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Tag: Mortgage affordability

  • Why are mortgages so expensive in Canada? – MoneySense

    Why are mortgages so expensive in Canada? – MoneySense

    A total of three rate cuts passed down from the Bank of Canada since June have cumulatively lowered the cost of borrowing for Canadians by 75 basis points, from 5% to 4.25%, offering home buyers some much-needed relief in terms of affordability.

    This is according to the latest affordability report compiled by Ratehub.ca, which crunches the minimum annual income required to buy an average home in some of Canada’s major cities. (Ratehub Inc. owns both Ratehub.ca and MoneySense.) The report is based on September 2024 and August 2024 real estate data reported by the Canadian Real Estate Association (CREA). It illustrates how changing mortgage rates, stress test rates and real estate prices are impacting the income needed to buy a home. 

    The September edition (updated monthly, so bookmark this page) shows the required income lowered in 11 of the 13 housing markets studied, as the average five-year fixed mortgage rate dropped to 5.04%, compared to 5.16% in August. As a result, the corresponding average mortgage stress test rate—which tacks on an additional 2% to a borrowers’ contract mortgage rate—fell to 7.04% from the previous 7.16%.

    Let’s take a look at how that’s impacted home buyers across Canada.

    The best places to buy real estate in Canada

    Housing affordability across Canada’s major cities

    Check out the chart below to see how affordability changed between August and September in Canada’s main housing markets, based on the income required to qualify for a mortgage.

    September 2024: How much do you need to earn to buy a home in Canada?

    City Average home price in August Average home price in September Change in home price  Income required in August Income required in September Change in income
    Vancouver $1,195,900 $1,179,700 -$16,200 $224,000 $219,000 -$5,000
    Toronto $1,082,200 $1,068,700 -$13,500 $204,100 $199,800 -$4,300
    Hamilton $840,300 $831,500 -$8,800 $161,800 $158,740 -$3,060
    Victoria $866,700 $864,400 -$2,300 $166,420 $164,450 -$1,970
    Halifax $543,700 $538,100 -$5,600 $109,940 $108,000 -$1,940
    Calgary $586,100 $582,100 -$4,000 $117,360 $115,600 -$1,760
    Ottawa $646,000 $642,800 -$3,200 $127,830 $126,100 -$1,730
    Edmonton $400,200 $399,400 -$800 $84,850 $83,990 -$860
    Winnipeg $361,800 $362,500 $700 $78,140 $77,600 -$540
    Fredericton $311,300 $312,000 $700 $69,310 $68,860 -$450
    Regina $319,700 $320,700 $1,000 $70,780 $70,360 -$420
    Montreal $535,700 $543,400 $7,700 $108,550 $108,900 $350
    St. John’s $354,600 $364,100 $9,500 $76,880 $77,880 $1,000
    Data in the chart is based on a mortgage with 20% down payment, 25-year amortization, $4,000 annual property taxes and $150 monthly heating. Mortgage rates are the average of the Big Five Banks’ 5-year fixed rates in September 2024 and August 2024. Average home prices are from the CREA MLS® Home Price Index (HPI).

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    Canadian cities where affordability improved

    Where in Canada is owning a home becoming more affordable?

    Vancouver: A chilly start to the autumn market

    Vancouver topped the list of cities with most-improved affordability, largely due to the fact that the average home price absorbed a $16,200 drop from August. Make no mistake,—this is still Canada’s most expensive housing market with an average property price tag of $1,179,700. But demand has been quite cool coming out of the summer months. According to the Greater Vancouver Realtors, sales fell 3.8% year-over-year in September, while the supply of new listings rose 12.8%, leading to an easy buyers’ market. As a result, Vancouver home buyers need to earn $5,000 less than they did last month to qualify for a mortgage on the average-priced home, at an income of $219,000.

    Toronto: A month of flat sales

    The city of Toronto came in second, as home prices continue to fall within Ontario’s largest city; the average property sold for $1,068,700, $13,500 less than it did in August, according to the Toronto Regional Real Estate Board. This is largely due to the fact that sales were unchanged from the previous month (though things are improving on an annual basis, coming in 8.6% higher than in 2023). Meanwhile, fresh supply continues to flood the market with new listings, which surged 35.5% year-over-year. Combined with easing mortgage rates, the average Toronto home buyer saw their required income shrink by $4,300, to $199,800.

    Hamilton: Hovering below the historical average

    Rounding out the top three cities is Hamilton, which has long been a popular Southern Ontario real estate destination, without the million-dollar price tag that characterizes neighbouring Toronto. The average home price in Hamilton in September came to $831,500, a decrease of $8,800 from August. The Association of Hamilton-Burlington reports that while sales were brisk in September, they continue to lag 2023 levels by 4% year-to-date and remain 28% below the long-term average. Meanwhile, new listings and inventory levels continue to rise, now sitting at a cumulative five months. That’s all cooled home prices, and as a result, Hamilton home buyers need to earn $158,740 to buy a home, $3,060 less than they did in August.

    Penelope Graham

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  • Renewing your mortgage? A guide for Canadians – MoneySense

    Renewing your mortgage? A guide for Canadians – MoneySense

    For those in that position, as well as those whose mortgages expire in the next 12 months, it’s best to go into the renewal process armed with knowledge of the kind of terms you’ll face and your options. Knowing in advance what you’re in for can take some of the sting out of “rate shock.” Depending on what your current lender and others have to offer, it may even make sense to renew before your old mortgage expires.

    Calculating your mortgage renewal

    Use the MoneySense Mortgage Renewal Calculator to get a sense of what you’ll be paying once you renew. This tool allows you to play around with variables, such as the location, amount borrowed, mortgage term, amortization and payment frequency to help find loan terms that work for you. If your current lender has already extended proposed terms for renewal, you can determine whether they are competitive or whether you should consider shopping around. You can even add in related expenses such as property taxes and utility fees to calculate your total costs of home ownership going forward.

    Should you change your mortgage terms and conditions?

    Worried that you’ll get saddled with what ends up looking like a pricey mortgage for the next five years? If you’re confident rates will continue to decline, you can reduce the length of your mortgage term to three years, two—as little as six months. (Conversely, you may conclude you don’t want to go through this often stressful process again that soon.) Read our coverage to learn the ins and outs of altering your mortgage term.

