Bank of Canada Leaves Prime the Same, April 2024
As Expected, No change in Bank of Canada benchmark interest rate for April 2024.
As noted in August 2023, the 1st Prime Rate reduction is expected in July and then Prime should come down at o.25% every 90 days so … 1 quarter percent reduction, every calandar quarter, for the next 2 years.
Mortgage Mark Herman, best top Calgary Alberta mortgage broker.
Today, the Bank of Canada announced it is keeping its benchmark interest rate at 5.0%, unchanged from July of 2023. However, much has changed in the economy and in the world since then. For evidence, we parsed today’s announcement and present a summary of the Bank’s key observations below.
Canadian Inflation
- CPI inflation slowed to 2.8% in February, with easing in price pressures becoming more broad-based across goods and services. However, shelter price inflation is still very elevated, driven by growth in rent and mortgage interest costs
- Core measures of inflation, which had been running around 3.5%, slowed to just over 3% in February, and 3-month annualized rates are suggesting downward momentum
- The Bank expects CPI inflation to be close to 3% during the first half of 2024, move below 2.5% in the second half, and reach the 2% inflation target in 2025
Canadian Economic Performance and Housing
- Economic growth stalled in the second half of last year and the economy moved into excess supply
- A broad range of indicators suggest that labour market conditions continue to ease. Employment has been growing more slowly than the working-age population and the unemployment rate has risen gradually, reaching 6.1% in March. There are some recent signs that wage pressures are moderating
- Economic growth is forecast to pick up in 2024. This largely reflects both strong population growth and a recovery in spending by households
- Residential investment is strengthening, responding to continued robust demand for housing
- The contribution to growth from spending by governments has also increased. Business investment is projected to recover gradually after considerable weakness in the second half of last year. The Bank expects exports to continue to grow solidly through 2024
- Overall, the Bank forecasts GDP growth of 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026. The strengthening economy will gradually absorb excess supply through 2025 and into 2026
Global Economic Performance and Bond Yields
- The Bank expects the global economy to continue growing at a rate of about 3%, with inflation in most advanced economies easing gradually
- The US economy has “again proven stronger than anticipated, buoyed by resilient consumption and robust business and government spending.” US GDP growth is expected to slow in the second half of this year, but remain stronger than forecast in January
- The euro area is projected to gradually recover from current weak growth. Global oil prices have moved up, averaging about $5 higher than the Bank assumed in its January Monetary Policy Report
- Since January, bond yields have increased but, with narrower corporate credit spreads and sharply higher equity markets, overall financial conditions have eased
- The Bank has revised up its forecast for global GDP growth to 2.75% in 2024 and about 3% in 2025 and 2026
- Inflation continues to slow across most advanced economies, although progress will likely be bumpy. Inflation rates are projected to reach central bank targets in 2025
Outlook
Based on the outlook, Governing Council said it decided to hold the Bank’s policy rate at 5% and to continue to “normalize” the Bank’s balance sheet. It also noted that while inflation is still too high and risks remain, CPI and core inflation have eased further in recent months.
The Council said it will be looking for evidence that this downward momentum is sustained. Governing Council is particularly watching the “evolution of core inflation,” and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
As it has said consistently over the past year, the Bank will remain “resolute in its commitment to restoring price stability for Canadians.”
Next Touchpoint
On June 5th, 2024, the Bank returns with another monetary policy announcement and economists are already lining up with predictions of a rate cut either then or in July.
Net Migration to Alberta – #’s here.
the CORE reason home prices in Calgary will be going up for the next 4 years, and are 100% supported and will not be coming down is summed up in this article right here.
https://www.cbc.ca/news/canada/calgary/alberta-population-records-2023-to-2024-data-1.7157110
Summary of the Main Reasons Home Prices are Supported:
- BC and Ontario home prices are DOUBLE Calgary home prices
- 4 million New Canadians on the way here in the next 5 years.
- We hatched the largest 20 – 29 year old population Canada has EVER had, and they are moving out of their parent’s basements and buying their own homes.
- Alberta does NOT have PST
- Alberta does not have a 1% “welcome to the neighborhood tax” when buying property.
