Today brought a mix of economic data and updates that could shape the future of mortgage rates in Canada. Let’s dive into how these developments, alongside some new government mortgage rule changes, may impact your financial plans.

Good News: Inflation in Canada is Cooling

Canada’s inflation rate dropped to 2.0% in August, the lowest level we’ve seen since February 2021, beating market expectations. With inflation stabilizing, this news sets the stage for potential rate cuts from the Bank of Canada. To give some perspective, pre-pandemic inflation was higher, yet the prime rate stood at 3.95%. This improvement could signal relief for mortgage holders as interest rates may decrease further in the near future.

US Retail Sales Beat Expectations

Meanwhile, U.S. retail sales rose by 0.1% in August—small but above expectations. Given that consumer spending drives nearly 70% of the U.S. economy, this stronger-than-expected data could influence the Federal Reserve’s interest rate decision. While the market had anticipated a 50 bps rate cut, this news might push the Fed towards a more conservative 25 bps cut. Any Fed rate cuts could positively impact Canadian bond yields, making mortgage rates more affordable in Canada.

New Mortgage Rules: Greater Flexibility for First-Time Buyers

In addition to economic factors, the Trudeau government has introduced some significant mortgage rule changes that could improve housing affordability, particularly for first-time buyers:

• 30-year mortgages: Starting in December 2024, first-time buyers will be able to secure 30-year mortgages for newly built homes, extending amortization periods and lowering monthly payments.
• Higher home price cap: Mortgage default insurance will now be available for homes worth up to $1.5 million, a jump from the previous cap of $1 million. This change will enable buyers with less than 20% down payments to bid on more expensive properties.

These changes are expected to increase homebuying opportunities for first-time buyers and help new homebuilders, potentially easing affordability challenges in major cities.

Housing Starts Down in Canada

On the housing front, Canadian housing starts fell sharply in August to 217.4K, down from 279.8K in July. This decline in new builds could signal fewer homes entering the market, potentially slowing down housing inventory growth. However, lower housing starts might also help stabilize home prices in the coming months, which is good news for buyers waiting for the right time to enter the market.

Bond Yield Update

Canadian and U.S. bond yields—a key indicator for fixed-rate mortgages—are trending lower. The 5-year Canadian government bond yield is down to 2.677%, and the U.S. 10-year Treasury yield is sitting at 3.633%. If these bond yields continue to decrease, we could see fixed mortgage rates drop, offering homeowners more favorable refinancing opportunities.

Bottom Line

Between Canada’s cooling inflation, evolving mortgage rules, and shifting economic data, homeowners and buyers are navigating a complex but potentially positive landscape. The new mortgage rules will make it easier for first-time buyers to enter the market, while the potential for further rate cuts might reduce monthly mortgage payments for many Canadians. Stay tuned as these changes unfold and keep an eye on the Bank of Canada’s next moves!

As anticipation builds for the Bank of Canada’s upcoming rate decision, many are speculating whether we will see a cut in the overnight rate. Given the current economic conditions and market signals, I believe there will be a 0.25% rate cut. Here’s why.

Understanding the Current Economic Landscape

The Bank of Canada (BoC) uses the overnight rate as a primary tool to manage monetary policy. Changes to this rate influence borrowing costs across the economy, impacting everything from consumer loans to mortgages. The decision to cut rates often reflects the central bank’s efforts to stimulate economic growth, combat inflation, or address other macroeconomic challenges.

Several factors suggest a rate cut might be on the horizon:

1. Economic Slowdown:
   • Recent economic indicators have shown signs of slowing growth. Leading economic indicators have been weaker than expected, and key sectors such as manufacturing and retail have faced headwinds. A rate cut could provide the necessary stimulus to boost economic activity.
2. Inflation Targets:
   • The BoC aims to maintain inflation within a target of 2%%. With inflation currently trending lower , a rate cut could help keep inflation trending towards the 2% target without causing a recession.
3. Global Economic Conditions:
   • The global economic environment plays a significant role in the BoC’s decision-making process. With ongoing uncertainties, including trade tensions and geopolitical risks, other central banks have adopted more accommodative policies. A rate cut by the BoC would align with this global trend and help maintain Canada’s competitive position.
4. Labour Market Concerns:
   • While unemployment rates remain relatively low, there have been signs of weakening in the labour market, with slower job growth and wage increases. Lowering the overnight rate could help support job creation and wage growth by making borrowing more affordable for businesses.

