We have a few things to share with you this week. First, and no great surprise, the Bank of Canada left their overnight rate unchanged at 0.50% as Canada’s economy continues to operate with excess capacity. Recent changes by the government to stabilize our housing market will temper residential investment and our broader economy. This will help keep inflation low and bodes well for continued low interest rates in the foreseeable future. After trending higher in the last few months, bond yields have stabilized with mortgage interest rates now hovering in the 2.24% – 2.94% range OAC.
South of the border the US Federal Reserve signalled they may raise their overnight rate March 15th. Most analysts (77%) are expecting an increase unless last minute data from non-farm payrolls and average hourly wages fall dramatically this week. This should drive the US Dollar higher and help Canada’s exports as long as trade negotiations with the Trump administration don’t cause a disruption. This uncertainty remains a risk to our economy.
As you might have heard, The BC Government recently announced they are raising the Property Transfer Tax Exemption threshold for first time buyers to $500,000 from $475,000. The exemption now pro-rates to zero for property values between $500,000 and $525,000. We give kudos to the province for introducing this measure to improve affordability.
Meanwhile the federal government continues to make changes to slow housing growth, increase capital reserves and reduce taxpayer risk. CHMC and the other default insurers are increasing high ratio mortgage insurance premiums on March 17th as shown:
Standard Premium (Current)
Standard Premium (March 17, 2017)
Up to and including 65%
Up to and including 75%
Up to and including 80%
Up to and including 85%
Up to and including 90%
Up to and including 95%
90.01% to 95% – Non-Traditional Down Payment
Our greatest concerns are the significant increases at lower loan to values and the 0.65% increase from 3.85% to 4.50% for non-traditional sources of equity (such as the BC Homeownership 2nd Mortgage Program). We continue to see an increase in families gifting down payment to their children to avoid mortgage insurance premiums and more restrictive insurer guidelines. If you know someone who plans to help a family with the down payment on a purchase please keep us in mind. As experts, we can optimize a family purchase plan using all available strategies to minimize fees and payments.
For our best available rates OAC click here. Thanks again for your amazing support and have a fantastic rest of the week!