After researching the above data points we can confidently say all 5 of these stacked factors will cause home prices to increase is all price ranges for the next few years.
Mortgage Mark Herman, licensed as a top Alberta Mortgage Broker for 21 years and 1 year in BC
Why to Buy Your Home Now; Vancouver Island, Winter, 2024
Summary
We expect to see multiple & competing offers, with NO Financing Conditions for all home types, priced from $400k to $1.1M, starting now, and growing to “full-scale crazy- town” by May.
Use this time before May 2024 to take advantage of slight & short term softening of the market before:
- News of lower mortgage interest rates ignites a powder keg of sidelined, eager, competitive buyers.
- Prices continue to climb due to continued competition from 4 million New Canadian immigrants for the few homes on the market; for the next 4 years!
- Housing will remain in super-tight supply with inventory pre-sold before it gets to market.
Shameless Advertisement … then the data
Your #1 concern should be: how does my offer win among 5, 10 or 20 others?
Will you have the confidence in your broker or bank to write a No Condition or Lo Condition Offer?
We support NO CONDITION & LOW CONDITION OFFERS!
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- with 100% pre-underwritten approvals and
- 9am to 11 pm live phone support – with me & your realtor – when writing your offer to ensure it works.
To take your 1st step to a FULLY Pre-Undewritten, Pre-Approval; that could go NO Conditions, if needed – click here.
DETAILS
1. Mortgage Rates
Have Decreased Already – but on the down low.
Without media attention, About 20 tiny reductions have already happened for FIXED RATES.
- Fixed rates have been slowly and quietly decreasing from Post-COVID 20 year highs; they were ~7% and are now ~5%
- Most people are only aware of the 10x Prime rate increases in a row post-COVID in 2023/23
- Prime has held steady at 7.2% since then,
- 1st Prime reduction expected in July and it has already been “100% priced-in” by the stock market.
- Inflation and the Consumer Price Index came in at 2.9% and is now back inside the target range of 1.0% to 3.0%.
Why the Rush?
1A. Joe Public is now correctly thinking;
-
the slight extra interest cost of buying now with marginally higher mortgage rates and some actual inventory selection to choose from; far, far, far out weighs …
- the small increase in buying power from lower rates that is sure to come with
- massive price increases when buying in the frenzy starts after the BoC rate cuts hit the news.
1B. 50% of “Exhausted Buyers” plan to re-enter the market when rates drop
A recent survey, half (51%) of those who put their home purchase plans on hold, now say they will re-enter the market when they hear that rates have dropped.
- A rate decline of just o.25% would be enough to bring 10% of those Exhausted Buyers back,
- A rate decline of 1.00% would bring back 23% of those sidelined.
- the Prime rate (for variable rates) is expected to go down 2%, and fixed rates could easily sneak down another 1.5% yet too.)
1C. AUTO_RATE_FLOAT_DOWN helps
In a decreasing rate environment, if the rates goes down AFTER you sign, you still AUTOMATICALLY get the lower rate right up until 5 business days before you move in.
See the GRITTY details of WHY THE VARIABLE RATE IS THE WAY TO GO HERE
- The Variable lets you take advantage the rates going down over the next 28 months, right now. It goes you an option to not take a fixed rate at near 10-year highs.
2. Home Pricing
Home prices on Vancouver Island are FULLY SUPPORTED, and will NOT be dropping at all, due to continuous demand from record setting immigration for the next 5 years.
- Remember in 2022, during COVID when “buyers were acting irrationally” and then home prices went up $500k over 1 year?
- That is about to happen again!
Consider this is the reason why Vancouver Island is in such demand …
- Every day, somewhere in Canada, say about 100 people retire and “sell all their things” and plan to move West, to the Island, and retire in Canada’s only temperate rain-forest. The #1 location choice for retirees.
- Right now the high interest rates are slowing the asset sales for these retirees to “move their high value assets” and move West including: primary and rental homes, cabins, businesses, vehicles and boats.
- When interest rates come down, buyers will better afford loans on these assets, and the above items will sell. The “tidal wave” of backlog retirees will all “move West to the Island” for the weather and retirement in a rush.
