I think we have all been reading the headlines and feeling the impact of the rapid rise in variable interest rates.  However, the 5-year fixed rates are now tracking about 120 basis points below the variable rates.  Steve Huebl from Canadian Mortgage Trends provides some insight as to where this might be leading us.

While rates have been steadily climbing for variable mortgages, fixed mortgage rates have been moving in the opposite direction.

Certain lenders and national brokerages have been gradually dropping rates for select terms since the start of the month. Average nationally-available deep-discount 5-year fixed mortgage rates are now about 20 basis points lower compared to earlier in the month, according to data from MortgageLogic.news.

The move follows the recent decline in the 5-year Government of Canada bond yield, which typically leads fixed mortgage rates.

The 5-year bond yield closed at 3.05% on Monday, bouncing back slightly from a 5-month low of 2.80% reached last week. Still, yields are down from about 3.40% four weeks ago and the 14-year high of 3.89% reached in October.

Could this be a peak for fixed rates?

While this isn’t the first time fixed mortgage rates have dipped in recent months, some suggest that with expectations of a recession on the horizon and with the worst of inflation seemingly behind us, rates could continue to ease some more.

“It certainly looks to me like we’re starting to bump up against some resistance on fixed mortgage rates,” Ben Rabidoux of Edge Realty Analytics said during a webinar for clients on Monday. “I think there is a very good chance that we’ve seen the peak in fixed mortgage rates and they’re now beginning to decline.”

He pointed to the “highly unusual” fact that fixed rates are now priced about 120 basis points (or 1.2 percentage points) below variable rates.

“That’s an indication that the rates market is projecting Bank of Canada rate cuts later this year,” he said. “This helps explain why fixed rates are lower than variable because the fixed rates are priced off the bond market…[and] the bond market is clearly signalling that the worst of the inflation scare is behind us.”

If the current trend continues, Rabidoux said that there’s a “very good chance” that 5-year fixed rates fall back to the “low fours” by the spring homebuying season.

“If [yields] continue to tick down a little, the possibility that we end up with mortgages in the high threes is not outside the realm of possibility at this point,” he added. “A lot can change, but as it stands right now, I think the direction of travel for interest rates is clearly down and that’s good news.”

Short-term fixed rates growing in popularity

Many borrowers are clearly anticipating lower rates again in the coming years, which explains the rising popularity of short-term fixed rates.

Data from the Bank of Canada shows a clear trend of borrowers shifting away from variable rates and towards short-term fixed rates.

Nearly a third (31%) of all new mortgage originations as of November had a fixed-rate term of under three years.

It’s a trend Rabidoux said he expects to continue, so long as expectations are for rates to come down in the near term.

“It makes sense. If I were taking out a mortgage today, I would be inclined to look at 1- or 2-year fixed because I think there’s a decent chance that, a year or two from now, [rates are] going to be substantially cheaper at renewal,” he said.

Meanwhile, after making up nearly 60% of new mortgage originations last year, variable-rate products are back to making up a more historically average share of new mortgages, according to the Bank of Canada data. In November, 22% of new originations had a variable-rate mortgage.

Written by: Steve Huebl_Canadian Mortgage Trends (published Jan 30/23)

“There have been a number of recent newpaper headlines about frauds being purpetrated against unsuspecting homeowners having their property sold out from under them.  What is Title Insurance and how can you protect yourself?”

What to Know About Title Insurance.

There are many insurance products when it comes to your home, but not all are created equal. One such insurance policy that potential homeowners may encounter is known as “title insurance”.

This particular insurance is designed to protect residential or commercial property owners and their lenders against losses relating to the property’s title or ownership. In fact, it is so important to lenders that every single lender in Canada requires you to purchase title insurance on their behalf. It is not a requirement to have coverage for yourself, but that doesn’t mean you should dismiss it outright.

While title insurance can protect you from existing liens on the property’s title, the most common benefit is protection against title fraud.

Title fraud typically involves someone using stolen personal information, or forged documents to transfer your home’s title to him or herself – without your knowledge. The fraudster then gets a mortgage on your home and disappears with the money. As the old adage goes: “It’s better to be safe than sorry” and the same goes for insurance.

Similar to default insurance, title insurance is charged as a one-time fee or a premium with the cost based on the value of your property. This insurance typically runs around $300 for the lender and $150 for the individual. It can be purchased through your lawyer or title insurance company, such as First Canadian Title (FCT).

If you are wanting to know more about title insurance, or confirm that you (and your home) are properly protected, don’t hesitate to reach out to a Dominion Lending Centres mortgage expert today for a mortgage review!

Written by : My DLC Marketing Team (Published Jan 17/23)

Maybe you have a variable mortgage and maybe you are just a little concerned about mortgage interest rates as you approach your trigger rate (the point at which your mortgage payment does not cover the interest due to rising rates).  Dr. Sherry Cooper outlines why she thinks a quarter point interest rate may be coming our way when the Bank of Canada makes its next policy announcement on January 25, 2023.