    Or you could consider switching to a variable- or floating-rate mortgage. That way you’ll always be paying a competitive rate of interest, whether it comes with fixed or variable payments. Be aware, though, that even fixed payments can end up rising if they hit a preset trigger rate. We’ve boiled down the arguments for fixed- versus variable-rate loans from some of Canada’s most knowledgeable mortgage minds.

    The best places to buy real estate in Canada

    How to cope with higher payments

    Regardless of the form your new mortgage takes, you will almost certainly be paying more than the one you signed up for in 2019 or 2020. We’ve compiled a list of strategies for managing the higher cost of borrowing (and to not lose your home), from making prepayments when possible to extending your amortization period. You can’t ignore the rest of your financial picture, either; you may have to cut back on discretionary spending, consolidate your other debts or dip into savings and investments to get your household cash flow on a sustainable trajectory.

    Compare the current rates in the table below. Just change the first variable to ”renewing,” and the others as they fit your situation.

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    What if you hit a wall?

    For some homeowners, a lender won’t offer to renew their mortgage at any price. In a higher rate environment or after a troubled mortgage term, your bank may simply decline your mortgage renewal application. Know that that is far from the end of the road. This article about what to do when your renewal is declined also explains how you can try to find a new, willing lender before resorting to the ultimate solution to mortgage-renewal trauma: selling your home.

    Read more on mortgage finance:



    About Michael McCullough


    About Michael McCullough

    Michael is a financial writer and editor in Duncan, B.C. He’s a former managing editor of Canadian Business and editorial director of Canada Wide Media. He also writes for The Globe and Mail and BCBusiness.

    Michael McCullough

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  • Deloitte Canada predicts more economic growth, benchmark rate below 3% in 2025 – MoneySense

    Deloitte Canada predicts more economic growth, benchmark rate below 3% in 2025 – MoneySense

    In the company’s fall economic outlook released Thursday, it forecasts the central bank’s interest rate will fall to 3.75% by the end of this year and a neutral rate of 2.75% by mid next year. 

    Meanwhile, it expects the economy to grow moderately as softer labour market conditions persist, especially as many home owners have yet to face higher rates when they refinance their loans.  

    “We do think that we’re going to be in for a decent year next year,” said Dawn Desjardins, chief economist at Deloitte Canada. 

    It appears Canada will successfully skirt a recession despite the impact of higher borrowing costs on the economy, said Desjardins. 

    “It’s hard to argue that the economy is just skating through this period of higher interest rates. But having said that, the overall numbers themselves continue to show the economy is expanding,” she said. 

    “Yes, the labour market has softened, but I don’t think we’re in any kind of crisis in the labour market at this time.”

    Higher interest rates impacting economic growth, labour market

    The Bank of Canada has cut its benchmark rate three times so far this year as inflation has eased, and signalled more cuts are coming. 

    Inflation in Canada hit the central bank’s 2% target in August, falling from 2.5 in July to reach its lowest level since February 2021. 

    The Canadian Press

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  • Variable mortgage rates regaining traction as Bank of Canada cuts rates – MoneySense

    Variable mortgage rates regaining traction as Bank of Canada cuts rates – MoneySense

    Are more rate cuts likely?

    In announcing the rate cut Wednesday, Bank of Canada governor Tiff Macklem said if inflation continues to ease broadly in line with the bank’s July forecast, it is reasonable to expect further cuts in the policy rate. 

    Julie Leduc, a mortgage broker at Mortgage Brokers Ottawa, said clients with variable-rate loans were not happy when rates were rising, but the cycle is turning. 

    “We’ve lived the worst of it, we’re on our way out,” she said. 

    “So let’s look for the benefits and the benefit is, if they go variable and the rates go down, they’re going to live the benefit.”

    Right now, the rates offered to those looking for a new variable-rate mortgage or needing to renew are higher than those being offered for five-year fixed rate mortgages, something that Leduc called an anomaly.

    That’s because the expectations are that the Bank of Canada will continue to cut interest rates, lowering the amount charged to borrowers in the future. If something unexpected happens and the central bank doesn’t cut rates, then the rates charged on variable-rate mortgages won’t go down.

    What to expect if you’re mortgage holder

    But if things continue to roll out as expected, those choosing variable-rate loans will see the amount they are charged go down. Just how much and how quickly will depend on the central bank.

    Sojonky says the discounts lenders offer to the prime rate for variable-rate mortgages are also improving. 

    The Canadian Press

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  • The after-effect of market lows: a drop in fixed mortgage rates – MoneySense

    The after-effect of market lows: a drop in fixed mortgage rates – MoneySense

    Bond yields have a “positive correlation” with fixed mortgage rates. That means when bond yields go up, so do fixed-rate mortgages, and vice versa. And since Canadian five-year government bond yields have dropped to 2.9%, as of Tuesday, mortgage rates are expected to come down, too. 

    What are bonds?

    Bonds are a form of debt security. Governments and corporations issue bonds to borrow money from investors. The amount borrowed is referred to as the bond’s face value or par value.

    Interest is paid on the face value to reward investors for lending their money. The rate may be fixed—constant over the duration of the bond—or variable, changing over time in response to changes in a benchmark interest rate such as the prime rate.

    Bonds are commonly referred to as fixed-income securities regardless of whether their interest rates are fixed or variable. 

    Read “What are bonds?” from the MoneySense Glossary.   

    The effect on bonds

    According to Ratehub.ca (Ratehub Inc. owns both Ratehub.ca and MoneySense), fixed mortgage rates are on their way down. 

    “Bond markets have dropped in response to yesterday’s massive stock sell-off, and are now at 2.97%, a low not seen since June 2023, and also marking a 20-basis point drop in the span of a week,” says mortgage expert Penelope Graham of Ratehub.ca. “That will certainly prompt additional discounts for fixed mortgage rates, on top of the lower rates we’ve seen hit the market in recent weeks.”

    The effect on mortgage rates

    Bond yields have been trickling down for a bit now. With the recent Bank of Canada (BoC) interest rate cuts on June 5 and July 24, yields have hovered around 3.3%, which hinted at a drop in fixed mortgage rates. And yesterday’s investor sell-off indicated lack of confidence from investors. So, where do mortgage rates sit?

    “Right now, the lowest insured five-year fixed mortgage rate is 4.29%, which is the lowest a five-year term has been since last May,” says Graham. “With further decreases expected, it’s a good idea for mortgage shoppers and renewers to look into their rate hold options, which would guarantee them today’s lows for up to 120 days.”