- With plentiful CASH reserves to haphazardly throw down on their last home purchase, completing their dream; and frustrating yours.
Prices are expected to further INCREASE for the next 5 years due to these data points below:
3. Current homes prices well below national average:
For 2023: Calgary; up 4%, Halifax; up 3%, Victoria; up 1%
- All other cities in Canada are down 18% to 21%‘; which really means Victoria is really up about 22-ish%.
- [data point here]
4. Peek New-to-Canada Immigration
Overall Canada’s population growth is 3.1% – 6x higher than the USA at o.5%.
- 1.2 million new Canadians arrived in 2022 – highest growth of all the G20.
- 4 million new Canadians are on the way before 2027; where will they live?
- That’s 2x Canada’s already hefty overall population increase, which also broke records.
- “We have never seen the young adult population growing anywhere nearly this fast before,” an analyst wrote. “Putting additional pressure on rents now, and in the medium term, it will put pressure on home prices.”
- See the red-blue graph below
5. Renting in the Wild West
37% of Canadian households are renters.
- New renters are on the scene from an unprecedented rise in working age population – up 874,000 in 2023
- Rent inflation was 8.2% in October 2023 – highest in over 40 years.
- The difference between rent inflation and “standard inflation” is the highest in 60+ years.
Costs to build a home are up 51% since 2020.
- High costs for all inputs, scarcity of skilled construction workers, higher mortgage interest rates for builder’s financing, supply-chain bottlenecks from COVID. (See the graphics below.)
- Forest fires from 2020 to 2023 have reduced the supply of lumber.
- 100,000 new construction workers are needed in Canada.
- Most will be “temporary foreign workers” also hoping to become citizens and buy the same home supply they are producing.
- Construction wages were up 11.5% in 2023.
{Lots of fantastic graphs go here.
For a copy of the actual report in PDF, please request from me in email.}
What about COMPETING / Multiple Offers?
- We do Lo/No CONDITION OFFERS with Pre-underwritten, Pre-approvals that actually work.
- And I answer my phone from 9-9 x 360 so you can win your competing deals at the last second.
- Banks don’t offer this service. We have been doing this since “the Rush of 2007” when home prices were going up $1000/ day. This will be similar.
Why Buy Your Home Today: Data Points, Alberta, Winter, 2024
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Underlying Economic data on BoC holding Prime rate the same, December 5, 2023
Bank of Canada holds its policy interest rate steady, updates its outlook
Against the backdrop of a decelerating economy and growing calls for less restrictive monetary policy, the Bank of Canada made its final scheduled interest rate decision of the year today.
That decision – to keep its overnight policy interest rate at 5.00% – was broadly expected. What was not entirely expected (or welcome) was the Bank’s statement that it is “still concerned” about risks to the outlook for inflation and “remains prepared to raise” its policy rate “further” if needed.
The Bank’s observations are captured in the summary below.
Since August, we have been saying the VARIABLE RATE mortgage is the way to go, and this proves we were right on the money.
Mortgage Mark Herman, top Calgary Alberta and Victoria BC mortgage broker
Inflation facts and housing market commentary
- A slowdown in the Canadian economy is reducing inflationary pressures in a “broadening range” of goods and services prices
- Combined with a drop in gasoline prices, this contributed to easing of CPI inflation to 3.1% in October
- However, “shelter price inflation” picked up, reflecting faster growth in rent and other housing costs along with the continued contribution from elevated mortgage interest costs
- In recent months, the Bank’s preferred measures of core inflation have been around 3.5-4%, with the October data coming in towards the lower end of this range
- Wages are still rising by 4-5%
Canadian economic performance
- Economic growth “stalled through the middle quarters of 2023 with real GDP contracting at a rate of 1.1% in the third quarter, following growth of 1.4% in the second quarter
- Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year
- Exports and inventory adjustment “subtracted” from GDP growth in the third quarter, while government spending and new home construction provided a boost
- The labour market continues to ease: job creation has been slower than labour force growth, job vacancies have declined further, and the unemployment rate has risen modestly
- Overall, these data and indicators for the fourth quarter suggest the economy is “no longer in excess demand”
Global economic performance and outlook
- The global economy continues to slow and inflation has eased further
- In the United States, growth has been stronger than expected, led by robust consumer spending, but is “likely to weaken in the months ahead” as past policy rate increases work their way through the economy
- Growth in the euro area has weakened and, combined with lower energy prices, has reduced inflationary pressures
- Oil prices are about $10-per-barrel lower than was assumed in the Bank’s October Monetary Policy Report
- Financial conditions have also eased, with long-term interest rates “unwinding” some of the sharp increases seen earlier in the autumn. The US dollar has weakened against most currencies, including Canada’s
Summary and Outlook
Despite (or in the Bank’s view because of) further signs that monetary policy is moderating spending and relieving price pressures, it decided to hold its policy rate at 5% and to continue to normalize its balance sheet.
