Calgary Housing Affordabilty IMPROVES!
This short version of the article should provide some confidence that the sky is not falling in Calgary and we will recover.
Mortgage Mark Herman, Best Calgary mortgage broker for home purchases and mortgage renewals
Housing affordability continues to improve in Calgary market
Owning a home in Calgary at market price remains more affordable than it has been on average since the middle of the 1980s, says a new report released Monday by RBC Economics Research.
But the latest Housing Trends and Affordability Report said movements in oil prices are likely to exert a stronger influence on the market direction in the short term.
“Alberta’s housing market is still feeling the impact from the oil price shock,” said Craig Wright, senior vice-president and chief economist, RBC. “That said, the dust began to settle this spring, and we saw a gradual recovery in confidence, which helped rebalance demand-supply conditions. Home re-sales started to turn around, and sellers no longer rushed to list their properties.”
The RBC Housing Affordability measures, which capture the proportion of pre-tax household income needed to service the costs of owning a home at market values, fell slightly in Calgary for both two-storey homes, to 31.9 per cent, and bungalows to 32.4 per cent. The measure for condos stayed relatively the same 19.5 per cent.
RBC’s Housing Affordability measure for the benchmark detached bungalow in Canada’s largest cities was: Vancouver 88.6 (up 3.0 percentage points); Toronto 59.4 (up 2.1 percentage points); Montreal 36.0 (down 1.2 percentage points); Ottawa 35.4 (unchanged); Calgary 32.4 (down 0.4 percentage points); Edmonton 32.5 (down 0.4 percentage points).
“With home resales beginning to turn around and sellers no longer rushing to list their properties in the spring, there was evidence that confidence slowly returned to the Alberta market in the second quarter following the hard blow delivered by the oil price plunge in the previous two quarters,” said the report.
Payout penalties – how the Big-5 banks get you
Below is a great example of how the Big-5 banks get you on a mortgage payout.
Always talk to a broker about your mortgage because Grandma used to say, “the rate is the rate, but the details are the details!”
Mark Herman
Top Alberta mortgage broker for home purchases and mortgage renewals
As you can see from the example below, the banks “discount rate recapture policy” can result in some pretty hefty added costs —$6,048 in the scenario here!
Example:
On July 31, 2011, you buy your first home and sign a five-year, fixed-term mortgage. As your family grows, you start looking at a bigger home, and after a few months of searching, you find the perfect one—on August 1, 2013.
Because of this unexpected upgrade, you now have to break your mortgage three years before it matures (you have $320,000 left on your mortgage). When you signed your current mortgage, you weren’t concerned about prepayment penalties, but as you can see below, prepayment penalties can have a significant financial impact on your bottom line.
| Your situation | |
|---|---|
| Mortgage date | July 21, 2011 |
| Date you break your mortgage | August 1, 2013 |
| How much you have left owing on your mortgage | $320, 000 |
| Your original mortgage term | 5 years |
| How many years left you have on your term | 3 years |
| Comparison | ||
|---|---|---|
| Mortgage breakage fee at the Big-5 banks | Mortgage breakage fee with Broker Banks |
|
| 5-year posted rate when you got your mortgage | 5.39% | Not applicable for the IRD calculation |
| Your actual contract rate | 4.00% | 4.00% |
| Discount | 1.39% | N/A |
| 3-year posted rate on August 1, 2013 (the day you break your mortgage) | 3.75% | 2.99% |
| IRD formula | (Contract rate – [Posted rate for remaining term – Discount from original mortgage]) x Principal outstanding x Remaining term | (Contract rate – Posted rate for remaining term) x Principal outstanding x Remaining term |
| IRD payment | $15,744 | $9,696 |
| Difference in fees | $6,048 | |
For a free mortgage check-up, or pre-approval, or compare what we can do vs. your bank, call Mark at 403-681-4376
• There is no cost to you for our services as the banks pay us for doing their work,
• You get our professional, un-biased advice & expertise on your mortgage,
• We answer our phones and emails, 7 days a week, from 9 – 9, including holidays,
• Your rate will be lower with us as we deal through “broker services” at the banks.