    Check this table to see how mortgage rates are reacting.

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    Will things be more affordable? Maybe, for now

    As for the market, some investors are relieved to see stock prices drop, namely those of technology companies, including the Magnificent 7, which have had a mixed bag of earnings this quarter. It’s not only made fixed mortgages, but also some sought-after stocks, more affordable.

    Read more about fixed mortgage rates:



    About Lisa Hannam


    About Lisa Hannam

    Lisa Hannam is the editor-in-chief at MoneySense.ca. She is an award-winning editor with over 20 years of experience in service journalism.

    Lisa Hannam

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  • Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

    Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

    What is the Bank of Canada’s interest rate?

    This latest decrease brings the central bank’s rate—which sets the benchmark for Canada’s prime rate and variable-rate borrowing products—to 4.5%.

    Combined with last month’s decrease, the benchmark cost of borrowing in Canada is now down 0.5% and is at its lowest since May 2023.

    What does the rate cut mean? Will the interest rate cuts continue?

    In the immediate aftermath of today’s rate cut, Canada’s prime rate will decrease from 6.95% to 6.7%, with consumer lenders passing that discount onto their prime-based products, including variable mortgage rates and home equity lines of credit (HELOCs).

    While the outcome of today’s BoC announcement was expected—markets had priced in an 80% chance of a cut—the language in the central bank’s news release was surprisingly cheerful. The central bank usually keeps its cards close to its chest in terms of future cuts, but it wasn’t afraid to come across more dovish today, pointing to the progress made thus far on inflation.

    It noted its preferred Consumer Price Index (CPI) “core measures” (called the CPI trim and median) have both trended under 3% in the last few months. The BoC also suggested that inflation will settle around 2%—the target the central bank wants to see—by 2025.

    That translates to more cuts to come. The question now, though, is whether another quarter-point cut will come in September and/or December. And, of course, just how many more cuts will come in 2025. 

    Currently, analysts believe the BoC’s cutting cycle will bottom out at 3%, which would require another six quarter-point cuts. 

    Of course, the BoC maintains that future cuts will depend heavily on inflation, stating, “Monetary policy decisions will be guided by incoming information and our assessment of their implications for the inflation outlook.” That means the markets will be watching upcoming CPI reports like a hawk. 

    What does the BoC rate announcement mean to you?

    …if you’re a mortgage borrower

    Renewing or borrowing, this is good news for Canadian home owners.

    The impact on variable-rate mortgages

    If you’ve stuck it out this far with a variable mortgage rate, you’re being rewarded today. As a result of today’s rate cut, your mortgage rate and payment will lower in kind immediately, if you’re in an adjustable-rate mortgage. If you’ve got a variable mortgage rate with a fixed payment schedule, more of your payment will now go toward your principal mortgage balance, rather than servicing interest.

    Penelope Graham

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  • 6 things to consider before borrowing from the Bank of Mom and Dad for your first home – MoneySense

    6 things to consider before borrowing from the Bank of Mom and Dad for your first home – MoneySense

    Before locking into a familial loan, both parties must assess whether they are on the same page and are in a position to take on this type of agreement—along with knowing the power and relationship dynamics that could come with it. Here are six key considerations when borrowing from the Bank of Mom and Dad for your first home.

    1. Is it a gift or is it a loan?

    Determine if the financial help you’re discussing with your family is a gift or a loan. “Make sure there’s good communication with regard to the parent and the child about the nature of this,” explains Nicholas Hui, P.Eng, CFP,  an advice-only Financial Planner at VAVE Financial Planning. “Is it a gift, or is it a loan? If it’s a gift, then I highly recommend having a ‘gift deed.’ A loan could be set up with some type of contract with payment terms and then seek legal advice to make it rock solid.” (More on gift deeds in a sec.)

    If it’s a gift

    If your parents gifted you money toward the down payment for your home purchase, then your mortgage lender may need proof of a gift deed or gift letter. In Canada, a gift deed is a legal document that transfers ownership of a property or asset from one party to another without exchanging money. This document confirms that the down payment amount from your parents is truly a gift and not a loan, which helps your lender verify the source—and nature—of the funds.

    Hui also suggests discussing with your family whether it’s part of an early inheritance and, if not, whether other siblings should be informed to prevent future miscommunication over the division of assets, especially after your parents pass away.

    If it’s a loan

    If you’re considering a loan from a family member, discuss interest. If your parents decide to charge interest, it’s not necessarily a bad thing. For one, it could be beneficial to keep those funds “in the family” and support the Bank of Mom and Dad instead of a financial institution or mortgage company. And you’ll likely benefit, too, if the agreed-upon interest rate is less than prime. 

    Hui says parents could consider using the prime rate of Canada as a guideline (currently 6.95%) and then go a little lower or higher than that—but he says it’ll depend on the dynamics, loan amount and other factors. 

    Whether interest will be charged or not, Hui suggests having all aspects of the agreement—repayment timeline and terms of the loan—put in writing so everyone is on the same page.

    2. Consider the tax implications 

    While there’s currently no “gift tax” in Canada, there are some tax implications to be mindful of. Interest charged on a loan is taxable income, so your parents will need to know that. “Like any investment, they’re loaning money to their child. If you pay them ‘income’ for that loan, it’s taxable,” Hui says.

    Alicia Tyler

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  • Should you get a 30-year mortgage?  – MoneySense

    Should you get a 30-year mortgage?  – MoneySense

    What to see the difference in a 25-year versus 30 year mortgage? Tap the filter icon on the far right to expand the data fields. Change the amortization to 25-year or 30-year mortgage (second from the right, second row).

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    The pros and cons of a 30-year mortgage

    Signing up for a 30-year mortgage allows a buyer to stretch their mortgage payments over a longer period of time. “You’re spreading your debt over five extra years [compared to 25-year mortgages]. That usually gets you a higher purchase price or mortgage amount that’s needed in the big markets,” explains Verceles.

    On a home selling for $699,117 (the average Canadian home price as of May 2024), a buyer who puts 20% down and takes out a 30-year mortgage at a five-year fixed rate of 4.99% will pay $2,982 a month on their mortgage. (You can run the calculations yourself using a mortgage payment calculator.) Another buyer with the same down payment and mortgage terms but a 25-year amortization would shell out $3,250—that’s $268 more than the first buyer every month, or an extra $3,216 a year. 