Potential Impact of a 0.25% Rate Cut

If the BoC announces a 0.25% rate cut, the gradual effects will be felt across various sectors of the economy:

1. Lower Borrowing Costs:
   • For consumers, a rate cut means lower interest rates on loans and mortgages. This can reduce monthly payments, increase disposable income, and boost consumer spending.
2. Business Investment:
   • Lower borrowing costs can also encourage businesses to invest in expansion and new projects, driving economic growth and job creation.
3. Housing Market:
   • The housing market could see increased activity as lower mortgage rates make home buying more affordable. This could be particularly beneficial for first-time homebuyers.  A lower qualifying rate will strengthen their purchasing power.

Why We Believe a Rate Cut is Likely

Given the current economic challenges and the need for stimulus, a 0.25% rate cut appears to be a prudent move by the BoC. The central bank has historically taken preemptive measures to support the economy, and the present conditions warrant such an approach. By lowering the overnight rate, the BoC can provide a much-needed boost to economic growth, support inflation targets, and maintain stability in the financial system.

As we await the Bank of Canada’s decision, the potential for a 0.25% rate cut seems both likely and beneficial given the current economic landscape. A rate cut could help mitigate the risks of a prolonged economic slowdown, support inflation targets, and stimulate growth across various sectors. While the final decision rests with the central bank, the indicators point towards a move that could have far-reaching positive effects for the Canadian economy. Stay tuned for tomorrow’s announcement, which could mark a pivotal moment for Canada’s economic outlook.

For any Mortgage Questions please contact us!

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In recent months, many Canadians have been bracing for significantly higher mortgage renewal rates. With rates climbing 2-3% higher than what they were a few years ago, this can translate into hundreds of dollars added to your monthly mortgage payments. Understandably, this prospect can be daunting. However, there’s good news: you don’t have to feel trapped by these higher rates. Refinancing your mortgage might be the solution you need to manage your financial situation more effectively. Let’s explore how refinancing can help you not only tackle higher renewal rates but also consolidate your debts into one manageable payment.

Understanding the Impact of Higher Renewal Rates

When your mortgage comes up for renewal, the interest rate can significantly affect your monthly payments. For example, if your previous rate was 3% and your renewal rate is now 5%, this 2% increase can add a considerable amount to your monthly expenses. For many households, this increase can strain their budgets, making it more challenging to meet other financial obligations.

Why Refinancing Could Be the Answer

Refinancing your mortgage means replacing your current mortgage with a new one, often with a different lender and potentially better terms. Here are some ways refinancing can alleviate the pressure of higher renewal rates:

1. Lower Interest Rates:
   • While renewal rates may have increased, refinancing could allow you to lock in a lower rate, especially if you shop around and find a lender offering better terms. Even a slightly lower rate can make a significant difference in your monthly payments.
2. Consolidate Debts:
   • If you have other consumer debts, such as credit card balances or personal loans, refinancing allows you to consolidate these debts into your mortgage. By doing this, you can take advantage of the typically lower interest rates of mortgages compared to other types of debt.
3. Reduce Monthly Payments And Improve Cash Flow:
   • By extending the term of your mortgage or securing a lower interest rate through refinancing, you can reduce your overall monthly payments. This can provide some much-needed breathing room in your budget and help you manage your finances more comfortably.

Steps to Refinancing Your Mortgage

1. Assess Your Financial Situation:
   • Before jumping into refinancing, take a close look at your current financial situation. Consider your income, expenses, and any other debts you may have. This will help you understand how much you can afford and what kind of terms to look for in a new mortgage.  You can get a copy of our Mainstream Mortgages Household Budget Worksheet.
2. Consult Dominion Lending Centres Mainstream Mortgages:
   • A mortgage broker can provide valuable insights and help you navigate the refinancing process. They have access to multiple lenders and can help you find the best rates and terms available.
3. Prepare Your Documentation:
   • Gather all necessary documents, such as proof of income, current mortgage details, and information about any other debts you have. Having these documents ready will streamline the refinancing process.  Our online application and document collection process is a dream.
4.  We Will Discuss Your Mortgage Options With You

Facing higher mortgage renewal rates can be stressful, but refinancing offers a way to regain control over your finances. By potentially lowering your interest rate, consolidating your debts, and reducing your monthly payments, refinancing can provide a path to financial stability. If you’re feeling overwhelmed by the prospect of higher payments, consider exploring your refinancing options and consult with a mortgage professional to find the best solution for your situation.

