just 2.7 per cent this year and slip by 1.2 per cent in 2015, when interest rates are expected to start climbing, the report forecasts.

Petramala notes that “prices ended 2013 on a much higher note than we had been expecting as households faced an unusually low level of homes for sale.”

That has played out in the old City of Toronto, in particular, in an unexpectedly feverish start to 2014, with a simple Junction Triangle row house going for $210,000 over asking price in a flurry of 32 bids.

“The one concern we have is that we’re seeing more strength in Toronto’s house prices than expected,” says Sal Guatieri, senior economist with BMO Capital Markets.

Even all those new condos coming on the market haven’t been enough to hold down housing prices, says Guatieri, noting that resale condo prices were up almost 4 per cent in December, year over year.

“We thought, if anything, Toronto house prices would fall somewhat last year. But underlying demand is pretty strong, net migration is pretty healthy and the number of echo boomers aged 30 to 34 is growing quite rapidly at the moment and they are a prime homebuying cohort, especially for condos.”

The housing market is “overshooting,” but “it’s not a market that is crashing,” says Benjamin Tal, deputy chief economist at CIBC World Markets.

He continues to believe that the market will slow to a soft landing and that real estate numbers to be released this week detailing January sales and prices (those from the Toronto Real Estate Board are due out Wednesday) could start to provide a more “realistic” picture of the health of the housing sector.

“This market will be tested when interest rates start rising, and that means it won’t be tested for a while.”

The Canadian housing market and worries about a real estate bubble have been key concerns for policy-makers for several years.

Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.

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