Mortgage Strategies: Take me out to the ball game!

General Krishna Menon 26 Sep

While most people start off their mortgage search by going after the lowest rate, what they are really after is the mortgage with the lowest cost. Then again, the majority of borrowers in Canada end up with a mortgage that is not the lowest rate nor the lowest cost. Strike 1!

Whether borrowers realize it or not, what is often more important to them is a mortgage with the lowest risk. So they end up with 5-year fixed mortgage that has a constant payment, which is usually not the lowest risk mortgage at all. Strike 2! Time to bring in a mortgage broker like myself or your local Dominion Lending broker to be the pinch hitter and go to bat for you.

There are 4 and only 4 mortgage strategies, and everything fits within these 4 strategies: Lowest Cost, Lowest Risk, Maximum Flexibility, and Lowest Payment. Expert investors think about financial transactions in these terms, and you should think about your mortgage in these terms too. Consider them like the 4 bases of a baseball diamond, you need to touch on every one of them to complete a home run. A mortgage broker like me or your local Dominion Lending Centres broker can help you prioritize your mortgage strategy based on your current financial goals, life situation, and risk tolerance, and the potential for various scenarios that could affect you over the term of the mortgage. You can’t achieve all 4 mortgage strategies together, there are trade-offs, but through strategic mortgage planning we can help guide you through the strategic options, help you determine the best strategy for you, and find the best mortgage products that fit your strategy.

So next time you are planning your mortgage, make sure to cover all 4 bases by thinking about The 4 Mortgage Strategies: Lowest Cost, Lowest Risk, Maximum Flexibility, and Lowest Payment, and get a mortgage broker like myself or your local Dominion Lending Centres broker to help you. Now that’s a Grand Slam!

Todd Skene


Dominion Lending Centres – Mortgage Professional
Todd Skene is the founder of DLC Home SMART Mortgage with DLC Pilot Mortgage Group based in Vancouver, BC.

First Time Home Buyers Incentive Program

General Krishna Menon 18 Sep


The new First Time Home Buyer Incentive program from CMHC (Canadian Mortgage and Housing Corporation) was officially released on September 2. This program was met with mixed reactions across the mortgage industry, but we wanted to take a minute to give you the facts regarding the program. Below are the key points you need to know, and as always if you do have any further questions please reach out to us.

What is it?
Eligible homeowners are able to apply for a 5% or 10% shared equity mortgage with the Government of Canada.  A shared equity mortgage is where the government shares in the upside and downside of the property value. The Incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest bearing and does not require ongoing repayments.
Through the First-Time Home Buyer Incentive, the Government of Canada will offer:
• 5% for a first-time buyer’s purchase of a re-sale home
• 5% or 10% for a first-time buyer’s purchase of a new construction

It’s important to understand that with this program, the government will then OWN 5-10% of the equity of your home (pending on how much was contributed to the down payment).

Who is eligible?
First, you must be a First Time Home Buyer. This incentive is only offered to those who are purchasing their first home. Second, you need to have the minimum down payment to be eligible. The minimum down payment is 5% of the purchase price of the property, and this must come from your own resources. The Federal Government will not give you 5% to put towards/cover the entire down payment. Third, your maximum qualifying income is no more than $120,000. Lastly, your total borrowing is limited to 4 times the qualifying income.

There are restrictions on the type of property you can purchase. The below are the eligible properties:
o New construction (5-10% incentive)
o Re-sale home (5% incentive)
o New and resale mobile/manufactured homes (5% incentive)

Residential properties include single family homes, semi-detached homes, duplexes, triplex, fourplex, townhouses, condominium units. The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

How Does Repayment Work?

You can repay back the incentive in full at any time without a pre-payment penalty or you can repay the incentive after 25 years or if the property is sold, whichever happens first. The repayment of the incentive is based on the property’s fair market value:
o You are given a 5% incentive of the home’s purchase price of $200,000 or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or %15,000
o You are given a 10% incentive of the home’s purchase price of $200,000 or $20,000 and your home value decreases to $150,000, your payback amount would be 10% of the current value or $15,000.