Remember, you don’t have to navigate these challenging times alone—help is available, and refinancing might be just what you need to ease your financial burden.

Contact us today!

When it comes to securing a mortgage, understanding every detail of your loan agreement is crucial. One important yet often overlooked component is the all-indebtedness clause. This clause can significantly impact your financial obligations and, if not understood properly, may lead to unforeseen complications. In this blog post, we’ll delve into what an all-indebtedness clause is and why you should be particularly diligent about it.

What is an All-Indebtedness Clause?

An all-indebtedness clause, also known as a cross-collateralization clause, is a provision in a mortgage agreement that stipulates that the property you are mortgaging is collateral not just for the specific loan you’re taking out, but for any debts you owe to the lender. This can include other loans, lines of credit, credit card debts, and even the overdraft protection you may have with the same financial institution.

How Does It Work?

When you sign a mortgage with an all-indebtedness clause, you essentially agree that the lender has the right to claim your mortgaged property as collateral for any of your debts with them. s.

Why Should You Be Extra Diligent?

1. Increased Risk of Foreclosure:
   • Even if you are diligently paying your mortgage, falling behind on other debts with the same lender can put your home at risk. This clause gives the lender the right to initiate foreclosure proceedings based on other unpaid debts.
2. Restricting your sale and purchasing options:
   • When you sell your home with an all-indebtedness clause, you may be surprised to find out that when you sell your home, your current lender will demand payment for all the debt you currently have with them.  Your car loan, your line of credit, and your credit cards.  This could seriously affect your pre-approval and may cause you to be declined by other lenders.
3. Impact on Refinancing Options:
   • If you decide to refinance your mortgage, the all-indebtedness clause can complicate the process.  If looking for a new lender, you may not have enough equity to pay and leave your current lender.
4. Transparency and Disclosure:
   • Lenders may not always clearly disclose the presence of an all-indebtedness clause. As a borrower, it’s essential to thoroughly review your mortgage documents and ask direct questions to ensure you fully understand the terms.

Tips for Homebuyers

1. Review Your Mortgage Documents Thoroughly:
   • Take the time to read through your mortgage agreement in detail. Look specifically for any mention of an all-indebtedness clause or similar terms.
2. Ask Questions:
   • Don’t hesitate to ask your lender or mortgage broker to explain any clauses you don’t understand. Clarify how the all-indebtedness clause could affect your financial situation.
3. Consider Alternative Lenders:
   • If an all-indebtedness clause seems too risky, consider looking for mortgage options with different lenders who may not include such clauses in their agreements.
4. Consult a Legal Advisor:
   • If you’re unsure about the implications of an all-indebtedness clause, consulting with a legal advisor can provide clarity and help you make an informed decision.

What Are The Pros & Cons?

This can be both a bad thing and a tool for some clients to use to their advantage.

Pros:
1. The lender will register a higher amount on the land title to allow you for future borrowing.  Please keep in mind standard qualification policies would still apply.
2. Loans and Lines of credit are usually at a lower rate.
3. Qualifying for loans, lines of credit and credit cards will be easier.

Cons:
1. This will limit your ability to shop for better rates at different lenders when refinancing.
2. Transferring the mortgage to a different lender will likely not be possible.
3. This clause is usually not explained very well at the time of mortgage signing and often the rate is slightly better than other lenders.
4. This clause would not be suitable for clients with shorter-term goals.
5.  Many of the lenders who have this clause are smaller and provincially regulated lenders, which usually means if you move out of the province all of the debt with the current lender will either need to be paid out or restructured which will cost you more money.

An all-indebtedness clause in a mortgage can have significant implications for your financial health and security. By understanding what this clause entails and why it’s important to be diligent, you can make more informed decisions and protect your investment. Always ensure you fully understand your mortgage agreement and seek professional advice if needed to navigate the complexities of mortgage terms and conditions.

We are here to answer all of your questions!