Employment report ended 2022 with a boom

Labour Force Survey for December was much stronger than expected, raising the odds of a 25 bps increase in the policy rate by the Bank of Canada on January 25th. While the Bank has hiked rates by 400 bps to 4.25%, core inflation remains sticky, wages have risen by more than 5% for the seventh consecutive month in December, and Q4 GDP is running well above the Bank’s forecast of 0.5%.

Employment rose by 104,000 last month, and the unemployment rate fell to 5.0%–just above the 50-year low of 4.9% posted in June and July. Indeed, the jobless rate would have fallen even further had the labour force participation rate not ticked upward as discouraged workers re-enter the jobs market when vacancies are plentiful. Employment rose the most for youth and people aged 55 and older.

Throughout 2022 the employment rate of core-aged women hovered around record highs. On average, 81.0% of core-aged women were employed, the highest annual rate since 1976 and 1.3 percentage points higher than in 2019.

Much of this increase has been among women with young children. On average, during 2022, 75.2% of core-aged women with at least one child under six years of age were working at a job or business, up 3.3 percentage points compared with 2019.

The increase in employment in December was driven by full-time work, which rose for a third consecutive month.  Full-time work also led employment growth for the year ending in December 2022.

Employment rose in multiple industries, notably construction, transportation, and warehousing.

Job gains were reported in Ontario, Alberta, BC, Manitoba, Newfoundland and Labrador, and Saskatchewan.  There was little change in the other provinces.

Bottom Line

The Canadian economy has also been boosted by strength in the US, where nonfarm payroll employment rose by 223,000 in December, and the unemployment rate fell to 3.5%, matching a five-decade low.

Governor Tiff Macklem and his officials have slowed down the rate hikes (from 75 bps to 50 bps) and signalled that future decisions would depend on economic data. Indeed, the most recent GDP and today’s jobs report point to continued economic strength. The October and November gains in GDP suggest Canada’s growth is holding up better than expected. The economy is on track to expand at an annualized rate of 1.2% in the fourth quarter, exceeding the central bank’s expectations.

The December CPI report will be released on Jan 17, ahead of the Jan 25 Bank of Canada decision. That will be closely watched as well.

In other news, housing market activity continued to slow in December. Home sales plummeted in the country’s largest metro areas by 30%-to-50% as buyers and sellers moved to the sidelines. Housing is the most interest-sensitive sector and has been slowing since the Bank began hiking interest rates last March.

Greater Vancouver led the way, with sales falling 52% year-over-year, while the Greater Toronto Area saw a 48% decline. Montreal followed with a 39% annual decline, whereas sales were down 30% in both Calgary and Ottawa.

Average prices continued to fall in most of the metro areas. The MLS Home Price Index benchmark is now down 9% year-over-year in the Greater Toronto Area. In Calgary, however, average prices remain nearly 8% above year-ago levels.

Written by: “Dr. Sherry Cooper, Chief Economist to Dominion Lending Centres”

The holidays are a season of giving and often times, households can often find themselves carrying some extra debt as we enter the New Year.

If you happen to be someone currently struggling with some post-holiday debt, that’s okay! Whether you’ve accumulated multiple points of debt from credit cards or are dealing with other loans (such as car loans, personal loans, etc.), you are likely looking for a way to simplify your payments – and reduce them. Rolling them into your mortgage could be the perfect solution.

Consolidating other forms of debt into your mortgage has multiple benefits. For starters, this process can help you to pay off your loans over a longer period of time with smaller payments per month, and often at a reduced interest rate when compared to a credit card.

By freeing yourself from these high interest rates and gouging interest payments, you will not only have more money each month but have a better chance of taking back your financial control and getting your loans completely paid off!

If you’re still not sure if this is the right solution for you, here is an example… if you have $30,000 of credit card debt, you are probably paying AT LEAST $600 per month and $500 per month of that is likely going directly to interest. If you let me help you to roll that debt into your home equity and monthly mortgage, your payment to this $30,000 portion would drop down around $175 per month, with interest charges closer to $140 per month. That is huge savings!

Not only does debt consolidation into your mortgage help with reducing interest charges and making your loan more manageable, but it is also much easier to keep track of and pay a single monthly installment versus managing a dozen different loans or bills.

While debt consolidation through refinancing will increase your mortgage since you have to add the debt into your existing mortgage amount, the benefits to lowering your overall payments and management can be well worth it when it comes to cost savings, time and stress. Keep in mind, you need at least 20 percent equity in your home to qualify for this adjustment.

If you are looking for a way to simplify (or get out of) debt, reach out to a Dominion Lending Centres mortgage expert! They would be happy to take a look at your financial portfolio and current mortgage and help you come up with the best option to suit your needs.

Written by the  “DLC Marketing Team”