The Bank also noted that it remains “concerned” about risks to the outlook for inflation and remains prepared to raise its policy rate further if needed. The Bank’s Governing Council also indicated it wants to see further and sustained easing in core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and “corporate pricing behaviour.”
Once again, the Bank repeated its mantra that it “remains resolute in its commitment to restoring price stability for Canadians.” As a result, we will have to wait until next year for any sign of rate relief.
What’s next?
The Bank’s next interest rate announcement lands on January 24, 2024.
In the meantime, please feel free to call me and discuss financing options that will empower you in this economic cycle, and the ones ahead.
BoC Holds Canadian Prime at 6.7% on April 12th – Good News!
Today, April 12, 2023, the Bank of Canada held its policy interest rate at 4.50%, a welcome outcome for borrowers after almost a year of constant increases, and a timely confidence-builder for the real estate industry as it enters the spring market.
The Bank also issued its latest Monetary Report with updated risk assessments and base-case projections for inflation.
We highlight the Bank’s latest observations below.
Inflation acts and outlook
- In Canada, the Consumer Price Index (CPI) inflation eased to 5.2% in February, and the Bank’s preferred measures of core inflation were just under 5%
- The Bank expects Canadian CPI inflation to “fall quickly” to around 3% in the middle of 2023 and then decline more gradually to the 2% target by the end of 2024
- Recent data is reinforcing Governing Council’s “confidence” that inflation will continue to decline in the next few months
- Similarly, in many countries, inflation is easing in the face of lower energy prices, normalizing global supply chains, and tighter monetary policy
- At the same time, labour markets remain “tight” and measures of core inflation in many advanced economies suggest persistent price pressures, especially for services
Canadian economic performance and outlook
- Domestic demand is still exceeding supply and the labour market remains tight
- Economic growth in the first quarter looks to be stronger than was projected in January, on a “bounce” in exports and solid consumption growth
- While the Bank’s Business Outlook Survey suggests acute labour shortages are starting to ease, wage growth remains elevated relative to productivity growth
- Strong population gains are adding to labour supply and supporting employment growth while also boosting aggregate consumption
- Softening foreign demand is expected to restrain exports and business investment
- Overall, GDP growth is projected to be weak through the remainder of this year before strengthening gradually next year, implying the Canadian economy will move into excess supply in the second half of this year
- The Bank now projects Canada’s economy will grow by 1.4% this year – an improvement over its last forecast of 1% growth – 1.3% in 2024 (a downgrade from its last forecast of 2% for 2024) and then pick up to 2.5% in 2025
Canadian housing market
- Housing market activity remains subdued
- As more households renew their mortgages at higher rates and restrictive monetary policy works its way through the economy more broadly, consumption is expected to moderate this year
Global economic performance and outlook
- The Bank’s April Monetary Policy Report projects global growth of 2.6% in 2023 – an improvement over its last forecast of 2% offered in January – and then fall to 2.1% in 2024 (lower than it last forecast of 2.5%), and rise to 2.8% in 2025
- Recent global economic growth has been stronger than anticipated with performance in the United States and Europe surprising on the upside
- However, growth in those regions is expected to weaken as tighter monetary policy continues to feed through those economies
- In particular, US growth is expected to “slow considerably” in the coming months, with particular weakness in sectors that are important for Canadian exports
- Activity in China’s economy has rebounded, particularly in services
- Overall, commodity prices are close to their January levels
Outlook
While holding the line on interest rates, the Bank also noted in today’s announcement that it is continuing its policy of quantitative tightening and remains “resolute in its commitment to restoring price stability for Canadians.” There was nothing new in that statement. However, it also posited that getting inflation the rest of the way back to 2% “could prove to be more difficult because inflation expectations are coming down slowly, service price inflation and wage growth remain elevated, and corporate pricing behaviour has yet to normalize.”
