Blog Post

Bank of Canada Rate Announcement Oct 19th, 2016

Katherine Martin • Oct 19, 2016

With all the recent government activity meant to bring stability to the Canadian housing market (read cool down Vancouver and Toronto), its no surprise that the bank of Canada has decided against making any drastic changes to the overnight rate in their announcement today. Here is the summary of where the government thinks we are at, along with a copy of the monetary policy report for October 2016.

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

The global economy is expected to regain momentum in the second half of this year and through 2017 and 2018. After a weak first half, the US economy in particular is strengthening: solid consumption is being underpinned by strong employment growth and robust consumer confidence. However, because of elevated uncertainty, US business investment is on a lower track than expected.

Looking through the choppiness of recent data, the profile for growth in Canada is now lower than projected in July’s Monetary Policy Report (MPR). This is due in large part to slower near-term housing resale activity and a lower trajectory for exports. The federal government’s new measures to promote stability in Canada’s housing market are likely to restrain residential investment while dampening household vulnerabilities. Recent export data are improving but are not strong enough to make up for ground lost during the first half of 2016, despite the effects of the Canadian dollar’s past depreciation. Growth in exports over 2017 and 2018 are projected to be slower than previously forecast, due to lower estimates of global demand, a composition of US growth that appears less favourable to Canadian exports, and ongoing competitiveness challenges for Canadian firms.

After incorporating these weaker elements, Canada’s economy is still expected to grow at a rate above potential starting in the second half of 2016, supported by accommodative monetary and financial conditions and federal fiscal measures. As the economy continues to adjust to the oil price shock, investment in the energy sector appears to be bottoming out. Non-resource activity is growing solidly, particularly in the services sector. Household spending continues to rise, along with employment and incomes outside of energy-intensive regions. The Bank expects Canada’s real GDP to grow by 1.1 per cent in 2016 and about 2 per cent in both 2017 and 2018. This projection implies that the economy returns to full capacity around mid-2018, materially later than the Bank had anticipated in July.

Measures of core inflation remain close to 2 per cent as the effects of past exchange rate depreciation and excess capacity continue to offset each other. Total CPI inflation is tracking slightly below expectations because of temporary weakness in prices for gasoline, food, and telecommunications. The Bank expects total CPI inflation to be close to 2 per cent from early 2017 onwards, when these temporary factors will have dissipated, but downward pressure on inflation will continue while economic slack persists.

Given the downward revision to the growth profile and the later closing of the output gap, the Bank considers the risks around its updated inflation outlook to be roughly balanced, albeit in a context of heightened uncertainty. Meanwhile, the new housing measures should mitigate risks to the financial system over time. At present, the Bank’s Governing Council judges that the overall balance of risks is still in the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.

Read the official Release Here.

Here are the remaining announcement dates for 2016.

Wednesday 7 December

Here are the announcements dates set our for 2017.

Wednesday 18 January *
Wednesday 1 March
Wednesday 12 April *
Wednesday 24 May
Wednesday 12 July *
Wednesday 6 September
Wednesday 25 October *
Wednesday 6 December

*Monetary Policy Report published

All rate announcements will be made at 10:00 (ET) , and the Monetary Policy Report will continue to be published concurrently with the January, April, July and October rate announcements.