Thank you to Bruno Valko from RMG for his excellent analysis, as always! 🙂

Great news for the Canadian economy! Recent inflation data shows promising trends, positioning the Bank of Canada comfortably for a potential rate reduction on July 24th. Let’s dive into the details and see what this means for bond yields and the housing market.

Canadian Inflation Trends

Canadian inflation came in at 2.7%, down from 2.9%, with a Month-over-Month change of -0.1%. This is encouraging news and suggests that the Bank of Canada might consider another rate reduction at their next meeting. The 2.7% inflation rate was below market expectations, which had predicted it would remain at 2.9%. This surprise has led to a drop in bond yields this morning.

Key Data Points:

• Year-over-Year Inflation: 2.7% (down from 2.9%)
• Month-over-Month Inflation: -0.1% (previously 0.6%)

This data aligns with the Bank of Canada’s forecasts that CPI inflation would remain near the 3% mark for the first half of the year and resume the deflationary trend in Canadian consumer prices.

Impact on Bond Yields

The 5-Year Government of Canada bond yield is down 6.7 basis points early this morning (8:33 am EST) in response to the inflation news. Lower bond yields are a positive sign for borrowers, as they often lead to lower mortgage rates.

• Canada 5-Year Bond Yield: 3.302% (-0.067)

Housing Starts: Where Are the New Homes?

Despite the positive inflation news, housing starts in Canada have fallen below market expectations and previous levels. This raises concerns about the availability of new homes that were promised.

Housing Starts Data:

• Housing Starts for June 2024: 241.7K (previously 264.9K, consensus 260K)
• Monthly SAAR of Total Urban Housing Starts: Decreased by 9% to 223,234 units
• Multi-Unit Urban Starts: Decreased by 12% to 180,205 units
• Single-Detached Urban Starts: Increased by 2% to 43,029 units
• Rural Starts Monthly SAAR Estimate: 18,438 units

Among the most populated provinces, Ontario and British Columbia saw the largest declines in housing starts, while the Prairies experienced the most significant increase.

The easing of inflation to 2.7% and the drop in bond yields are encouraging signs for the Canadian economy. However, the decline in housing starts highlights ongoing challenges in the housing market. It’s crucial to stay informed and watch these trends, especially as the Bank of Canada’s July 24th announcement approaches.

Special thanks to Bruno Valko from RMG Mortgages for providing the valuable information that helped shape this analysis.

Contact us today for your next mortgage!

As mentioned, Fixed-rate mortgage rates in Canada are directly tied to the US Economy and their  10-year treasuries.

Recent economic data has shown a mixed picture of the Canadian economy. Inflation rates have been a primary concern, prompting the Bank of Canada to adjust its monetary policies. The central bank has implemented several interest rate hikes in response to rising inflation over the past years. These moves are aimed at cooling down the economy and bringing inflation back to its target range of 2%

The Bank of Canada has already reduced the rate once this year, and there is a good chance that on July 24, 2024 that there could be another.

This week the US is a frenzy of information:

1.  Inflation is down both YoY and Core
2. Jobless claims came in below expectation
3. US Fed Chair J. Powell has hinted/foreshadowed an interest cut.
4.  All eyes are on the US presidential election.  Is Joe Biden up for another term?  Is Project 2025 going to tank Republican support?

In Canada, the news is less promising.  We lost over 1000 jobs in June, the Toronto real estate market is mired in a slow period and news about allegations of fraud.

What does this all mean for your mortgage?  We believe that many people should review their options and try to buy as much time as possible before renewal.  Renewing into shorter-term mortgages is a strategy, however, it’s very difficult to make up the premiums that will be paid over 1yr, 2yr, and 3yr.   Variable rates and open mortgage rates are VERY HIGH.

The best thing to do is to call us today and let’s make a plan together.

When you receive your mortgage renewal agreement from your lender, stop! Before you sign anything, it’s crucial to get a second opinion from us at Mainstream Mortgages. Transferring your mortgage has never been easier, and it could save you a significant amount of money.

The Myth of the Best Rate from Your Financial Institution

Many Canadians assume their financial institution will offer them the best rate upon renewal. However, this is rarely the case. Almost 70% of borrowers simply sign and return the first mortgage renewal offer they receive from their lender without seeking a better deal.

It’s important to remember: NEVER, EVER accept the first mortgage renewal offer.