As it sets monetary policy going forward, the Bank’s Governing Council indicated that it will be “particularly focused” on these indicators, and the evolution of core inflation as it gauges the progress of returning CPI inflation back to its 2% target.
The Bank also said it continues to assess whether monetary policy is “sufficiently restrictive” to relieve price pressures and “remains prepared to raise the policy rate further if needed” to return inflation to its 2% target.
Next Announcement is …
We will have to wait until April 20th to get the next CPI reading to gauge progress in one of the Bank’s determining indicators and June 7th for the Bank’s next scheduled policy interest rate announcement.
Inflation is slowing and that is great news for Canadian home buyers
Mortgage Mark Herman, Top Calgary Alberta Mortgage Broker
Using Return-To-Work Income while on Maternity Leave to buy a home IS possible in Canada.
Using Return-To-Work Income while on Maternity Leave to buy a home IS possible in Canada.
Are you on maternity leave and trying to buy a home, but the bank will not use your income? This is a common reason home buyers find us on the internet or their realtors send them to us.
We CAN use your FULL RETURN TO WORK SALARY as qualifying income, if you have a “return to work date” that is less than 12 months away from your home purchase possession date.
Big-6 banks do not do this and we have no idea why. It frustrates everyone, and broker lenders have no issue with it.
Mortgage Mark Herman, Top-Best Calgary mortgage broker near me.
And while we are it – our lenders also use CCB – Canadian Child tax Benefit – for all children aged UNDER 16, when the mortgage starts.
Big-6 banks don’t use this … not sure why that is.
What else about Broker Lenders?
Broker lenders are all secure, and many are publicly traded, and all are audited by the same staff the investigate all of the Big-6 banks.
Broker lenders also have payout penalties that are 500% to 800% LESS than the way Big-6 banks do it. Here are the links for that specific data on my blog:
- General explanation: http://markherman.ca/payout-penalties-how-the-big-5-banks-get-you/
- Details of all the lenders and their specific math: http://markherman.ca/fixed-rate-mortgage-penalties-larger-than-ever/
Broker lenders ALWAYS renew you are best rates, while Big-6 banks know that 86% of mortgages that renew will take the 1st offer so they “bump the rate” on you. Then you have to call in/ go in to chisel them down.
- At broker lenders, they expect you to call us to check the rates and we would jump at the chance to move you to a different lender and get paid again … so you get best rates with broker banks.
There is lots more to … call to find out.
Mortgage Mark Herman, licensed in Alberta since 2004.
403-681-4376
New Mortgage Rules 2023: Expanding the “Stress Test” to Everything?
This is from the Desk of Dr. Cooper, our Economist, and this data is 1 of the reason we are at Dominion Lending – to get this data.
Below is the details of the government expanding the STRESS TEST, or other mechanisms, to make it harder to buy a home.
OSFI Is Concerned About Federally Insured Lender Exposure to Mortgage Risk.
Late last week, the Office of the Superintendent for Financial Institutions (OSFI) announced it was concerned about the risks associated with the large and rising number of highly indebted borrowers, especially those with floating-rate mortgages, which stands at a record proportion of outstanding mortgage loans.
With the economy in danger of entering a recession and the Bank of Canada warning of potentially more rate hikes to counter persistent inflation, the housing market may face continued pressure in the coming months.
A record number of buyers used floating-rate debt for purchases during Canada’s pandemic-era real estate boom. Those borrowers may come under increasing strain if mortgage costs remain high. Job losses from an economic slowdown also would make it harder for people to keep up with loan payments and stay in their homes.
