This weeks top stories include how the Toronto real estate market is heating up for another year, how we take a moment to address the big mortgage question on fixed and variable rates, how we discuss the changes in mortgage default insurance regulations and how existing home sales across the greater Toronto area have declined 17% from the same time last year.
Many have been waiting on the sidelines for home prices to come down to more acceptable levels but all they continue to get is disappointment as prices continue to rise. There is currently a housing boom going on that show’s no signs of slowing in Canada, especially in Toronto and Vancouver.
Finance Minister Jim Flaherty stepped up and tightened mortgage lending guidelines numerous times in the past few years to try and cool the overheated housing market, especially in Vancouver and Toronto where low mortgage interest rates continue to spur demand. It seems that this will not be enough to temper demand for housing, with home buyers not affected by the changes, offers continue to keep coming in.
The condo sector has cooled slightly but lowrise housing has been on a tear with no signs of cooling as demand out paces the number of available units on the market. Condo prices remained relatively flat but low rise home prices have increased 6% from last year until now even with sales numbers down 11.5% during the same period. Could this be due to a lack of available listings on the market?
Semi detached homes rose 12.2% from last year with the average price now running at $622,044. Detached homes were up 7.2% from last year with the average price at $909,910. The new demand is not for large homes and lots of fancy cars but rather to live where you can buy groceries and supplies within walking distance and have transit access at your doorsteps. What do you think? Is this the way of the future for housing? Please comment below.
The question on everyone’s mind when it comes to their mortgage is always the same one. Do I lock in my mortgage rate or take advantage of the lower variable rate being offered in the market today. Historically, in most cases, the variable rate has been the way to go but now is one of those times where fixed may actually be the better option or it’s a coin flip.
Most people question whether I am fixed or variable on my personal mortgage. Right now I am fixed. The variable rate is usually for a finance savvy consumer that keeps an eye on their rates to watch for the perfect time to lock in. I was variable up until a few months ago when the fixed rate reached 2.84%, at which time I locked in my rate. The variable rate today is Prime minus 0.5%, or 2.5%. With the 5 year fixed rate mortgage currently at 2.79%, a quarter point increase in the variable rate would put you close to your fixed rate.
This also means that a half point increase would put you above the fixed rate. Our contacts at the Bank of Canada (BoC) have outlined that they expect to see a quarter point increase between November of this year and February of next year. If the U.S. economy continues down its current path of expansion and the economy continues to gain traction, we can expect interest rates to rise fast. So back to the issue at hand, the difference in monthly payments on my personal mortgage is only $8 a month. For that I have the added security of sleeping at night knowing that any increase will not affect me. Do you have this same comfort at night? Please comment below.
As you may have heard, if you are tuned into my blog regularly, the Canadian government company Canada Mortgage & Housing Corporation (CMHC) will no longer insure mortgages where the homes are valued at more than $1 Million. This means that anyone purchasing a home for $1 Million or more will be required to put a minimum of 20% down payment in order to close on the property.
The flip side of this argument is that anyone looking to purchase a home valued at less than $1 Million can purchase with as little as 5% down payment but be warned, the CMHC default insurance cost can become quite pricey. Especially if you are purchasing a home close to $1 Million with a 5% down payment, which is difficult to get approved for these days. The only people getting approved in this price range are doctors and lawyers that still have student debt but have the cash flow to get into their homes today.
The other option currently on the table would be to get the first mortgage from the bank at 80% of the value of the home, through your mortgage broker and then have your mortgage broker obtain a private second mortgage behind the bank’s first for the remaining amount. This would allow you to purchase the home over $1 Million but the costs will still add up. You can expect that the money saved on the CMHC default insurance will be collected in fee’s as the lender will take a 2% fee and the mortgage broker will charge a 2% fee (negotiable). What are your thoughts? Would you utilize this strategy if you were purchasing a $1 Million dollar home? Please comment below.
Sales of existing homes, in the Greater Toronto Area, witnessed another decline with sales down 17% when compared to a year earlier, according to the Toronto Real Estate Board (TREB). Many have been watching the market closely to see if it would rebound but numbers continue to be disappointing.
Jim Flaherty has stopped tightening mortgage lending guidelines for the moment but did decide to intervene when a lender dropped their 5 year fixed rate to 2.89%. Flaherty made a quick call to the lender and had them pull the rate within 48 hours, which I find odd because we are currently offering rates between 2.79% and 2.89% for a 5 year fixed rate mortgage.
Toronto’s condo market has already been put in to the lime light as fears that a market correction could dampen condo prices substantially. Condo sales have declined more than 18% year over year and are expected to decline further as construction now outweighs demand. Even the low mortgage interest rates are not enough to sway buyers back into purchasing. What do you think? Is the condo market a soft spot for Toronto? Please comment below.
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