Why today’s bank rate cut is not a big deal for mortgages
Below is a great summary of why this rate cut is not a big deal mortgage wise.
All the banks kept their rates the same but for TD that lowered their Prime rate by 0.10% only. No other banks have followed yet and are not expected to. As you can see the banks will keep that rate cut to boost their profits … because they love money; specifically, your money, not you.
Variables went down only by 0.1% … and fixed rates all stayed the same … at their 115 year all-time lows. Looks like mortgage interest rates are as low as they can go.
Mark Herman, top Calgary Alberta mortgage broker for home purchases and mortgage renewals.
Why the Bank of Canada’s interest rate cut won’t help us.
After seven years of interest rate cuts, this economic lever is a spent force. The law of diminishing returns means each new cut has less and less impact.
The Bank of Canada decision Wednesday to cut its key lending rate for the second time this year to 0.50 per cent …
The impetus behind the cut wasn’t really about getting you to borrow more or ease your borrowing burden. It was about widening the gap between our interest rates and those in the U.S. to push our dollar down.
“Canada’s economy is undergoing a significant and complex adjustment,” the bank said in its rate decision, noting there was a modest recession in the first half of the year as the economy contracted.
Our dollar started the day down a third of a cent to 78 cents, a level not seen in 10 years. That’s going to make snowbirds unhappy, but the central bank is more interested in fuelling exports to our larger trading partner.
Can the Bank of Canada really save the day? Rates are already so low, we’re at the point of diminishing returns. Each new cut is greater in percentage terms than the last, but the real impact is smaller and smaller.
Here are four reasons this cut isn’t likely to make much difference:
1. Not much relief
If interest rates are at 15 per cent – not far off what I was paying for my first mortgage – and fall to 10 per cent, that’s a 33 per cent decline and puts a huge amount of money in your pocket.
If the rate is 0.75 per cent and falls to 0.50, it’s the same 33 per cent drop, but the saving is negligible. By the time it filters down through the banking system to your line of credit, the difference may add up to a Big Mac meal.
Wednesday’s move by the central bank means the banks will likely lower consumer borrowing costs a little. The betting is that they’ll give us 10 basis points and they’ll keep the other 15. TD Bank was first off the mark, doing just that.
So, suppose you’re a good bank customer. Your $100,000 secured line of credit is at prime, plus half a point, or 3.35 per cent (2.85 plus .50). You’re making an interest-only payment each month which comes to $279 a month.
The bank passes on 10 basis points. Your new combined rate is 3.25 per cent, or $271 a month. Spend that $8 wisely.
2. Indifferent businesses
Businesses who need money to invest are already borrowing. This rate cut won’t make a difference to their plans…
3. Indifferent consumers
… many consumers see the low rates as normal. He’s right, in that anybody 45 or younger has only lived in an environment of falling interest rates. So 10 basis points off is just more of the same and unlikely to generate much interest….
4. Drooping dollar
Economist have noted that the January rate cut did send the dollar lower, but did little to accelerate growth, even as the loonie fell from 87 cents to about 82 cents and now 78 cents..
http://www.thestar.com/business/personal_finance/2015/07/15/4-reasons-the-bank-of-canadas-interest-rate-cut-wont-help-us-mayers.html
Divorce and Mortgages
We do lots of mortgages for divorces – because they are complicated. Both people want to buy after or one buys out the other. BUT, you have to set the seperation agreement up correctly so this can happen.
Banks mess this up EVEY time as the math is complicated and people at banks are not licenced mortgage brokers 99% of the time.
Why not use the #1 mortgge brokerage in all of Canada for 2 years in a row to ensure your seperateion agreement is set up to work for both of you?
Mark Herman, Calgary Alberta mortgage broker and divorce mortgage specialist.