If you are interested in this program or have further questions, we encourage you to reach out to your Dominion Lending Centres mortgage broker. This is a brand-new program and more details are coming out each day. We also are working to better understand the implications of this type of shared equity mortgage and will keep you updated on any news or updates we receive.

Geoff Lee


Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.

August Data Confirm that Housing has turned the corner by Dr. Sherry Cooper

General Krishna Menon 18 Sep


Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales rose for the sixth consecutive month. Transactions are now running almost 17% above the six-year low reached in February 2019, but remain about 10% below highs reached in 2016 and 2017. Toronto, Montreal and Vancouver all saw sales and prices rise. CREA updated its 2019 sales forecast, now predicting a 5% gain this year. Gains were led by a record-setting August in Winnipeg and a further improvement in the Fraser Valley. These confirm signs that the country’s housing market is returning to health.

Actual (not seasonally adjusted) sales activity was up 5% from where it stood in August 2018. The number of homes that traded hands was up from year-ago levels in most of Canada’s largest urban markets, including the Lower Mainland of British Columbia, Calgary, Winnipeg, the Greater Toronto (GTA), Ottawa and Montreal.

New Listings
The number of newly listed homes rose 1.1% in August. With sales and new supply up by similar magnitudes, the national sales-to-new listings ratio was 60.1%—little changed from July’s reading of 60.0%. The measure has risen above its long-term average (of 53.6%) in recent months, which indicates a tighter balance between supply and demand and a growing potential for price gains.

Based on a comparison of the sales-to-new listings ratio with the long-term average, about three-quarters of all local markets were in balanced market territory in August 2019. Of the remainder, the ratio was above the long-term average in all markets save for some in the Prairie region.

There were 4.6 months of inventory on a national basis at the end of August 2019 – the lowest level since December 2017. This measure of market balance has been increasingly retreating below its long-term average (of 5.3 months).

There is considerable regional variation in the tightness of housing markets. The number of months of inventory has swollen far beyond long-term averages in Prairie provinces and Newfoundland & Labrador, giving homebuyers an ample choice in these regions. By contrast, the measure is running well below long-term averages in Ontario, Quebec and Maritime provinces, resulting in increased competition among buyers for listings and fertile ground for price gains. Meanwhile, the measure is well centred in balanced-market territory in the Lower Mainland of British Columbia, making it likely that prices there will stabilize.

Home Prices
Canadian home prices saw its biggest one-month gain in two years. The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.8% m-o-m in August 2019.

Seasonally adjusted MLS® HPI readings in August were up from the previous month in 14 of the 18 markets tracked by the index, marking the biggest dispersion of monthly price gains since last March.

In recent months, home prices have generally been stabilizing in British Columbia and the Prairies, a measure which had been falling until recently. Meanwhile, price growth has begun to rebound among markets in the Greater Golden Horseshoe (GGH) region amid ongoing price gains in housing markets east of it.

A comparison of home prices to year-ago levels yields considerable variations across the country, with declines in western Canada and price gains in eastern Canada.

The actual (not seasonally adjusted) Aggregate Composite MLS® (HPI) was up 0.9% year-over-year (y/y) in August 2019. This marks the second consecutive month in which prices climbed above year-ago levels and the most substantial y/y increase since the end of last year.

Home prices in Greater Vancouver (GVA) and the Fraser Valley remain furthest below year-ago levels, (-8.3% and -5.5%, respectively). Vancouver Island and the Okanagan Valley logged y/y increases of 3.7% and 1.5% respectively.

Prairie markets posted modest price declines, while y-o-y price growth has re-accelerated ahead of overall consumer price inflation across most of the GGH. Meanwhile, price growth has continued uninterrupted for the last few years in Ottawa, Montreal and Moncton.

