Determining home affordability

home pricesMagnifying glass

Affordability is a hot topic in Canada's residential real estate market. While rising home prices mean greater value for homeowners, they can also translate to difficulties for prospective homebuyers. After all, a more expensive home will require more financing, something that can lead to more debt and ultimately foreclosure if a borrower is unable to stay current on their loan.

Data from the Teranet-National Bank's house price index shows that despite a decline in sales, home prices have continued to rise throughout the country. Overall, on a year-over-year basis, home prices increased 2 percent during May. This follows a 2 percent gain during April. Continue reading

Homebuyers looking to take advantage of low mortgage rates

BMOMagnifying glass

It seems like not a day can go buy without some industry observer proclaiming that the sky is falling in the Canadian real estate market. However, if data from the Bank of Montreal is to be believed, maybe the end times aren't as certain as some may think.

While it's no secret that the housing market has cooled in recent months, the BMO's Housing Confidence Report shows that nearly half of Canadian homeowners (48 percent) intend to purchase a property within the next five years. This number is relatively unchanged from fall 2012, meaning Canadians still have a high level of confidence in the housing market. Continue reading

CMHC consumer survey sheds light on mortgage process

When evaluating the mortgage market, one of the best ways to understand how the industry is faring is to look at the ways consumers are going about the process of finding a mortgage. The manner in which borrowers react to rules and regulations, use various tools to search for mortgage information (including lender websites and mortgage calculators) and whether or not they choose to use a mortgage broker, are key indicators of the health of the overall market.

Recently, the Canada Mortgage and Housing Corporation (CMHC) released a survey that revealed some of that information, and its results serve to shine some light on how borrowers feel about the mortgage process in 2013.

Obviously, the internet plays a huge role in how people research mortgage options. The report states that 63 percent of consumers searched for information about mortgages online. On top of that, 84 percent of consumers researched mortgage rates online. While that already represents a large majority, it is highly likely the number will continue to grow. That means lenders and brokers who haven't already put a lot of work into developing their online footprint are far behind the curve, and those who already have put in that effort will need to continue to do so in the future. Continue reading

Canadian mortgage rates continue to climb after Bernanke’s latest edict

With Canadian and American mortgage rates being closely linked, there is little surprise to be seen on the faces of Royal Bank of Canada and Scotiabank officials as the remarks of U.S. Federal Reserve Chairman Ben Bernanke spurred rates for a five-year closed mortgage to a level of 4.26 percent as detailed in the Epoch Times.

The Times' contributor Richard Kensington divulged "the Federal Open Markets Committee laid clear a path for higher interest rates in the U.S., which caused the 10-year treasury bond yield to hit 2.54 percent," causing a similar reaction in Canadian bond markets.

Special discounted rates to rise
The Southern Daily Press recently reported that "the Royal Bank of Canada and Scotiabank both announced increases to several mortgage packages, particularly those considered as 'special discounted rates.' Scotiabank's special discounted rates on two-year, four-year, seven-year and 10-year fixed-rate mortgages for residential properties all increased by 0.10 percent effective Sunday, June 22." Continue reading

Five-year fixed-mortgage rates on the rise

Rates for five-year fixed-mortgages are climbing, effectively ending the trend of 3 percent five-year fixed-mortgage rates.

According to Move Smartly, last week five-year fixed-mortgage rates rose and then rose again. The increase is a lender reaction to the Government of Canada's (GoC) bond market. The GoC's five-year bond yields have, in the past seven weeks, increased by 66 basis points.

CBC News said that  bank's are seeing their borrower's rates go higher and are therefore increasing lending rates to offset the costs.

The increase in bond yields is due to three key points, according to Move Smartly. First, the willingness to pay for safety of GoC bonds was reduced and the bond yield rose from 1.15 percent to 1.44 percent from May 1, 2013 to June 6, 2013. Second, the Canadian job market spiked with almost 100,000 new jobs in May, causing bonds to surge 19 basis points. Lastly, the U.S. Federal Reserve announced it would begin to taper off its $85 billion per month program to purchase U.S. treasuries and mortgage backed securities.The U.S. Treasury yields will rise, so higher fixed-mortgage rates in Canada are inevitable because for the past five years GoC bond yields have had a 98 percent correlation with the U.S. Treasury. Continue reading

Mortgage rates present opportunity

Low mortgage ratesMagnifying glass

Historically low mortgage rates are continuing to make homeownership affordable for Canadians, according to the Royal Bank of Canada.