    At first glance, the 30-year mortgage seems like the better choice—except that the buyer would end up paying a total of $514,068 in interest over the life of the mortgage, assuming rates did not change. The 25-year mortgage buyer, on the other hand, would pay $415,615 in total interest—a difference of $98,415 on the same mortgage principal. 

    In Canada, a 30-year mortgage is not insurable through the CMHC, meaning a minimum 20% down payment is required, unless it is for a new build as outlined above. Even with the new change around 30-year mortgages, this can make it more difficult to purchase the home that you want. A 15% down payment on a $748,450 house is $112,268. At 20%, the down payment jumps to $149,690—meaning you will need to access $37,422 more.

    Plus, Verceles says, mortgage lenders tend to give borrowers slightly better rates for mortgages covered through CMHC insurance, because the lender isn’t the one shouldering the risks of a default. Usually, those savings can amount to a quarter of a percent in interest, according to Verceles.

    Pros

    • Ability to stretch mortgage payments over a longer period of time
    • Access to a higher purchase price or mortgage amount

    Cons

    • More interest paid over the term of the mortgage compared to shorter terms
    • Not insurable through the CMHC, which could mean paying a higher interest rate
    • A minimum 20% down payment is required
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    Can you get a mortgage of more than 30 years?

    In some countries, such as Japan, mortgages with terms of 35, 40 and even 100 years are not unheard of. The long term mortgages are intended to be paid over multiple generations. Canada’s major lenders once offered 40-year mortgages, but that ended when the North American housing bubble burst in 2008. Shortly after that meltdown, Canada’s Department of Finance decreased the maximum amortization to 35 years, then later reduced it to 30 years.

    “They don’t want people to leverage themselves too far,” Verceles explains. (Some alternative lenders still offer 35- and even 40-year mortgages, albeit with steeper interest rates than a shorter mortgage from a bank.)

    Widespread concern about housing affordability in Canada have made the idea of longer amortization periods more attractive to homebuyers, but Verceles says he isn’t sure whether the Canadian government will loosen rules to allow 30-plus-year amortizations again. But given the importance of real estate to Canada’s economy, it’s possible that the federal government may to ease the financial burden of homebuyers by letting them spread out their payments over a longer period of time.

    Brennan Doherty

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  • 3-year versus 5-year mortgage: How to choose your term – MoneySense

    3-year versus 5-year mortgage: How to choose your term – MoneySense

    Whether or not a variable-rate mortgage is a good option for you depends largely on market fluctuations. Rates for this type of mortgage are typically lower than those of fixed-rate mortgages, which is a win as long as the prime rate doesn’t go up too much. And historically, they’ve tended to average out to lower payments over time. But the past few years have reminded Canadians that huge increases are possible, and home owners who signed on for a variable-rate mortgage pre-2022 have been waving goodbye to an extra several hundreds or thousands dollars every month for the past year and a half. For some, though, these increases are unmanageable and can lead to a potentially dire financial situation.

    What is a 5-year mortgage?

    A five-year fixed mortgage allows you to lock into a specified interest rate for a full five years. Just like with a three-year term, you don’t have to worry about changing markets affecting your payments for the duration of the contract. This is very appealing to home owners with less tolerance for risk—it’s a nice, long period of predictability. It also means much longer stretches between dealing with the headache of renegotiating. 

    Being locked in for longer, however, puts you in a less flexible situation. If interest rates drop, you won’t be able to take advantage of those lower rates—unless you decide to break your mortgage early, a decision that comes with hefty penalty. Or if your financial situation changes or you want to sell your property sooner than anticipated, that five-year commitment is a bit of a roadblock. 

    With a five-year variable mortgage, your payments will change according to the whims of the market. Usually, variable mortgage rates are lower, but since currently they will likely give home owners greater savings over their mortgage term, they’re higher than fixed-rate mortgages.  

    Where are interest rates headed? 

    The soaring interest rates of the past couple of years have been a significant stressor on millions of home owners and would-be home owners across Canada. While early 2024 has seen inflation cool, the prime rate, which is currently at 6.95%, has come down only slightly from its recent high of 7.2%. Economists expect June’s BoC interest rate cut will be followed by gradual decreases over the next few years. Most predictions suggest we’ll reach a full 1% drop by the end of the year with rates stabilizing at 5.2% by the end of 2027. Check out the latest rates.

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    Deciding on a mortgage term

    So, what does this mean when it comes to choosing a mortgage? If the predictions are accurate, a variable-rate mortgage is a great way to take advantage of the downward trend and save some money. Just be sure there’s enough room in your budget to cover higher payments should there be any rate hikes. Five-year variable mortgages are currently being offered at lower rates than three-year variable loans, which could make them the winning choice. 

    However, if any level of risk is the kind of thing that keeps you up at night, a three-year fixed-rate mortgage could be a better option—there’s no unpredictability when it comes to that monthly payment, and interest rates will most likely have decreased quite a bit by the time you have to renew. A five-year fixed may not be the best choice right now, as you’ll get locked into higher payments at a time when interest rates are going down. 

    Rate decreases aside, the decision largely comes down to your future plans—are you holding on to your property for the long term or do you want to keep your options open?—and your appetite for risk. Find your comfort zone and a plan that works for you.

    Read more about mortgages in Canada:


    Ciara Rickard

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  • Where to buy a home for under $1 million in Canada – MoneySense

    Where to buy a home for under $1 million in Canada – MoneySense

    But if you have some flexibility around where to live, there are cities and neighbourhoods in Canada where homes can be had for less than seven figures—lots of them, in fact. All but five of the 45 cities and regions analyzed by our partner Zoocasa in this year’s Where to Buy Real Estate in Canada report had benchmark prices below $1 million (as of the end of 2023).

    See the list of Canadian cities and regions below, in order of most to least affordable (followed by neighbourhood data for Toronto and Vancouver). You can sort the data in each table by tapping on the column headers, or filter results using the last row. You can download the data to your device in Excel, CSV and PDF formats. 

    Canadian cities and regions with a benchmark price under $1 million

    Prohibitively high prices around Greater Toronto and B.C.’s Lower Mainland can obscure the fact that the national average home price was a tad under $735,000 in 2023, according to the benchmark Zoocasa used in its analysis.