Monetary Policy Report October 2016

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Katherine Martin

Origin Mortgages

Phone: 1-604-454-0843
Email: kmartin@planmymortgage.ca
Fax: 1-604-454-0842

Porting Your Mortgage

By Katherine Martin • 24 Apr, 2024

Porting your mortgage is when you transfer the remainder of your current mortgage term, outstanding principal balance, and interest rate to a new property if you’re selling your existing home and buying a new one. Now, despite what some big banks would lead you to believe, porting your mortgage is not an easy process. It’s not a magic process that guarantees you will qualify to purchase a new property using the mortgage you had on a previous property. In addition to re-qualifying for the mortgage you already have, the lender will also assess the property you’re looking to purchase. Many moving parts come into play. You’re more likely to have significant setbacks throughout the process than you are to execute a flawless port. Here are some of the reasons: You may not qualify for the mortgage Let’s say you’re moving to a new city to take a new job. If you’re relying on porting your mortgage to buy a new property, you’ll have to substantiate your new income. If you’re on probation or changed professions, there’s a chance the lender will decline your application. Porting a mortgage is a lot like qualifying for a new mortgage, just with more conditions. The property you are buying has to be approved So let’s say that your income isn’t an issue and that you qualify for the mortgage. The subject property you want to purchase has to be approved as well. Just because the lender accepted your last property as collateral for the mortgage doesn’t mean the lender will accept the new property. The lender will require an appraisal and scrutinize the condition of the property you’re looking to buy. Property values are rarely the same Chances are, if you’re selling a property and buying a new one, there’ll be some price difference. When looking to port a mortgage, if the new property’s value is higher than your previous property, requiring a higher mortgage amount, you’ll most likely have to take a blended rate on the new money, which could increase your payment. If the property value is considerably less, you might incur a penalty to reduce the total mortgage amount. You still need a downpayment Porting a mortgage isn’t just a simple case of swapping one property for another while keeping the same mortgage. You’re still required to come up with a downpayment on the new property. You’ll most likely have to pay a penalty Most lenders will charge the total discharge penalty when you sell your property and take it from the sale proceeds. The penalty is then refunded when you execute the port and purchase the new property. So if you are relying on the proceeds of sale to come up with your downpayment, you might have to make other arrangements. Timelines rarely work out When assessing the housing market, It’s usually a buyer’s market or a seller’s market, not both at the same time. So although you may be able to sell your property overnight, you might not be able to find a suitable property to buy. Alternatively, you may be able to find many suitable properties to purchase while your house sits on the market with no showings. And, chances are, when you end up selling your property and find a new property to buy, the closing dates rarely match up perfectly. Different lenders have different port periods Understanding that different lenders have different port periods is where the fine print in the mortgage documents comes into play. Did you know that depending on the lender, the time you have to port your mortgage can range from one day to six months? So if it’s one day, your lawyer will have to close both the sale of your property and the purchase of your new property on the same day, or the port won’t work. Or, with a more extended port period, you run the risk of selling your house with the intention of porting the mortgage, only to not be able to find a suitable property to buy. So while the idea of porting your mortgage can seem like a good idea, and it might even make sense if you have a low rate that you want to carry over to a property of similar value, it’s always a good idea to get professional mortgage advice and look at all your options. While porting your mortgage is a nice feature to have because it provides you with options, please understand that it is not a guarantee that you’ll be able to swap out properties and keep making the same payments. There’s a lot to know. If you’re looking to sell your existing property and buy a new one, please connect anytime. It would be a pleasure to walk you through the process and help you consider all your options, including a port if that makes the most sense!

A First Home Savings Account (FHSA)

By Katherine Martin • 18 Apr, 2024

Dreaming of owning your first home? A First Home Savings Account (FHSA) could be your key to turning that dream into a reality. Let's dive into what an FHSA is, how it works, and why it's a smart investment for first-time homebuyers. What is an FHSA? An FHSA is a registered plan designed to help you save for your first home taxfree. If you're at least 18 years old, have a Social Insurance Number (SIN), and have not owned a home where you lived for the past four calendar years, you may be eligible to open an FHSA. Reasons to Invest in an FHSA: Save up to $40,000 for your first home. Contribute tax-free for up to 15 years. Carry over unused contribution room to the next year, up to a maximum of $8,000. Potentially reduce your tax bill and carry forward undeducted contributions indefinitely. Pay no taxes on investment earnings. Complements the Home Buyers’ Plan (HBP). How Does an FHSA Work? Open Your FHSA: Start investing tax-free by opening your FHSA. Contribute Often: Make tax-deductible contributions of up to $8,000 annually to help your money grow faster. Withdraw for Your Home: Make a tax-free withdrawal at any time to purchase your first home. Benefits of an FHSA: Tax-Deductible Contributions: Contribute up to $8,000 annually, reducing your taxable income. Tax-Free Earnings: Enjoy tax-free growth on your investments within the FHSA. No Taxes on Withdrawals: Pay $0 in taxes on withdrawals used to buy a qualifying home. Numbers to Know: $8,000: Annual tax-deductible FHSA contribution limit. $40,000: Lifetime FHSA contribution limit. $0: Taxes on FHSA earnings when used for a qualifying home purchase. In Conclusion A First Home Savings Account (FHSA) is a powerful tool for first-time homebuyers, offering tax benefits and a structured approach to saving for homeownership. By taking advantage of an FHSA, you can accelerate your journey towards owning your first home and make your dream a reality sooner than you think.