Affordability

affordability

noun

  1. The extent to which something is affordable, as measured by its cost relative to the amount that the purchaser is able to pay.

The last few months our affordability has definitely taken a hit. Everything from gas, housing and food is up. There are recent news reports that people are eating less in order to save some money. Yet our pay checks have not kept up with the steady increase of the cost of everything.

In terms of housing and mortgage affordability, things are vastly different over the last 24 months. We have had a stress test for mortgage qualification, this is in order to protect us from rising rates so we will still be able to afford to make the payment. Not sure that they had this current market in mind when they came up with them.

At the start of last year our qualification rate was 4.79%. This changed last spring when the housing market went into overdrive and they increased it to 5.25%. The thought was that this increase would cool the market, in my mind there was no effect. Now there is another part of the stress test which says that the qualification rate will be either the stress test rate or the benchmark rate +2%. Now that we are in a much higher interest rate environment, it is now the latter as 5 year fixed rates are starting at 4.29%, so this makes the qualification rate now 6.29%.

With these higher qualification rates and still high housing prices, this has now priced many out of the housing market. For example people who have lived here in Halifax all their lives can not afford to buy in the neighbourhoods where they grew up. Yet there is still more talk about future interest rate increases by the Bank of Canada to help curb inflation.

So with our current inflation rate still sky high, talks of more rate increases and the Russian invasion of Ukraine still dragging on, we may have to do our best keep our spending in check until this all starts to settle down.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

BOC June Meeting

The Bank of Canada is widely expect to raise interest rates again this morning. If they come through with another 50 basis points increase, this will be the 3rd increase in a row, amounting to 125 basis points in increases this year.

Yes it is true that inflation is at 30 year highs, the cost of housing has increased dramatically recently and the price of oil is through the roof. However the increase to the over night lending rate which then increased the prime rate that we see as consumers just further increases our housing costs. All of this is supposed to cause consumers to spend less money as the costs of borrowing has increased.

There is only so much discretionary spending that we can cut back as the costs of everything has gone up recently from food, to gas and now higher borrowing costs for housing. All this is blamed on supply chain problems due to Covid shut downs and more recently the war in Ukraine.

One of the best ways to insulate yourself against any other further prices increases is to learn how to better manager your money. The single best program out there is called YNAB, which stands for You Need A Budget. Instead of X amount into the future for Y, you give ever dollar you make a job and budget only what you make.

As expect the Bank of Canada increased the over night lending rate by 50 basis points, thus increasing the prime rate to 3.70%. However those of us on a variable rate mortgage are still better off then those who have switched to a fixed.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

Peak Rate

People are complaining about how high mortgage rates have risen in the past 6 months. While not realizing how good that we had it over the past 3 years, where fixed rates dropped as low as 1.79% for 5 years.

Things have changed a lot with the increases in bond yields which drives the fixed rates. In the last four months alone the fixed rates have gone from 2.89% at the end of January to now having 5 year fixed rates as low as 4.29%. That is an increase of 140 basis points while the variable rates have increased by 75 basis points.

However don’t forget that the Bank of Canada meets next week to set the next over night rate and most if not all economists are predicting another 50 basis points increase. Some economists are saying that we may be approaching Peak interest rate, however predictions are just that and ultimately the market will decide.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

New Record

The consumer price index ( how we track inflation) hit a 31 year high for the month of April at 6.8%. Up .1% from March. The increase is a result of higher food and housing costs. The causes of this stem from the war in Ukraine and supply chain disruptions in China due to Covid. While global crude oil prices declined in April, they have vastly increased in May so we may be in for another record for the May report.

As a result of the record high CPI we are pretty much guranteed for another Bank of Canada rate increase when they meet next on June 3rd. What we don’t know is if it will be another 50 basis points like the last time or just 25 basis points like the first increase we had earlier this year.

So while the costs of everything in life has been steadily rising, the wages that we are getting paid is not keeping up with the high costs of living. They did go up 3.3% as compared to last year but this is still not keeping pace with the costs to keep food on the table so sooner or later something will have to give.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

Smart Advice

It’s not often when I will link to another article from someone else in my field. However I am going to do that today. Fellow mortgage broker David Larock wrote a compelling piece in move smartly about the current fixed vs variable debate. In the article he makes sound points as to why I am personally going to stick with my own variable rate mortgage.

The best thing that we can do right now is to educate ourselves and make smart decisions. His article provides lots of great information about the current fixed vs variable debate and why in my opinion it may be best to ride it out. However if the anxiety of the recent rate increase and the news about more rate increases is keeping you up then do what will allow you to sleep better and just lock it in.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

Predictions

After reading the Bank of Canada’s press release after it’s last rate announcement on April 13th, it is quite clear that they believe that we will be in a higher inflationary zone till almost 2024. What this means is that we have definitely not see the last of the Bank of Canada rate hikes. Our CPI numbers were released after the BOC met and blew away their prediction of a 6% rate when we hit 6.7%.