    And even in the regions with benchmark prices above the $1-million threshold, the survey demonstrates there are more affordable neighbourhoods to be found. It should be noted our statistics do not differentiate between housing types, so don’t expect to find detached homes for these prices in these cities. But it’s still possible to get a toehold in the market with a condo or townhouse for less than $1 million, sometimes a lot less.

    You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.

    Where to get a home for less than $1 million in Toronto

    Our survey turned up no less than 106 neighbourhoods in the city of Toronto with benchmark prices below $1 million—the most affordable being Tandridge, with a benchmark price of just $484,269.

    Toronto neighbourhoods

    With prices like those, you might assume there’s something wrong with these neighbourhoods. Consider that a lot of them are coming up in the world. Tandridge, along with Rivalda Heights, Keelegate, Humbergate, Cook Village, Duncanwoods, Morningside, Woodbine Downs, South Steeles, Glenfield, Chapel Glen, Dorset Park, Glen Long and Mount Olive have all seen price appreciation of 50% or more over the past five years. Yorkwoods and University Village have both gone up more than 80%, and Beaumond Heights, an astonishing 113%!

    Beyond those in the city of Toronto, we count an additional 65 neighbourhoods across the Greater Toronto Area where the benchmark price was below $1 million at the end of 2023.

    Greater Toronto Area neighbourhoods

    How much would a typical home in Toronto’s Tandridge neighbourhood cost you in monthly mortgage payments? Using a mortgage payment calculator, we find that with the minimum down payment of $24,213 and a mortgage of 25 years, you’d be looking at a monthly payment of $2,685—based on the lowest available five-year fixed mortgage rate on June 13. Add in taxes, insurance and fees, and you’d need a total of $40,706 in cash to close the deal. With 20% down ($96,854), the monthly payment would be $2,240 on a 25-year amortization.

    Where to get a home for less than $1 million in Vancouver

    In the city of Vancouver, which represents less than one-quarter of the Metro Vancouver population, we counted just six enclaves with benchmark prices under $1 million.

    Michael McCullough

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  • Rates are going down—is now a good time to buy a house in Canada? – MoneySense

    Rates are going down—is now a good time to buy a house in Canada? – MoneySense

    The housing supply issue is improving

    It comes after some of Canada’s largest cities have seen ballooning home listings in recent months from droves of sellers listing their properties, despite demand from potential buyers not keeping up. That includes the Greater Toronto Area, where new listings last month jumped 21.1% year-over-year, with 18,612 properties put on the market. Calgary and Vancouver have seen similar trends, with new listings rising 18.7% and 12.6%, respectively, year-over-year in May. But home sales declined in all three cities. In Toronto, there were 21.7% fewer sales in May year-over-year, the Toronto Regional Real Estate Board reported Wednesday.

    The board said 7,013 homes changed hands in the month compared with 8,960 in May of last year, which coincided with a brief market resurgence. TRREB president Jennifer Pearce said homebuyers were waiting for “clear signs” of declining mortgage rates before going ahead with purchasing a property.

    “Typically when rates go down, prices go up.”

    The effects of the rate cut on the housing market in Canada

    “As borrowing costs decrease over the next 18 months, more buyers are expected to enter the market, including many first-time buyers,” she said in a press release. “This will open up much needed space in a relatively tight rental market.”

    Around 56% of Canadian adults who have been active in the housing market said they have been forced to postpone their property search since the Bank of Canada began raising its key lending rate from near zero in March 2022, according to a Leger survey earlier this year commissioned by Royal LePage. Among those waiting on the sidelines, just over half said they would resume their search if interest rates went down, including one-in-10 who indicated a 25-basis-point drop would be enough for them to jump back in.

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    Canadian home buyers waiting for cuts

    “There certainly is pent-up demand,” said Karen Yolevski, chief operating officer of Royal LePage Real Estate Services, in an interview. “Typically when rates go down, prices go up. So this would be the time where people come off the sidelines, knowing and anticipating that prices are likely to rise.”

    In the Greater Toronto Area, the average selling price of a home was down 2.5% year-over-year to $1,165,691 last month. There were 2,701 sales in the City of Toronto, a 17.3% decrease from May 2023, while throughout the rest of the GTA, home sales fell 24.3% to 4,312.

    In general, buyers have been looking for some positive signs,” said Scott Ingram, a sales representative with Century 21 Regal Realty in Toronto. “The sentiment effect of this always punches above the actual dollar and cents. When people are looking for any bit of good news, they’ll take it.”

    The Canadian Press

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  • Mortgage broker vs. bank—which will save you more money? – MoneySense

    Mortgage broker vs. bank—which will save you more money? – MoneySense

    For most Canadians, using a broker is the wisest choice to save money, as they have access to a wider selection of products and should have more experience in going through the application process than you do. 

    However, not all brokers are made the same. Some specialize in mainstream lenders, others are more familiar with getting you a mortgage if you have impaired credit, while others tend to source mortgages for investment properties. Again, ask around, search online. Look at reviews and get referrals if you can.

    What to do before signing a mortgage contract

    Before signing your mortgage contract it’s worth reading the fine print, to make sure everything’s above board. Are you getting the interest rate you signed up for? What about the cost of any lender fees, like an arrangement or booking fee? 

    One important aspect is your “prepayment privilege,” which means how much you’re able to overpay your mortgage every month, shortening the time it takes to pay off the loan. It’s good to know where you stand, because by paying too much you can be charged a prepayment penalty, which makes paying it off faster not worth it.

    Buyers should view a survey of the property before signing the contract, as this can reveal if there are any issues with the home they’d need to deal with, and could even justify a renegotiation on the price. Surveys reveal the boundary of the home, so you have an idea of where you’re allowed to build on. In Canada most sellers take out the survey, known as real property reports (RPRs), and they should be scrutinized before you sign on the dotted line.

    If you’re buying a condominium—often the most affordable option in cities—you’ll want to review documents on how it’s run. Generally you join a condominium corporation where you have to pay fees which are used to manage common areas of the building, so it’s a good idea to know what you’re getting into.

    In the contract you should make sure any verbal agreements are in writing. For example if the seller informally agreed to leave some furniture as part of the purchase it’s best to make this official, just in case you get a nasty surprise when you move in.

    When getting a mortgage it’s important to make sure you don’t overburden yourself and have a backup plan if something goes wrong. Like, could you afford to repair a major leak if that happened? Do you have a plan of action on how you’ll be able to repay the mortgage if you lost your job? In some cases the latter issue can be mitigated by either taking out insurance, or using a guarantor when applying for a mortgage. 