Below are some interesting numbers for Divorces:
If the Calgary- Red Deer – Edmonton Corridor was an actual country it would have:
- a growth rate only 2nd to China – in all the world and
- the highest divorce rate in all the world.
Other Key Findings
•Annual average of divorces in Canada: 71,000
•Marriages that won’t reach their 50th anniversary: 43%
Divorce Rates around the World
Sweden 55%
US, Australia 46%
United Kingdom 43%
Canada 40%
Israel 26%
Switzerland 25%
Greece 18%
Singapore, Poland 17%
Spain 15%
Italy 12%
Marriage rate in Newfoundland and Labrador 54.3% (highest in Canada)
Marriage rate in Quebec 37.5% (lowest in Canada)
Month with the highest Separation applications? January
Mortgage Rules for Divorces, updated for MArch, 2015:
In situations where two parties are on title to a property in the process of a legal separation where one party will keep the existing property, the following guidelines will now apply:
•Applications may be submitted as a purchase loan up to 95% LTV – or 5% down
•Both parties must be on title to the property prior to the legal separation
•Since this purchase transaction is non-arms length, a full internal appraisal is required
•The following documents confirming the sale price and transfer of title must be on file:
- Finalized separation agreement
- Offer to purchase
Calgary – 5th BEST place to live in the world! – the Economist
This is why Calgary housing prices are supported by about 20,000 new arrivals a year. The in-migration will continue for a while yet … and that will support housing prices.
Three Canadian cities — Vancouver, Toronto and Calgary — have been named as some of the best places to live in the world, according to a report by The Economist.
In the annual poll ranked Vancouver as 3rd most livable city in the world; followed by Toronto at No. 4, and Calgary tied for fifth place with Adelaide, Australia.
… The Economist ranks the cities on 30 factors across various categories, including stability, health care, culture, environment, education and infrastructure.
the article is here: http://www.thestar.com/business/2014/08/19/melbourne_wins_tops_most_liveable_city_ranking_three_canadian_cities_in_top_10_list.html
YYC & YEG set to lead ALL of Canada for growth
Calgary and Edmonton and all of Alberta continue to grow = housing price support, which is pretty much the theme to 50% of the data I post. Alberta is the only province that is continually growing and we would be competing with China’s growth rate if Alberta were a country.
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Edmonton housing market overtakes Calgary in investment ranking
Both cities poised to lead Canadian economic growth
CALGARY — Edmonton has overtaken Calgary as the top community in Alberta to invest in residential real estate.
The ranking was done by the Real Estate Invesment Network and released Saturday. Edmonton was second behind Calgary on last year’s list.
“Before the flood hit, Calgary’s real estate market was performing right in tune to the underlying economic fundamentals. Not too hot, not too cold,” said Don Campbell, senior analyst of the REIN Research Institute. “After the floods hit, the rental as well as the housing markets over-performed the underlying fundamentals and have pushed it into the too hot level, but this situation should not last longer than 12 months. We continue to experience zero vacancy rates, strong in-migration, one of the strongest job creation economies in the country. So slowdown of the effect of the post-flood transaction bump will not be felt negatively in the market due to the pent-up demand. Good news overall for Calgary’s market for the coming years.
“Calgary did not, in essence, lose its No. 1 ranking. It is still one of the top places in North America for property investment. However, Edmonton grabbed the No. 1 ranking because it is behind Calgary in its residential and industrial recovery curve. This means that Edmonton’s market, beginning at a lower position in the real estate cycle, should slightly outperform the returns a homeowner or investors will experience in Calgary, which is already 12 to 18 months ahead on the cycle.”
Campbell said both cities are poised to be economic leaders in Canada in 2014 and 2015 and therefore the forecast for in-migration and housing demand remains very strong.
The ranking for other Alberta communities are: 3. Airdrie; 4. Leduc; 5. St. Albert; 6. Red Deer; 7. Fort Saskatchewan; 8. Fort McMurray; 9. Grande Prairie; 10. Lloydminster; 11. Okotoks; and 12. Lethbridge.