Superintendent of Financial Institutions Peter Routledge said a review of the country’s mortgage-underwriting rules that starts later this week would look beyond its current main measure — a stress test requiring borrowers to qualify for higher interest rates than what their banks are offering.
“The question in our minds is, is it sufficient?” Routledge said of the current stress test. “So we will look at a broader range of debt-serviceability tools, including debt-to-income constraints, debt-service constraints, as well as the current interest-rate stress test tool.”
The proposed rules—subject to public consultation—include loan-to-income and debt-to-income restrictions, new interest rate affordability stress tests and debt-service coverage restrictions.
Highly Indebted Borrowers
OSFI is particularly concerned about the rise in mortgage originations to households with a loan-to-income ratio of 450% or more, which the Bank of Canada has long asserted is the sector most at risk of delinquency and default. This risk has repeatedly been highlighted in the Bank’s financial risk analysis–the Governing Council’s Financial System Review. The latest report says, “Those with high debt are more vulnerable to a decline in income and will face more financial strain when they renew their mortgages at higher rates.”
This vulnerability relates to households’ ability to continue servicing their debt if incomes decline or interest rates rise without significantly reducing their consumption. The Bank staff estimate that the most highly indebted households have generally seen the smallest increases in liquid assets. At the same time, alongside higher house prices, many households have taken out sizable mortgages to purchase a house, adding to the already large share of highly indebted households.
The chart below shows that the average share of high loan-to-income borrowers before the pandemic was 23.8%. The average since the pandemic onset has risen to 33.7%.
Proposals for Comment
To date, mortgage delinquency rates at federally regulated financial institutions (FRFIs) are at a record low. The large FRFIs have worked closely with borrowers who have reached their trigger points. TD, CIBC, and BMO have allowed some negative amortizations until renewal. As a result, the proportion of their mortgages having remaining amortizations has risen sharply (see second chart below). Questions remain regarding how they will deal with this at renewal time. Will the new mortgage be amortized at 25 years at renewal, raising the monthly payments dramatically and increasing the risk of delinquency or default, especially among highly indebted households?
Earlier last week, CEOs of the Big 5 banks weighed in on vulnerable mortgage clients. None were quite as forthcoming as Scotiabank’s new President and CEO, Scott Thomson, who said the bank has about 20,000 borrowers that it considers “vulnerable.” These are borrowers with a high loan-to-value (LTV) mortgage, a low credit score, lower deposits in their checking accounts and those with home valuations that are susceptible to market conditions.
“So, as you think about the tail risk, we have about 20,000 vulnerable customers, which would be 2.5% [of the total portfolio],” he said Monday during the RBC Capital Markets Canadian Bank CEO Conference.
However, he added this represents a “manageable-type situation for us on mortgages.” Scotiabank’s floating-rate mortgages are not fixed payment. They adjust monthly payments every time the central bank changes the overnight rate.
According to Steve Huebl at Canadian Mortgage Trends, RBC President and CEO Dave McKay said that his bank is “keeping a watchful eye on its mortgage clients, turning to AI and various types of modelling to forecast clients’ cash flow.”
“We look at incomes, we look at the stress of inflation on expenses in a household, and we monitor cash flow to interest payments, as you would in any corporation,” McKay said during the conference. “We do that [for] every single consumer in our portfolio because over 80% of our clients have their core checking and core cash management with us.”
Looking at the bank’s variable-rate mortgage portfolio, which totals between $100 and $120 billion, McKay said the bank has been able to segment that group of clients, keeping tabs on when they reach their trigger rates and when they’ll be coming up for rate resets in the next several years.
Through modelling, the bank can then predict which clients with upcoming renewals “will or will not have a cash flow challenge” should the economy enter a moderate or severe recession, he said. “We have a pretty clear view of that.”
For clients who have difficulties making their payments, mortgage lenders have several options to try and assist borrowers before the situation progresses to the point of them needing to sell their homes.
“You have skip-a-payment deferrals, you have maturity extensions, whatever it happens to be, you have a lot of ways to work with that client,” McKay said.
In terms of clients with cash flow challenges in addition to a collateral problem, where the property sale wouldn’t cover their mortgage and could result in default, McKay said it’s a much smaller group but one the bank is actively monitoring.