Data from the RBC's Housing Trends and Affordability report shows that low mortgage rates are keeping Canadian homeowners from entering dangerously unaffordable territory. Additionally, the report stated that rate increases are likely not on the horizon.

"Exceptionally low mortgage rates have been the main factor preventing affordability from reaching dangerous levels in recent years; yet, we believe that the likelihood of a surge in rates is slim at this stage," the report stated.

Continued low mortgage rates are good news for Canadians, especially as a report from the Certified General Accountants Association of Canada shows that while many Canadians are satisfied with their finances, they're not necessarily keeping on top of them. Continue reading

Fitch Ratings highlights six default factors

FitchRatingsMagnifying glass

According to Fitch Ratings' Canadian Residential Mortgage Loan Loss Model, there are six primary factors that influence mortgage defaults. These include borrower equity, borrower credit score, total debt service ratio, loan purpose, occupancy and property type.

A mortgage borrower's equity is the difference between the value of a home and value of all mortgage secured against it. As a borrower pays off their home loan, they build equity. This can be a valuable asset to homeowners, as the more equity that's built up in a home, the more that can be accessed through home equity loans or home equity lines of credit. This essentially allows homeowners to turn the value of the home into cash for any number of purposes, including renovations, college tuition or medical costs. Continue reading

Home prices rise, construction declines

If it seems like Canada's housing market bounces back and forth from doom and gloom to optimism and sunshine faster than a mortgage application can be submitted, it's likely because it makes for better headlines than the truth: The market is cooling, but it's heading for a soft landing, not a crash. Mortgage rates remain near all-time lows, making it more affordable than ever for consumers to take the plunge into homeownership. Meanwhile, property prices continue to remain high.

New home prices rise in March
According to data from Statistics Canada, new home prices increased 0.1 percent overall during March on a month-over-month basis. Most of this positive activity is being attributed to Calgary, where Canada's oil industry is giving workers the means for homeownership. The new housing price index shows that prices in Calgary rose 0.3 percent from February to March. Meanwhile, the Toronto-Oshawa region saw an increase of 0.1 percent following a flat rate in February. Regina, Saskatoon and Windsor are also reported to have experienced large price hikes during the same time period. In fact, while prices rose in nine cities, only three saw a decline, including Vancouver, where new home prices fell 0.2 percent from the previous month. Meanwhile, prices stayed unchanged in nine cities during this time period. Continue reading

Counting on curb appeal

Magnifying glass

Many Canadian homeowners are looking to take advantage of historically low mortgage rates and upgrade to a new property. However, in order to do so, most will need to first sell their current home. While a number of factors can affect how quickly a home will sell, it's important for homeowners to understand the importance of curb appeal.

What is curb appeal?
Put simply, curb appeal is how attractive a home looks from the sidewalk. When a potential homebuyer first sees a property, it's the curb appeal that will give them their first impression. Curb appeal includes everything from a home's paint job to its front lawn. Obviously, factors such as price, square footage and condition will play a large role in whether a buyer is interested, but curb appeal is a home seller's first and best chance to grab a buyer's attention. Continue reading

The importance of walkability

family walkingMagnifying glass

While the financial responsibilities that come with buying a home are important to consider, there's more to purchasing property than just home loans and mortgage rates. One aspect of homeownership that has become more discussed recently is the importance of walkability when choosing a home to buy.

What is walkability?
Walkability concerns how conducive a particular area is to pedestrian movement. This includes factors such as the availability of footpaths and sidewalks, amount of traffic, building accessibility, safety and other components.

Why is walkability important?
As health and the environment continue to become more important to individuals, walkability will likely only grow in popularity. Walking is the most environmentally-friendly mode of travel available today, as it cuts down on vehicle pollution. Additionally, the health benefits of walking are self-evident, as regular exercise is an important part of human health. In fact, a study from America's Columbia University has shown a correlation between walkability and a lowering of individuals' body mass index (BMI).  Continue reading