This week’s Team RRP Vancouver Mortgage Market Update crosses borders as we look at how the economy and political situation in the USA affects the housing marketing in Canada. We’ll discuss tax season and how your BC Home Assessment could help you refinance your mortgage and dive into how a first-time homebuyer can take advantage of the tax benefits of using their RRSP’s as a downpayment on their home.
USA Economic Indicators
The US Federal Reserve surprised economists last week by reversing their previous hawkish tone on raising interest rates this year. In light of slowing US economic indicators, the US Fed mentioned it may not need to raise its overnight rate from current levels. Macroeconomic indicators are showing that the global economy peaked last year with global growth continuing to slow.
In the absence of new stimulus, such as tax cuts, and a polarized Congress, the Trump administration will have its hands full trying to stimulate the economy prior to next years election. It will be interesting to see what happens politically south of the border. If the US Fed remains at status quo on rate hikes, it bodes well for Canada keeping its overnight interest rate at current levels. While our economy is doing well with unemployment near a 43 year low, inflation hasn’t been much of an issue mostly due to energy and wages.
With sustained low energy costs and anemic wage growth despite a 43-year low unemployment rate, core inflation seems to be holding in the Bank of Canada’s target range.
BC Property Assessments
Locally, BC Assessments have been received by many clients. We often find this a focal point for those wanting to know what their financing options are given positive or negative changes in their home equity. If your assessment triggers any questions regarding plans to sell or refinance your home, we’d love to hear from you!
The Assessed values are established as of July 1, 2018, and reflect the beginning of slowing market conditions and falling home values. With continued migration and a strong economy, the value of all assessed properties in BC rose from $904B in 2018 to $947B this year. The 2019 assessed values reflect market compression between low-end and high-end residential housing; with growth in this year’s value based on new properties coming into the market which is expected to continue. As home prices have fallen since last July and buyer’s market conditions continue to evolve, we are starting to see more activity with pre-approvals and buyers.
We remain optimistic that falling prices, more listings, and favourable interest rates will translate to a healthy spring market. We continue to see the market favouring first time and move up buyers.
It’s RRSP Season in Canada
We are entering RRSP season and remind those of you planning to buy for the first time to consider the Federal Home Buyers Program with your RRSPs. This is a Federal Program that is a great strategy for first-time buyers looking at boosting their down payment.
Under the RRSP Home Buyers Program, a maximum of $25,000 can be redeemed for a down payment. The magic of the program is that any funds placed into an RRSP will yield a tax break equivalent to the marginal tax rate of the contributor.
Let’s say a person earning $50,000 per year puts $10,000 of their down payment into their RRSP. Based on an applicable 28.20% tax rate for a BC contributor earning $50,000 per year, a $10,000 RRSP contribution would yield a $2,820 tax refund. The refund can be added to the $10,000 to be borrowed from the RRSP for a total down payment of $12,820.
The extra $2,820 from this strategy can increase down payment or help with closing/moving costs. There are a number of advantages benefiting first-time buyers. Our team are experts and will make sure all possibilities and programs are covered. In order to participate in the RRSP Home Buyers Program, the deadline for RRSP contributions this year is March 1st.
We are grateful to be entering the spring market after a slower than usual winter and very much appreciate your amazing support. We look forward to hearing from you, or those you know, on how we can assist you meet your mortgage and real estate goals! Over time our relational approach has helped thousands of people take advantage of market conditions and help them meet their goal of becoming debt free.
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