“That bucket, I can tell you, is in the low single-digit percentages of our portfolio,” he said. “And that’s the bucket we’re managing”.
Bottom Line
To the extent these measures are implemented, further pressure on mortgage growth is likely. Mortgage brokers can access lenders not impacted by OSFI B-20 rule changes. More than ever, brokers could add value to borrowers turned away from the banks. In these uncertain times, existing and new clients need advice from a trained and caring professional.
Work Visa’s / Non-Canadians Can’t Buy Homes: 2023 New Rules
Prohibition on the Purchase of Residential Property by Non-Canadians Act.
Summary of New Rules, 2023:
Anyone with a work visa will have to have lived here for 3 of the past 4 years and have filed taxes during those years. Here are the RULES!
- Holds a valid work permit as defined in section 2 of the Immigration and Refugee Protection Regulations, or is otherwise authorized to work in Canada in accordance with section 186 of the Regulations;
- Has worked in Canada for a minimum continuous period of 3 years within the past 4 years, where the work meets the definition set out in s. 73(2) of the Regulations; and
- Has filed a Canadian income tax return for a minimum of 3 of the past 4 taxation years preceding the year in which the purchase is made.
Please also find below the Globe and Mail article that ran last week on December 1st.. I copied and pasted the whole article:
Ambiguity about Canada’s ban on foreign home buyers creating hiring headaches for businesses
Canada’s impending ban on foreigners purchasing residential real estate is complicating how businesses hire, promote and transfer immigrant workers because of an information vacuum about the final rules.
The Prohibition on the Purchase of Residential Property by Non-Canadians Act, passed by Parliament earlier this year, will restrict foreigners from buying homes in Canada starting next month. That ban will remain in place for two years – supposedly to curb investor speculation in the housing market.
Although the legislation will come into force on Jan. 1, 2023, the federal government still hasn’t released the final regulations outlining how the prohibition will work. Those details are essential because they will specify which non-Canadians, both individuals and corporations, will be exempt from the ban.
Our legislators, however, seem unaware that 2023 is less than 30 days away. But you can be damn sure the businesses and foreign workers who have to comply with the law are acutely aware of the problem.
“The regulations will be made available soon,” Claudie Chabot, a spokeswoman for the Canada Mortgage and Housing Corporation, wrote in an e-mail. (The national housing agency led the government’s consultation on the law.)
The sooner the better. Businesses and workers are being kept on hold.
The government’s consultation paper proposed that exemptions would only be given to temporary residents who hold a valid work permit and who’ve worked in Canada for a “minimum continuous period of three years within the past four years.” Additionally, those individuals would have to prove they filed Canadian income tax returns for at least three of the four years preceding their property purchase.
That potentially sets a high bar for skilled workers. Is Ottawa really planning to prohibit executives and other talent, who plan to move to Canada with their families, from buying a home until they’ve worked here for three years?
We don’t know because the government still hasn’t finalized the rules. It’s ridiculous.
“If I’m sitting in London, England, and I’m saying, ‘Well, gee, do I want to go to Canada? Do I really want to go through all of this aggravation?’ ” said Stephen Cryne, president and CEO of the Canadian Employee Relocation Council.
Known as CERC, the non-profit organization advocates for increased labour force mobility on behalf of companies in sectors including financial services, technology, natural resources and telecommunications.
As Mr. Cryne points out, top executives who work for companies such as banks, energy companies and manufacturers have plenty of choices about where they and their families choose to live in the world.
“I was speaking with one of our members,” he recounted. “They’re looking at bringing in several executives and their families from South Africa, and [because of the uncertainty around the new rules], they’re second-guessing saying, ‘We’re not sure.’ ”
That’s hardly a vote of confidence in Canada.
CERC is asking the federal government for a blanket exemption for any foreign national with a valid work permit who is living and residing in Canada. It’s a reasonable ask.
“Given Canada’s critical skills shortages, these requirements will place Canada in an uncompetitive position when compared to other countries where such restrictions on the purchase of residential property by foreign nationals may not exist,” CERC told the government in a submission.
