Hi and welcome to the latest edition of my newsletter where I cover real estate and mortgage insights & updates for my clients and real estate partners. Previous editions of this newsletter can be found as blogs on my website here.
As we head off into the last few weeks of summer and get ready to welcome fall, it’s a good time to take stock of how the real estate and mortgage markets are looking currently. I’ll also cover a few noteworthy updates on interest rates, interesting surveys and what can be expected next, particularly on mortgages. Here’s what we’re covering today:
- Housing market overview
- Interest rate & bond yield projections by big banks till end of FY ‘24
- REMIC poll
- Renewals
- Key updates from the mortgage world
Let’s get started, shall we?
- Housing Market Overview
As per the latest (July 2023) data, this is where we stand on the GTA housing market.
As can be seen from the graphic above, month-on-month, prices of all types of properties as well as the number of transactions have fallen. However, if you compare this from last year’s data of the same time period it’s green across the board.
What that means is, that every type of property in the GTA increased in price year over year, despite extremely challenging headwinds in the real estate & mortgage markets.
- Interest rate & bond yield projections by the big banks till FY ‘24
This was an interesting chart on the target rate from Canadian Mortgage Trends which I thought of sharing. It shows what the big banks are projecting as expected interest rates & bond yields till the end of FY ‘24.
Big Banks Interest Rate Projections
The consensus seems to be that interest rates will drop by the end of next year, which is good news. The not-so-good news is that it might not drop by enough to bring back the low 2% and even mid-1 % rates that a lot of people seem to think the rates will go back to.
- REMIC Mortgage holders poll
Moving on, REMIC recently conducted a poll of 1,000 random Canadians asking them about their mortgages. The survey had a few shockers. I’m highlighting some of its findings here, you can read more using this link.
- A combined 68.4% of Canadians said they didn’t know what their mortgage payments would be if the Canadian interest rate reached 5%. (5% IS the current interest rate!)
- Only 30.21% of Canadians said they would have purchased a less expensive property if they knew mortgage rates would go up
- Over half of Canadians (57.80%) believe that banks give them the best mortgage rates because they are ‘loyal customers.’ (I can assure you, this is not necessarily true. Banks might give you good rates to get you in, but on average, especially come renewal, they will offer you about 15-20 bps higher than their own best discounted rates)
- Nearly half (45.2%) of Canadians don’t think they will be able to pay off their mortgages until age 60.
What this shows me is that it is imperative for Canadians to have better knowledge and understanding of the biggest liability that they’ll ever have in their lifetimes, which is a mortgage. Without that understanding and knowledge Canadians are leaving money and long-term wealth on the table and not even realising it.
The easiest way to do that is to work with a trusted and licensed mortgage professional who has your financial well-being in mind while recommending mortgages and mortgage strategies.
- Renewals
Here’s the current likely scenario for people who might need to renew their mortgages soon (based on average interest rates for the year):
- Renewals on Fixed (5.25%)
- From 2018: +2.25%
- From 2019: +2.75%
- From 2020: +3.25%
- From 2021: +3.50%
- Renewals on Variable (Prime -0.90% at 6.3%)
- From 2018: +4.00%
- From 2019: +3.00%
- From 2020: +4.00%
- From 2021: +5.00%
The situation above doesn’t look good. No matter what, if your mortgage’s current term is ending and you need to renew soon, in almost all cases your new mortgage will end up costing you significantly more.
As seen earlier, if you need to renew in the next few months, please reach out and speak to me instead of signing whatever renewal terms your current lender is offering you. As a licensed mortgage professional, I can certainly try and help reduce your pain, come renewal.
- Key updates from the mortgage world
- Scotia Bank moved back into competitive mortgage lending through the broker channel after intentionally slowing it earlier this year. The bank is still being cautious and is focusing more on customers to whom it can cross-sell its other products and services.
- BMO is re-entering the broker channel after a gap of over 15 years. The roll out will happen from early 2024.
- Both of these are welcome updates for potential mortgage customers as it increases competition and will give borrowers more options.
- Bank of Canada’s next rate announcement is expected next week on the 6th of September.
As always, please reach out if you or anyone you know has any questions about mortgages. Until next time!
