Sunday Dock Read – Christmas Home Shopping, Current Lending Climate, Mortgage Charter Unpacked

I’d like to first wish everyone a Merry Christmas from HuronMortgages.ca before diving into this blog!

Christmas Festive Home Shopping and our Thoughts at HuronMortgages.ca

‘Tis the season to be house hunting! While most folks are busy decking the halls and sipping on eggnog, you might want to break from tradition and dive into the world of open houses and real estate offers. Why? Well, because during the holiday hustle, everyone is too caught up in festive shenanigans to think about moving.

Picture this: as you are sipping cocoa by the fireplace, savvy sellers are out there getting into the holiday spirit by slashing home prices. It is like a winter wonderland of real estate deals, and you could be the lucky one to unwrap the perfect home at a discounted price.

According to the Annual TREBB data, between Black Friday and Christmas, new listing prices typically do the holiday limbo, dropping about 5% to 7%. It is the time when serious buyers emerge from the tinsel-covered woodwork, and sellers, in the spirit of giving, sweeten the deal with extra incentives.

And we are not just talking about a bow on the front door—some sellers are going all out with appliances like energy-efficient washers, dryers, and even big-screen plasma TVs. It is like finding a golden ticket in your real estate adventure!

But hold on, Frosty. While the idea of scoring a home with all the trimmings sounds merry and bright, there is a catch. Mortgage brokers can be real Scrooges about these things. So, if you are dreaming of a home with a side of freebies, make sure you follow the rules.

List those goodies separately in an addendum, get the contract wording approved early, and avoid turning your cozy home purchase into a holiday nightmare. With the relatives jingling all the way, work closely with seasoned real estate and mortgage brokers to ensure your home-buying adventure does not turn into a holiday sitcom. Happy house hunting, and may your new home be the best gift under the tree!

 

The Updated State of our Current Lending Environment

The Canadian mortgage market has decelerated, experiencing its slowest growth in 22 years in September. New mortgage activity has only increased by 3.2% annually, marking the most subdued pace since 2001, a stark contrast to the 10.9% surge witnessed during the early 2022 pandemic housing boom.

Year-to-date, mortgage activity has witnessed a notable decline, down by 25% from 2022 and nearly 30% from 2021, presenting a challenging economic landscape.

It is essential to note that these figures do not factor in the recent escalation in borrowing costs. The apparent stability of the market can be largely attributed to the surge in home prices. Additionally, the impact of negatively amortizing static-payment variable-rate mortgages, especially prevalent at major banks, has served as a buffer against the market’s decline.

A noteworthy shift has occurred in borrower preferences, with fixed-rate mortgages emerging as the favored choice, constituting approximately 95% of new mortgages. This marks a substantial reversal from early 2022 when variable-rate mortgages reached their zenith at nearly 57%. This trend is expected to persist unless there is a discernible indication of imminent rate cuts, a prospect the author envisions occurring on March 6.

Broker feedback typically prompts consideration of a 3-year fixed rate or a 5-year variable rate, especially for those anticipating forthcoming Bank of Canada rate cuts. While variable rates may not witness a significant increase, they position borrowers to benefit when the Bank of Canada eventually initiates rate cuts, albeit modestly unless a substantial reduction, approximately 1.50%, is observed by 2024.

Another consideration is a 5-year term, especially if, at the time of execution, it proves substantially more cost-effective than the 3-year term. The rationale behind this is that, in the event of a substantial drop in rates within the agreed-upon term, the interest savings would more than compensate for the 3-month penalty incurred to renegotiate a new mortgage, offering an advantageous position.

 

The New Canadian Mortgage Charter Unpacked

The Canadian Mortgage Charter, introduced in the Fall Economic Statement by the Liberal government, is not a law but a set of guidelines for financial institutions to follow when dealing with borrowers.

It focuses on helping “vulnerable borrowers” facing financial strain.

The charter outlines six expectations for lenders, including;

1.      allowing temporary extensions on mortgage amortization,

2.      waiving fees for relief measures, and

3.      exempting insured mortgage holders from stress tests for lender switches at renewal.

4.      requires initiative-taking communication with homeowners,

5.      allowing lump sum payments, and

6.      waiving interest on interest for mortgage relief measures.

While many measures already existed, the charter consolidates them for clarity, making it easier for vulnerable borrowers to understand their options.

Notably, insured borrowers are now exempt from the stress test when changing lenders during mortgage renewal. A ‘vulnerable borrower’ is someone facing severe financial stress related to their principal residence mortgage. Those not offered outlined affordability measures can file complaints on the FCAC website, which investigates issues with federally regulated financial institutions.

Have Questions?

Contact us today to schedule your personalized consultation and take the first step towards turning your homeownership dreams into reality or look into better investing opportunities by phone at 519.497.3667 or by email at mathew.monks@migroup.ca.

Mathew Monks, Mortgage Agent Level 2
Licence #M18002043

Mortgage Intelligence FSRA
Licence #10428

Phone: 519.497.3667

Email: mathew.monks@migroup.ca

Website: huronmortgages.ca