    Ryan Bembridge

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  • How much income do I need to qualify for a mortgage in Canada? – MoneySense

    How much income do I need to qualify for a mortgage in Canada? – MoneySense

    Fredericton: Home prices poised to rise with rate cuts

    Fredericton marks the third and final city where the additional required income to purchase a home remains below $1,000. The average home price there rose $2,600 on a monthly basis to $292,900, which pushed the minimum income up by $430, to $68,170. According to CREA, Fredericton home sales declined 15.2% over the course of the month.

    This reflects real estate trends in New Brunswick as a whole, as home prices have steadily increased over the past three months. This is mainly due to shrinking supply, as new listings remain 12.1% below the five-year average for March. However, sales and supply could be poised to perk up should interest rate cuts materialize later this summer.

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    The least affordable places to buy in Canada

    Toronto, Hamilton and Vancouver sit at the bottom of the list.

    Toronto: The toughest place to buy a home in March

    It should come as no surprise that Toronto home buyers are the most financially squeezed; home prices there escalated sharply over the pandemic’s lockdown years, and remained elevated at an average of $1,113,600 in March, up $19,700 from February. That resulted in the average buyer needing an annual income $3,400 higher than they did in February, making it now $217,500.

    While home sales have chilled slightly at the start of the year, the Toronto Regional Real Estate Board (TRREB) says enough competition remains in the market to push prices higher, and that this will only tighten further as interest rates start to decline.

    Source: Ratehub

    Hamilton: Another challenging Golden Horseshoe market

    The City of Hamilton—which boomed in popularity in recent years as a real estate destination—came in second in terms of worsening affordability. The average home price does remain under the $1-million mark, making it a much more affordable option when compared to neighbouring Toronto. But that gap is narrowing sharply, up by $14,600 in March to an average of $850,500. In terms of income, a Hamilton buyer needs to earn $169,640 annually, an increase of $2,540.

    Vancouver: Softening sales, but demand still drives prices

    The City of Vancouver remains Canada’s most expensive housing market, with an average price of $1,196,800 in March, up $13,500 from the previous month. As a result, a buyer there must earn $232,620 in order to qualify for the required mortgage, an increase of $2,270 compared to February.

    Penelope Graham

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  • Best places to buy real estate in Metro Vancouver – MoneySense

    Best places to buy real estate in Metro Vancouver – MoneySense

    Between December and January, the benchmark home prices in Port Coquitlam and Coquitlam increased by about 3% and 2%, respectively. In Port Moody, the benchmark home price dipped by about 1%, but home prices will likely climb as the spring market kicks off.

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    Burnaby, New Westminster and Richmond, B.C. 

    The city of Vancouver is bordered by Richmond to the south, and by Burnaby and New Westminster to the east. Burnaby and Richmond are B.C.’s third- and fourth-largest cities, respectively, each with a population above 200,000.

    Best places to buy real estate in Burnaby, New Westminster and Richmond 

    In the table below, you’ll find the top neighbourhoods for real estate purchases in Burnaby, New Westminster and Richmond. To view all the data, slide the columns right or left using your fingers or mouse. You can download the data to your device in Excel, CSV and PDF formats.

    Source: Zoocasa

    Top three neighbourhoods in Burnaby, New Westminster and Richmond

    Situated in Richmond, Hamilton is just north of Annacis Island and the Annacis Channel, and west of Queensborough. Hamilton’s 2023 benchmark home price was $947,750 as a result of a consistent and stable increase in property values. The benchmark was 3% higher than in 2022, 37% higher than in 2020, and 22% higher than in 2018. This trend contributes to Hamilton’s impressive value score of 4.6.

    Hamilton is a distinctive neighbourhood with a blend of residential properties, predominantly single-family homes, alongside businesses and recreational facilities. It offers various amenities such as the Hamilton Community Centre, Hamilton Highway Off-Leash Dog Park, and the Bridges Marina. The neighbourhood boasts several parks, including the well-kept and popular Hamilton Community Park. Locals appreciate the trails that lead to the waterfront, a popular spot for dogs to take a swim. Hamilton has the highest percentage of households with children (57%) in this part of Metro Vancouver, by a significant margin. Families can send their kids to Hamilton Elementary School, the Choice School for Gifted Children, or Queen Elizabeth Elementary School. However, Hamilton has the third-worst accessibility score among the three cities, at 0.3.

    View Hamilton real estate listings on Zoocasa.

    In the southwest corner of Richmond lies the historic community of Steveston, where the powerful Fraser River meets the Pacific Ocean. Steveston is bordered by Williams Road to the north, the Fraser River to the south, No 2 Road to the east, and the Strait of Georgia to the west. The neighbourhood’s 2023 benchmark home price was $1,529,183, considerably higher than those of surrounding neighbourhoods. Home prices in Steveston Village have been on a slight upward trajectory. The benchmark home price was 1% lower than in 2022, but 28% higher than in 2020 and 17% higher than in 2018. As a result, Steveston has a modest value score of 2.0. However, it has by far the highest neighbourhood economics score in the region (5.0), which helped push it to the top. 

    So, what brings buyers to this neighbourhood? Following the closure of the fish canneries, significant residential development has transformed the area, with the emergence of new luxurious condominiums and townhomes reshaping the landscape. Residents benefit from outstanding local dining options, unique boutiques, a picturesque boardwalk that is popular among both tourists and locals, beach access, parks, playgrounds and biking trails—all enhancing Steveston’s charm. While primarily residential, Steveston has several parks near schools like Diefenbaker and James McKinney Elementary, along with the expansive Manoah Steves Neighbourhood School Park, which features four sports fields, three ball diamonds and a playground. The neighbourhood has one of the highest concentrations of households with children (49%).

    View Steveston Village real estate listings on Zoocasa.

    Nestled in North Burnaby, the Brentwood Park neighbourhood has traditionally offered a balanced mix of affordable single-family detached homes and condominiums. With The Amazing Brentwood housing spectacular developments, Brentwood Park is poised to become one of the largest urban destinations in North America. In 2023, the neighbourhood’s benchmark home price stood at $881,425. Home prices in Brentwood Park haven’t risen as rapidly as those in other neighbourhoods on our list. The 2023 benchmark price was 1% lower than in 2022, 18% higher than in 2020, and 11% higher than in 2018. This translates to a value score of 3.2. But Brentwood Park has one of the highest neighbourhood economics scores, 3.1, in this part of Metro Vancouver, behind only Steveston. 