All benchmark home categories tracked by the index returned to positive y/y territory in August. Two-storey single-family home prices were up most, rising 1.2% y/y. This category of homes had .been hardest hit during the slump. One-storey single-family home prices rose 0.7% y/y, while townhouse/row and condo apartment units edged up 0.3% and 0.5%, respectively.

Stress Test
Canada’s introduction of stricter mortgage-lending rules last year inhibited some potential home buyers. Until recently, declining interest rates and lower home prices may have allowed some of those buyers to return to the market, according to the CREA report.

“The recent marginal decline in the benchmark five-year interest rate used to assess homebuyers’ mortgage eligibility–from 5.34% to 5.19%–together with lower home prices in some markets, means that some previously sidelined homebuyers have returned,” said Gregory Klump, CREA’s chief economist. “Even so, the mortgage stress-test will continue to limit homebuyers’ access to mortgage financing, with the degree to which it further weighs on home sales activity continuing to vary by region.”

CREA also updated its forecasts. National home sales are now projected to recover to 482,000 units in 2019, representing a 5% increase from the five-year low recorded in 2018. The upward revision of 19,000 transactions brings the overall level back to the 10-year average, but remains well below the annual record set in 2016, when almost 540,000 homes traded hands, CREA said.

Bottom Line: This report is in line with other recent indicators that suggest housing has recovered from a slump earlier, helped by falling mortgage rates. The run of robust housing data gives the Bank of Canada another reason — along with robust job gains, higher wage rates and stronger than expected output growth in Q2 — to hold interest rates steady, even as more than 30 central banks around the world have cut interest rates further.

The Federal Open Market Committee meets again on Wednesday, and it is widely expected that they will cut rates by 25 basis points as the White House is calling for “emergency easing moves.” The Trump administration has just in the past few days succumbed to political pressure to reduce trade tensions. Trade uncertainty is the only thing right now that would derail the Canadian recovery.

As a result of this recent easing in trade tensions and last week’s cut in overnight rates further into negative territory by the European Central Bank, the flight to US Treasury bond safety diminished, raising the US and Canadian government bond yields by roughly 25 basis points from extremely low levels. Canadian 5-year bond yields at 1.48% are at their highest level in two months. In consequence, the spread between the best 5-year fixed mortgage rates and 5-year government bonds is at a very tight 77 basis points, which is likely not sustainable. A more normal spread between the two is 120-ish (or more) for the best rates and 150-plus-ish (for regular rates). Some lenders are already hiking mortgage rates.

The situation has been compounded with even more considerable uncertainty with the weekend bombing of the Saudi Aramco oil fields, taking an estimated half of all Saudi oil out of production. Stay tuned.

Dr. Sherry Cooper


Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

Canadian Jobs Surge Following a Three-Month Slowdown

General Krishna Menon 10 Sep

Canadian Jobs Surge Following a Three-Month Slowdown


The Bank of Canada’s reticence to signal coming rate cuts has been vindicated by the rebounding jobs report released today for August. Following a strong posting for real GDP growth in the second quarter, Canadian job growth surprised on the upside with a gain of 81,100 in August. The August job gains were one of the best months on record in August, a surprising show of strength by a labour market that has relentlessly powered the country’s expansion. Over the past year, employment increased 471,000–up 2.5%–the most since 2003. Full-time employment rose +306,000 or +2.5% over the past year, while part-time work increased +165,000 or +4.8%. Over the same period, hours worked rose by 1.2%.

Last month’s job gains were mostly in part-time work. The unemployment rate remained at 5.7% as discouraged workers returned to the labour market, helping to mitigate the fear of worker shortages. The bulk of the employment increase last month was in Ontario and Quebec, where the jobless rate fell to 4.7% in Quebec and 5.6% in Ontario (see table below). The Quebec economy and housing markets have been on a roll this year.