Your Current Financial Institution

Financial institutions, especially large banks, often send renewal offers that are 0.25% to 1.25% higher than the best rates available in the market. They count on the convenience of online renewals and the tendency of customers to avoid negotiation. By simply accepting the offered rate, homeowners end up paying thousands of dollars in unnecessary interest and reducing the amount paid towards the mortgage principal.

The Importance of Shopping Around

It’s wise to start shopping for a new mortgage term between four and seven months before your current term expires. At Mainstream Mortgages, we begin reminding our clients 210 days before their mortgage renewal date. This proactive approach is especially beneficial in a rising interest rate environment, where early renewal can save you from higher rates.

In contrast, during periods of falling interest rates, financial institutions might send renewal offers up to six months in advance, hoping to lock you into a higher rate before rates drop further. This tactic limits your time to find a better deal with another lender. Therefore, it’s essential to track your mortgage term timeframe and start exploring your options early.

Before you hear from your lender about renewing your mortgage, let Peter, Derek, and Colten at Mainstream Mortgages shop around for you. You’ll be amazed at the savings they can secure on your behalf.

Potential Savings: Thousands of Dollars

Your mortgage is one of your largest expenses, and the Mainstream Mortgage Team can help you save thousands of dollars in interest. Securing the best interest rates and terms is critical to minimizing your costs over the life of your mortgage. Don’t be part of the 70% who simply sign and return their renewal offer. Reach out to the Mainstream Mortgage Team instead.

What We Do

When we handle a mortgage renewal, we refer to it as either a switch or a transfer. It’s important to note that this involves a full mortgage application process that must be underwritten by the new lender. Fortunately, in almost all cases, the new lender covers the associated fees (legal, transfer, discharge, etc.). Additionally, if your existing lender charges a penalty or other fee, we can include up to $3,000 of these costs in the new mortgage.

P.S. If your current financial institution offers a better deal, we will be the first to let you know.

House hunting can be both an exciting and daunting experience for first-time homebuyers. Two key steps that can significantly enhance this journey are attending open houses and getting pre-approved for a mortgage. In this post, we’ll delve into the benefits of each and how they can set you on the path to finding your dream home.

The Benefits of Attending Open Houses

Open houses provide a unique opportunity to experience properties firsthand. Photos and descriptions online can only tell you so much. By visiting an open house, you can get a real sense of the space, layout, and overall feel of the home. This is invaluable when making such a significant decision.

Additionally, open houses allow you to assess the neighborhood. You can take note of the surrounding area, check out local amenities, and even chat with potential future neighbors. This can give you a better idea of whether the location suits your lifestyle.

Attending open houses also helps you get a feel for the current market. You can compare different properties, see what’s available within your budget, and understand the value of different features and upgrades. This knowledge can be crucial when you’re ready to make an offer.

Engaging with real estate agents at open houses can also be beneficial. They can provide additional insights about the property, the local market, and the buying process. Building relationships with agents can be helpful as you continue your search.

The Importance of Getting Pre-Approved for a Mortgage

Getting pre-approved for a mortgage is a critical step in the home buying process. First, it helps you understand your budget. A pre-approval gives you a clear picture of how much you can afford to borrow, which narrows down your search to homes within your price range.

Pre-approval also demonstrates to sellers that you are a serious buyer. In a competitive market, having a pre-approval letter can make your offer more attractive compared to those from buyers who have not taken this step.

Additionally, being pre-approved can speed up the buying process. Once you find a home you love, you’ll be ready to move forward quickly, reducing the risk of losing out to another buyer.

Finally, pre-approval can help you avoid disappointment. By knowing what you can afford upfront, you won’t waste time looking at homes that are out of your budget. This focus can make the home buying process more efficient and enjoyable.

Combining Open House Visits with Pre-Approval

Combining open house visits with mortgage pre-approval can streamline your house hunting process. With pre-approval, you can attend open houses with confidence, knowing exactly what you can afford. This allows you to make informed decisions on the spot if you find a property you love.

Being pre-approved also strengthens your negotiating position. Sellers are more likely to take your offer seriously, knowing that you have the financial backing to close the deal.

Conclusion

In summary, attending open houses and getting pre-approved for a mortgage are two essential steps that can greatly enhance your home buying journey. By experiencing properties firsthand and understanding your budget, you can make more informed decisions and find the perfect home for your needs. Start your journey today and take the first steps towards homeownership with confidence.