    The neighbourhood boasts stunning views of Burnaby Mountain and the North Shore Mountains. Beecher Park offers forested areas, a sports field, a children’s playground and Beecher Creek, a local salmon spawning habitat connecting to Still Creek. Eileen Dailly Leisure Pool & Fitness Centre is well known for its swimming pool, children’s water play area, sauna and steam room, weight room, and more. The area is also home to the McGill Branch of the Burnaby Public Library. Public schools in Brentwood include Brentwood Park Elementary, for kindergarten to grade seven, and Alpha Secondary School, which offers an advanced placement program allowing students to take college-level courses while still in high school.

    View Brentwood Park real estate listings on Zoocasa.

    What happened in the real estate markets of Burnaby, New Westminster and Richmond?

    Real estate activity was stable in all three cities last year, and there was much less fervour compared to previous years. Home prices experienced modest price growth from January to December 2023, though this was due more to tight competition than increased demand. 

    Burnaby East experienced the most price growth, with the benchmark price rising about 7% from January to December. But the area is also the most expensive, with a December benchmark price of $1,157,400. New Westminster had the most affordable homes, with a benchmark home price of $815,600 in December, up about 4% from the beginning of the year. In Richmond, the benchmark home price rose from $1,109,200 in January to $1,153,400 in December—an increase of about 4%. 

    “Interest rates played a pivotal role in shaping affordability [in these areas], and there was a noticeable withdrawal from the market among potential buyers,” says Pershick. For the three cities combined, total home sales across all property types in 2023 came in below 2022 levels.

    What’s next for real estate in Burnaby, New Westminster and Richmond?

    Between December 2023 and February 2024, benchmark home prices in all three cities inched upward, suggesting a stronger start to the year than in 2023. Of the three, Richmond’s benchmark price increased the most, rising about 2% to $1,173,100 in February. Burnaby South has also experienced a decent increase, with the benchmark price rising by about 2% to $1,113,500 over the same period. 

    As of February, year-to-date sales for detached properties in Burnaby and Richmond are up compared to 2023. However, it’s Burnaby condo apartments that have gotten the most attention, with year-to-date sales up by about 19%. 

    Zoocasa

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  • BoC expects to cut rates this year, governing council split on timing: deliberations – MoneySense

    BoC expects to cut rates this year, governing council split on timing: deliberations – MoneySense

    That’s according to the central bank’s summary of deliberations detailing the discussions governing council members had in the lead-up to the March 6 interest rate announcement.

    What did the Bank of Canada’s governing council agree on?

    The summary says governing council members agreed that if the economy and inflation evolve in line with the Bank of Canada’s projections, the central bank will be able to begin cutting interest rates sometime this year.

    And while members agreed on the conditions the Bank of Canada needs to start lowering its policy rate—they want to see further and sustained easing in the bundle of indicators they call “underlying inflation”—they had varying views on when those conditions will be met. 

    “There was some diversity of views among governing council members about when there would likely be enough evidence that these conditions were in place, and how to weight the risks to the outlook,” the summary said. 

    The Bank of Canada opted to continue holding its interest rate at 5% earlier this month and brushed off questions on the timing of rate cuts.

    Governor Tiff Macklem said the central bank did not want to move too quickly, only to have to reverse course later. 

    Recent data shows Canada’s annual inflation rate came in lower than expected for a second consecutive month, reaching 2.8% in February.

    When will the Bank of Canada lower its policy rate?

    As inflation continues to ease and the economy slows, forecasters continue to expect the Bank of Canada to begin lowering its policy rate around the middle of the year. 

    The Canadian Press

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  • There’s a flicker of life in the housing market as average mortgage payments plummet nearly $400 over 2 months and buyers start to stir again, Redfin says

    There’s a flicker of life in the housing market as average mortgage payments plummet nearly $400 over 2 months and buyers start to stir again, Redfin says

    Following a painful year for the housing market that saw mortgage rates shoot up to just over 8% after years of historically low rates, monthly mortgage payments have finally fallen back down to their lowest level in nearly a year, according to a newly released Redfin report. But it’s still rough, as Las Vegas agent Shay Stein told Redfin for the report. “Two years ago, buyers would have cried about a 6% mortgage rate. Now, they’re happy they’ve dropped down to the mid-6’s.” 

    The median mortgage payment was $2,361 during the four weeks ending December 31, down $372, or 14%, from October’s all-time high, Redfin’s data journalist, Dana Anderson wrote. She cited a change in the weekly average mortgage rate, which fell to 6.61% at the end of December from a 23-year high of 7.79% in late October. The falling mortgage rates coincide with concerns over the economy subsiding in the wake of cooling inflation, as seen by falling yields for the 10-year Treasury Yield. In short, the cheaper the yield, the less the market is seen to be worrying about inflation in the future, and that’s good for cheaper mortgage rates.

    The average 30-year fixed mortgage rate is currently sitting at 6.76%, so it’s still a far cry from the 3% rates that filled the pandemic, but it’s much better than an 8% mortgage rate. Consider this: last October, a typical homebuyer would have spent more than 40% of their income on their mortgage payment, according to an earlier Zillow report; that was an all-time high, although Zillow’s data only goes back to the 1990s.

    That being said, demand is starting to pick back up. Apart from lower mortgage rates, new listings are up nearly 10% on an annual basis. That’s an indication that the lock-in effect, which refers to homeowners that have locked in low mortgage rates and refuse to sell for fear of losing those low rates, could be easing up. There’s now close to four months of supply, which is considered balanced—but given it’s on the lower end of the scale, it still indicates conditions associated with a seller’s market, as Redfin suggests. 

    Homebuyer demand index ticks up

    Redfin’s homebuyer demand index, which measures requests for home tours and other services, is also up 10% from the previous month, its highest level since August, Anderson wrote. Additionally, while pending home sales are down over 3% year-over-year, it’s the smallest decline in two years, according to Redfin. 

    “There have been more tours and more offers on my listings since mortgage rates started declining,” Stein said in the report. 

    But it’s not all good news. In the four weeks ending December 31, the median home sale price was $363,371, a 4.4% increase from the previous year. That is also the biggest increase since October 2022, according to Redfin. The median asking price has also increased 4.3% year-over-year to $359,236.