The number of private-sector employees increased in August, more than offsetting the decline in July.

There were more people employed in finance, insurance, real estate, rental and leasing; educational services; and in professional, scientific and technical services. In contrast, employment declined in business, building and other support services.

The rebound in the housing market in most provinces since the end of the first quarter boosted the finance, insurance, real estate, rental and leasing sector, bringing the year-over-year (y/y) gain to 3.9%. The increase in August was in Quebec and Ontario. Construction employment increased by 8.4% y/y in Quebec and 4.3% in Ontario. Housing-related jobs in the service sector (finance, insurance, real estate, rental and leasing) posted y/y gains of 5.5% in Ontario and 2.7% in Quebec.

In direct contrast, the BC housing market’s slowdown took its toll. Construction jobs fell y/y by -0.3%, although housing-related service sector jobs rose a still-strong 4.5% y/y.

Wage gains slowed but remained strong. Hourly pay was up 3.7% in August from a year earlier. While that’s down from 4.5% in July, it’s still well above average in recent years. Permanent worker pay slowed to an annual pace of 3.8%.

Bottom Line: Overall, today’s jobs numbers will leave the BoC comfortable with the neutral stance it took this week. Markets seem to agree, with the Canadian dollar strengthening further this morning.



US Jobs Report Disappoints

In contrast, business hiring stumbled in August in the US, likely confirming expectations for a second straight Federal Reserve interest-rate cut when they meet again September 17-18. The jobless rate held steady at 3.7%, and wage growth ticked lower but held above 3%.

Although the unemployment rate held steady at multi-decade lows, the headline employment gain of 130,000 was disappointing. Private payrolls rose 96,000, a three-month low, after a downwardly revised 131,000 advance the prior month, according to a Labor Department report Friday that trailed the median estimate of economists for a 150,000 gain. Total nonfarm payrolls climbed a below-forecast 130,000, which was boosted by 25,000 temporary government workers to prepare for the 2020 Census count.

Fears abound that economic growth in the US is slowing under the weight of escalating international trade tensions and the slowdown in the global economy. Calls may grow for the Fed to cut interest rates this month by a half-point instead of a quarter-point.

The US manufacturing sector is showing clear signs of struggling, and the White House continues to pressure the Fed about the need for even more aggressive interest rate cuts. As well, the payroll figures showed weakness in several sectors. Manufacturing added an anemic 3,000 jobs, and retailers cut positions for a seventh straight month and education and health services hired the fewest people since February.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Wondering how the Residential Market is doing? Here is an update.

General Krishna Menon 3 Sep

Residential Market Commentary – Rate cut seems certain

Market watchers have really come around to the idea that the Bank of Canada is going to be cutting interest rates.  The only point that is up for debate is when.

The latest GDP numbers, which surprised just about everyone, are not going to be enough to prevent the BoC from trimming rates before it wants to.

Second quarter, annualized growth came in at 3.7%, well above the Bank’s forecast of 2.3% and the 3.0% predicted by economists.  It is an impressive jump, but it is just that – a jump.  There is no sustained loft.  The increase is largely based on a spike in exports, an increase in oil prices and the movement of product that had been stuck in place by bad winter weather.

A deeper look shows that the economic metric known as Final Domestic Demand dipped sharply in Q2.  This drop in consumption, business investment and government spending means there is no economic support for a GDP rebound.  The trade headwinds blowing out of the White House and the resulting trajectories of the U.S. and global economies make it likely that Canada will see growth diminish.

Housing has been a bright spot in all of this, with sales increasing and mortgage generations on the rise.  But generally, consumers are reducing their spending.  The household saving rate rose to 1.7%, up from 1.3% in the first quarter.

Third quarter results are widely expected to be the tipping point.  Most analysts expect, at least, a quarter-point rate cut by the end of Q1 2020.

Sep 3, 2019
Be the expert
First National Financial LP