Weekly Digest

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September 1st, 2023

Changes to HELOC’s in Canada

Starting November 1st, 2023, any borrowers who have a Home Equity Line Product will be impacted by impending changes laid out by OSFI. Any global limit registered to 80% of the value of the home will gradually have its equity reduced to 65% across a 25 year period. The future availability of home equity will slowly begin to decline. The changes affect any mortgage opened or refinanced past September 15th, 2012.

Example;

Purchase Price;
= $1,500,000
Total registration of HELOC plan (80%);
= $1,200,000
Mortgage Segment;
= $975,000
Line of credit segment;
= $225,000

In this example, the line of credit segment is the additional equity between 65%-80% loan to value. This authorized limit will begin to decline by 1/25th per year or 4%. Each year, the line of credit room will drop by 4%, $9,000.

To gain back the equity in the future, a refinance application can be completed(assuming the home’s value has increased).

Mortgage Updates

• Some good news…bond yields are down to August 1st numbers. We were running at 16 year high, and have now returned to beginning of the month numbers. Banks and lenders don’t adjust rates on the way down, as quickly as they react on the way up so fixed rates remain unchanged.

• Qualification continues to be challenging. The average Canadian household income is $108,000. With qualification estimates at 4.5 X income, this gives a mortgage result just shy of $500,000. Average MLS pricing sits at almost $670,000. Its no wonder why sales have slowed.

• From RBC’s earning call last week;

  • “We remain focused on the trade-offs between spreads and new mortgage originations as intense pricing competition is limiting expansion in asset betas.”

  • 43% of all RBC’s mortgages are now above 25 years (up sharply from 26% before COVID).

  • Dave McKay stated; “The industry has a significant portion of mortgages maturing in2024, 2025. The rate resets will pull more disposable income out of the economy and slow [inflation] even faster.”

• From TD’s earning call last week;

  • Less volume in the market has increased competition levels.

  • 48% of all RBC’s mortgages are now above 25 years (up from 35% before COVID).

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 6.09%

• 3 year fixed, 30 yr amortization – 6.56%

• 5 year variable, 30 yr amortization – Prime – 0.40% = 6.80%

• 5 year fixed, 25 yr amortization – 6.09%

• 3 year fixed, 25 yr amortization – 6.46%

• 5 year variable, 25 yr amortization – Prime – 0.50% = 6.70%

INSURED

• 5 year fixed, 25 yr amortization – 5.64%

• 4 year fixed, 25 yr amortization – 5.74%

• 3 year fixed, 25 yr amortization – 6.19%

• 5 year variable, 25 yr amortization – Prime – .90% = 6.30%

Fast Facts

• $21,000 – the average non-mortgage debt of a Canadian household.

• $108,000 – the average income of a Canadian family

• $7,100,000 USD. Money raised by Donald Trump’s presidential campaign since the former president’s mug shot was released last Thursday. The campaign says it brought in more than $4 million on Friday alone.

• 900,000. The number of international students expected to attend school in Canada this year. The feds are considering a cap on international students in an effort to address a shortage of rental housing.

• 4.4 billion. Estimated tonnes of plastic waste that Canadians throw away each year, only 9% of which is recycled. Ottawa is now requiring supermarkets to begin phasing out plastic food packaging.

• August 24 – That’s the day American workers most often call in sick, according to a new study, presumably to catch a last summer break. A stomach bug is cited as the most common reason for the day off. The U.S.’s second “sickest” day falls on February 13, around Super Bowl and Valentine’s Day.