    In early December, Redfin chief economist Daryl Fairweather shared her outlook for this year’s housing market. One of her predictions was that home prices would fall 1% year-over-year in the second and third quarters and be flat in the first and last quarters of this year. Still, that small decline, “will mark the first time prices have declined since 2012, when the housing market was recovering from the Great Recession, with the exception of a brief period in the first half of 2023,” she wrote at the time. 

    Another prediction was that mortgage rates would gradually decline, falling to about 6.6% by the end of year. However, affordability isn’t necessarily set to improve a whole lot given home prices rose substantially during the pandemic fueled housing boom and mortgage rates have still more than doubled in just a few years. “Home prices will still be out of reach for many Americans, but any break in the affordability crisis is a welcome development nonetheless,” Fairweather wrote. 

    And while monthly mortgage payments have fallen to their lowest level in nearly a year, they’re still up more than 5% from a year earlier. 

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    Alena Botros

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  • What does the new Canadian Mortgage Charter mean for home owners? – MoneySense

    What does the new Canadian Mortgage Charter mean for home owners? – MoneySense

    How do interest rates relate to affordability?

    In an effort to subdue runaway inflation, the Bank of Canada (BoC) has raised the benchmark interest rate several times over the last 24 months. This rate affects the interest rates of other financial products. The interest offered on guaranteed investment certificates (GICs) is far higher than usual, for example. This is because the benchmark rate is higher.

    Unfortunately for home owners in Canada, the benchmark rate also affects mortgage interest rates. Home owners with variable-rate mortgages, whose interest rates fluctuate with the benchmark rate, have grappled with sharp increases to their mortgage payments over the past few years. But even those with fixed-rate mortgages must contend with higher interest rates when their mortgages come up for renewal.

    “In the face of a rapid global increase in interest rates, many Canadians are feeling the squeeze, particularly when it comes to affording a home to rent or own,” Deputy Prime Minister and Minister of Finance Chrystia Freeland said in a press release. The Canadian Mortgage Charter is one measure intended to provide relief.

    What is the Canadian Mortgage Charter?

    The Canadian Mortgage Charter is a document that lays out expectations for banks and other lending institutions about how they will behave in their relationships with “vulnerable borrowers.” The guidelines stem from a document published by the Financial Consumer Agency of Canada (FCAC) in July 2023, but the charter is a concise and public-facing document. It outlines six things Canadian borrowers can expect of their banks:

    1. Allowing temporary extensions of the amortization period for mortgage holders at risk
    2. Waiving fees and costs that would have otherwise been charged for relief measures
    3. Not requiring insured mortgage holders to requalify under the insured minimum qualifying rate when switching lenders at mortgage renewal
    4. Contacting home owners four to six months in advance of their mortgage renewal to inform them of their renewal options
    5. Giving home owners at risk the ability to make lump sum payments to avoid negative amortization or sell their principal residence without any prepayment penalties
    6. Not charging interest on interest in the event that mortgage relief measures result in a temporary period of negative amortization

    Of these guidelines, numbers three and four are actually new. The charter is the first time lending institutions have been asked not to require mortgage holders to requalify if switching lenders, and the first time they’ve been asked to reach out to borrowers in the months leading up to mortgage renewal.

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    What does this mean for Canadian mortgage holders?

    The Canadian Mortgage Charter is intended to encourage banks to identify at-risk borrowers and offer them mortgage relief measures so that fewer people experience extreme financial hardship or lose their homes.

    The Canadian Mortgage Charter is not a law. Rather, it’s a set of expectations, much like the changes to mortgages, bank account fees, junk fees and dispute resolution proposed by the government earlier this year. And just like with those measures, the only recourse for borrowers if a lender doesn’t heed the government’s request is to make a complaint on the FCAC website. It’s unclear what, if any, consequence there is for non-compliance.

    In additional to the new charter, the Fall Economic Statement announced billions of dollars in financing to accelerate housing construction, plus plans to crack down on short-term rentals “so that homes can be used for Canadians to live in.”

    Keph Senett

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  • Renting vs. owning: Can you be financially secure without buying a home? – MoneySense

    Renting vs. owning: Can you be financially secure without buying a home? – MoneySense

    I don’t expect real estate prices to rise at the same 6.75% rate we have seen over the past 10 years, so instead, let’s say prices rise at 4% per year. Some people may think that number is high, while others may think it is low. But if you look back at U.S. residential real estate appreciation since 1890, which looks to be similar here in Canada, prices have only risen by a bit more than the rate of inflation, so even 4% may be generous. Nevertheless, assuming 4% growth is correct, the condo would be worth $740,122 after 10 years. Home equity, representing the condo’s value minus the mortgage balance, would be $471,613.

    What if someone could rent the same $500,000 condo for $2,000 per month (a number that might seem high or low depending on where you live)? Compared to making monthly mortgage payments on that same property, the renter would be saving $559 per month. Their rent would rise over time, say, at 2% per year, so the $599 per month of savings would decrease over time.

    Now, let’s say they invested their initial $100,000 (the amount that would have been used on a down payment) and $559 a month (a number that would decrease as rent increased) into a tax-free savings account (TFSA). If they earned 4% per year on their investment, they would have $204,396 after 10 years. The buyer, with $471,613 of home equity, is clearly better off than the renter, right?

    The problem here is you cannot just compare the mortgage payment to the monthly rent. Owning has other incremental costs that might include:

    Property tax: $200 monthly (not ap
    Condo insurance: $10 or more per month, compared to tenant insurance
    Condo fees or repairs: $500 more per month, compared to renting

    Property tax rates can vary significantly depending on where you live. And condo fees and repairs can vary, depending on the age and amenities in the building. But if we added another $710 per month from the categories above to the renter’s monthly investment deposits, the renter would have $319,117 accumulated after 10 years. The same tax-free TFSA return of 4% is assumed, perhaps in their spouse’s TFSA.

    The owner would still have 471,613 in home equity. So, owning is still better than renting, right?

    Let’s not forget there are costs to buy and sell real estate. It could cost $10,000 in land transfer tax, legal fees and other costs to buy, and another $40,000 to sell after 10 years. If the renter added these amounts to their investments, they would be at $373,919. The buyer is still ahead of the renter with $471,613, but as you can see, the gap is closer.

    Jason Heath, CFP

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