The proposed rules are also creating headaches for U.S. relocation management companies that handle employee moves on behalf of Canadian corporations. Some of these American companies will purchase and resell an executive’s home to speed up a move. But as non-Canadians, they could be banned from conducting such property transactions for two years – further complicating the process of relocating employees.
Not only are businesses’ hiring and relocation plans getting gummed up, the regulatory uncertainty about the forthcoming ban also risks chasing away foreign direct investment. Our immigration backlog is already a frustration for foreign companies that want to hire more employees and expand their operations in Canada.
Worst of all, it’s not clear that a ban targeting foreign home buyers will actually prevent speculation in the real-estate market.
After all, non-residents only owned 3.1 per cent of residential property in British Columbia in 2020, according to Statistics Canada. In Ontario, that figure is only 2.2 per cent.
So why is the Liberal government pointing a finger at foreign buyers for pricing Canadians out of the housing market?
This is the problem with populist policies. They might make for good politics, but they often have undesirable consequences for businesses and consumers.
The government needs to clear up the confusion about its foreign-home-buyer ban – and fast.
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Canadian Residential Mortgage Market: Inflation & Interest Rates: the Lead Characters for 2023
Summary:
- The Bank of Canada (BOC) increased interest rates 7 times in 2022. Exactly as expected 16 months ago.
- Inflation is at least 5.7%; and it needs to get down to 3%
- The BoC would rather over-tighten than under-tighten
- Normally it takes 18 to 24 months for interest rate increases to work their way into the economy and we are only about 10 months into this tightening cycle
These 4 painful data points mean Prime will increase from 6.45% to 6.70% on Jan 25th.
We now expect there to be at least 1 or 2 more o.25% increases to Prime before it is expected to hold for the rest of 2023, and then begin to decrease in 2024.
Mortgage Mark Herman, Top Calgary Alberta Mortgage Broker
DATA
A lot of the recent talk in financial and real estate circles has been centering on the possibility of a pause in the Bank of Canada’s aggressive interest rate increases. Some speculate that could happen at the next rate setting, later this month, on January 25th.
The Bank raised rates 7 times last year in an effort to rein-in galloping inflation. It does seem to be working, but there are some stubborn sticking points.
Headline inflation, known as the Consumer Price Index (CPI), has dropped. It was 8.1% in July and drifted down to 6.8% in November. However, the drop from October to November was a mere one-tenth of one percentage point and the Bank’s target rate remains significantly below that, at 2.0%.
As well, the BoC’s preferred inflation measure, Core Inflation (which strips out volatile components like food and fuel), actually increased. A simple averaging of the three components that the Bank uses to measure Core Inflation came in at nearly 5.7% in November, up from 5.3% in October.
Other factors that figure into the Bank’s plans include Gross Domestic Product and unemployment. Canada’s GDP continues to grow, albeit modestly, despite rising interest rates. It increased by 0.1%, month-over-month in November. Unemployment dipped 0.1% to 5.0% in December. Both of these tend to fuel higher wages which are a key driver of inflation.
The Bank of Canada, itself, remains firmly dedicated to battling back inflation. Governor Tiff Macklem has said he would rather over-tighten than under-tighten and run the risk of having high inflation linger and become entrenched.
The U.S. central bank has made it clear it plans more rate hikes. Given the integration of the Canadian and American economies, the Bank of Canada does have to pay attention to what its American counterpart does.
The BoC will have new economic data by the time it makes its January 25th announcement. The December numbers will provide a fresh look at how well the inflation fight is going.
Normally it takes 18 to 24 months for interest rate increases to work their way into the economy and we are only about 10 months into this tightening cycle. It is reasonable to expect another 25 basis-point increase on the 25th. Given the Bank’s apparent success so far it also seems reasonable to expect a pause sometime after that.
Looking ahead to a year from now some forecasters say we might start to hear talk of interest rate cuts, which would be welcome news. Cuts would allow the BoC to move toward its, long stated, goal of normalizing rates back into the neutral range of 2.5% to 3.5%. The Bank of Canada, and central banks around the world, have been trying to do that for more than a decade – since the ’08 – ’09 financial collapse.