Partner Appreciation Trip – 2023-2024

Our annual partner trip is wrapped up from sunny Las Vegas.

Reminder, to qualify for 2024-2025 trip, send $1,500,000 in advanced mortgage volume. Location to be confirmed soon!

Bond Yields on the Rise

Canada’s 5-year yield is up again this week, thanks in small part to U.S. retail sales, which jumped 0.7% versus the 0.4% consensus. The big question mark is oil prices. Watch what happens with the middle east conflict over the coming weeks and its impact on crude oil.

Canada’s Inflation Cools

Average core inflation has now dropped into the 2% range. We have not seen it this low since the middle of 2021.

Last week’s welcomed report read as follows:

• Headline inflation: 2.9% y/y (prior 2.8%)

• Average core inflation: 2.95% (prior 3.15%)

Mortgage interest costs continue to remain elevated as does rent.

Bank of Canada Odds

With the positive news from core inflation cooling, June B.O.C cut odds are now at 54% and 100% for July. Reminder, we need to see the following meeting odds above 60% for a chance of cut. The next reports to watch out for are GDP (April 30th ) and unemployment (May 10th).

The USA’s CPI numbers are posing challenges for us north of the border. Yields have shot up and there is no longer certainty the US will cut rates in September as originally priced in.

More Budget News…

Increase to Capital Gains

In an effort to make Canada’s tax system “more fair”, the government is proposing an increase in taxes on capital gains. In total, capital gains tax revenue from individuals and corporations is expected to generate $19 billion in new revenue.

Effective June 25, 2024, the government will tax two-thirds of your capital appreciation versus one-half today. This starts at dollar one for corporations and trusts. For individuals, it applies only to capital gains over $250,000. It’s the first change to capital gains inclusion in 23 years ago.

Property sales in a company name will feel the full brunt of the changes. Will we see a sell of homes before the deadline of June? Albeit, there are only a few month to make a sale.

The feds claim only the elite 0.13% will feel the capital gains pinch. But those 40,000ish people generate a disproportionate amount of tax revenue. Taxing the rich? Or taxing the productive?

Capital gains on the sale of one’s principal residence remain untaxed.

An Example;

Client purchased a cottage in 2015 for $1,000,000 as is it designated as a second home.

He now sells the cottage in 2025 for $2,000,000. They have a$1,000,000 capital gain.

50% of the first $250,000 is taxed (for a total of $125,000)

66.67% of the remaining 750,000 is taxed (for a total of $500,025).

The client has a total capital gain of $625,025. This isa dded to the client’s income (line 150) so his entire marginal tax rate is now well over the top income bracket if assume the client is employed.

Home Buyers Plan (HBP)

Budget 2024 proposes to increase the withdrawal limit from $35,000 to $60,000 and postpone the 15-year repayment period by 5 additional years.

This is significant, as a couple can now access up to $120,000 of RSPs for the purchase of their first home and pay the amount back over 20 years.

Digital Income Verification

A big win for us honest mortgage brokers, a new tool will be made available through the CRA to verify borrower income for mortgages. Forcing most/all prime borrowers through this system will remove income fraud, make approvals more efficient and save lenders time. The system will link “line 150” for borrowers to the bank directly which will cross reference the documents provided.

Sharia Finance

The government is exploring new measures to expand access to alternative financing products, like halal mortgages.

Secondary Suite Loan Program (SSLP)

Administered by CMHC, this program will offer up $40,000 to help though build a rental suite in their property. Details are very minimal at this stage, and we will advise once we know more.

Fall Out From 30 Year Amortizations on New Builds

Many are disappointed in the obvious headline grab from last week. Just look at the sharp decline in net new mortgage advances that are insured. For our office, our number is well under 10% of all business.

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 5.19%

• 3 year fixed, 30 yr amortization – 5.44%

• 2 year fixed, 30 yr amortization – 6.20%

• 5 year variable, 30 yr amortization – Prime – 0.80% = 6.40%

• 5 year fixed, 25 yr amortization – 5.09%

• 3 year fixed, 25 yr amortization – 5.34%

• 2 year fixed, 25 yr amortization – 6.10%

• 5 year variable, 25 yr amortization – Prime – 0.90% = 6.30%

INSURED

• 5 year fixed, 25 yr amortization – 4.89%

• 4 year fixed, 25 yr amortization – 4.89%

• 3 year fixed, 25 yr amortization – 4.94%

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

Fast Facts

• 202,000 – New employees added to Canada’s public sector in the last year. For comparison, the country’s private sector added 141,300 jobs over that time span.

• $250 million – Bonuses paid to Business Development Bank of Canada employees since 2019. Critics have argued the Crown corporation lacks transparency in how it awards bonuses.

• 108,000 – The number of charges of the Vacant Home Tax the City of Toronto mistakenly issued for the 2023 tax year.