Some in my field are even saying that the BOC’s target for the prime rate will hit 5.20% before things start to settle down. Just so you don’t have to do the math that is a full 200 basis points or 2% higher that we are right now. By reaching those rates it will also take us closer to parity with the 5 year fixed rate when the discount to prime has been calculated in for clients.

That being said I am still going to stick it out with my variable rate, however clients who are in a variable rate have to decide themselves if they will sleep better at night by increasing their rate by switching from a variable to a fixed. The current spread in the difference is between 1.5 – 2% from the variable to the fixed, but without the rate volatility that the variable is going through.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

It’s about the numbers

Buying a home can sometimes be a very emotional decision. This is where you will be spending a great deal of your time so you want to get as many things right as possible. However it is also a good idea to take a step back and examine the numbers, because long after the initial honeymoon phase wares off you will need to be able to pay your mortgage and take care of the upkeep.

This is more important today as most listings are going with multiple offers and for well over asking prices. So buying that 399K listing for 525K will only make sense if you plan on staying there for a long time. This will give you ample time to pay down the morning in the event there is a market correction suddenly leaving you owning more than your property is worth. These corrections will not matter so much if the plan is to make it your forever home.

So look at everything from your mortgage payment, see if there is any deferred maintenance that needs to be tackled in the next few years and how much that will cost you. As well look at creating a home repair emergency fund as things do happen from tree’s falling on your roof or springing a leak in the basement. Are you planning on starting a family and the costs associated with that and will this be the perfect place to raise your kids and or pets. Lastly that vehicle that you are driving is it getting up there in Km’s and what will it cost you to replace it. The last thing anyone wants to be is house poor so look at all the numbers.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

Rate increased

Just incase you were not watching the 5 year fixed insured AAA rate went up yesterday from 3.84% to 4.09% or an increase of 25 basis points. This is an increase of 120 basis points or 1.2% since the first of February. So it’s no wonder that the core inflation rate in Canada increased by 6.7% for the month of March. The costs of everything from fuel, food, housing and now mortgage rates have increased drastically.

So what are you doing to protect your self against the rising costs everything all around you. Are you cutting back on using your vehicle as much, have you stopped eating out, have you trimmed back some of the streaming services that you subscribe to for your entertainment or have you just buckled down and focused on working harder and putting more money away in the bank. The thing is the government wants us to continue to spend to keep the economy moving but also to cut back so we can tackle inflation.

We can’t have it both ways, something is going to have to give and if the rates increase too steeply and too quickly it may just push us into a recession as consumers and businesses cut back on any and all unnecessary spending. The next few months may be a bumpy ride so make sure that you are prepared the landing on the other side.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

Blind Bidding

Blind bidding as it refers to real estate is when you put in an offer on a house with no idea what others have offered on the same property. You don’t see blind bidding at art of luxury car auctions yet they still seem to be getting record amounts for both of those products. So would a change to this rule and or ability help cool the housing market here in Canada?

Before I attempt to answer that, let me tell you a few things about blind bidding. In our current hot housing market, keeping the process of blind bidding in place will help property sellers get the top dollar for their property. Also Realtors get paid more as they earn a % fee of the sale as their commission. Since we are putting this all on the table, us mortgage brokers are paid a % of the total loan amount. So all three of these parties make more money by keeping blind bidding when homes are selling for top dollar.

However there are jurisdictions where there is no blind bidding such as Sweden, Australia & New Zealand. All three of these places have experienced dramatic increases in real estate prices as compared to Canada during the pandemic. So will removing the blind bidding process really help cool our hot real estate market? I don’t think so as the recent price growth has more to do with overwhelming demand in our real estate sector and very limited supply.

As always I welcome your comments and feedback.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here

March 2022 Inflation numbers

Well the inflation numbers for March 2022 just came out this morning and we are now at 6.7% ( up from 5.7 for February) or the highest rate since January of 1991. All the categories that Statistics Canada tracks from food, energy, shelter and transportation were all up. The largest increase is the 11.2% increase in transportation due to the rapid increase of the price of oil. Which is up 39.8% year over year, and now mostly due to the Russian invasion of Ukraine.

It’s this increased transportation costs that are pulling up the cost of food, durable goods and plane tickets. Economists are predicting that the inflation rate will remain higher than the Bank of Canada’s target range of 1-3% till 2023. Lowering your purchasing power as interest rates rise to try to offset the inflation rate.

If you are on a variable rate you can either sit tight and ride it out or pay slightly more and convert it over to a fixed rate.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here