Weekly Digest

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September 19th, 2024

Partner Trip for 2025

April (Spring) 2025, our annual realtor trip will be held in Nashville, Tennessee.

Qualifying is easy. Send $1,500,000 in total closed mortgage business to automatically qualify.

To date, we have 4 realtors who have already qualified.

A Whirlwind of a Week

This was one of the busiest news dumps for mortgages and real estate in recent memory. All signs point to a very busy Spring, 2025.

Default Insurance Changes

The main talking point of the week, comes from the Federal government.

Swooping changes to mortgage default insurance across Canada are being implemented December 15th, 2024. This has something that has been lobbied for years and now it has finally come to light.

(1)    Maximum purchase price on default insured files will be increased by 50% to $1,499,999. This is the first change since 2012. This is great news for high income earners living in the GVA and GTA who traditionally would be forced to the condo market without a 20% down payment.

(2)    All Default Insured First Time Home Buyers can now take a 30 year amortization. This will provide payment relief of 9% by increasing the amortization by 5 years. First time buyers represent 43% of annual sales in Canada’s resale market so this is a big win for these borrowers.

Also by taking a 30 year amortization, borrowers will now have increased purchasing power due to lower debt servicing. This works out to about an 8% uplift in approval amounts.

We are still waiting for details regarding minimum down payments amounts over 1,000,000 and the effect on the insurance premiums. Will borrowers require a higher down payment on the amount above $1,000,000? Will insurance premiums go up? More info to follow.  

Insured lending has struggled since the pandemic with record low numbers over the last 2 years.

Inflation Relief

Mission accomplished…well almost. CPI is suddenly below target. Technically, it came in at 1.95% this week. We weren’t supposed to reach the target until next year, according to BoC forecasts.

Meanwhile, the overnight rate is still 150bps above neutral… something’s not right with this picture. The market forecasts are adjusting quickly and rate cuts will continue into next year.

If it weren’t for mortgage costs (up another 18.8% in August), inflation would be sitting at 1.2%. There is now buzz about a potential 0.50% cut to rates at the next Bank of Canada meeting.

Moving forward, there are challenging comparable data sets ahead so we will likely see a bump to inflation back into the mid 2% over the next 3-6 months.

The FED Drops the Hammer

The Fed just delivered a 0.50% rate drop this week, a bold move. This large of a policy change is generally reserved for emergency Fed meetings. The economy in the US is improving quickly, and this rate drop is the first sign of this.

Some key points from the Fed announcement

• The U.S. economy “continues to expand at a solid pace.”

• The “labour market is in solid condition”

• Unemployment will reach only 4.4% by year-end

• Consumer spending is “resilient”

• “We don’t think we’re behind [on rate cuts]”

• “The U.S. economy is in good shape.”

It is important to note that this decision was essentially the opposite of prior messaging.

• In June the Fed told us not to expect more than 25 bps of cuts this year

• It stated it is making a “commitment to not get behind” on easing

• Last meeting, they stated that it wasn’t considering a cut of 50 bps.

Only 10% of the 100+ economists surveyed by Bloomberg expected a 50 bps Fed cut on Wednesday. The bond market got it more right, projecting a 60% probability right before the meeting.

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 4.79%

• 3 year fixed, 30 yr amortization – 5.04%

• 2 year fixed, 30 yr amortization – 6.00%

• 5 year variable, 30 yr amortization – Prime – 0.70% = 5.75%

• 5 year fixed, 25 yr amortization – 4.74%

• 3 year fixed, 25 yr amortization – 4.94%

• 2 year fixed, 25 yr amortization – 5.95%

• 5 year variable, 25 yr amortization – Prime – 0.80% = 5.65%

INSURED

• 5 year fixed, 25 yr amortization – 4.49%

• 4 year fixed, 25 yr amortization – 4.54%

• 3 year fixed, 25 yr amortization – 4.64%

• 5 year variable, 25 yr amortization – Prime – .95% = 5.50%

Fast Facts

• $2,800 USD –  Price of Huawei’s new tri-folding smartphone, a futuristic device that folds out into a tablet-sized display. The device already has more than four million pre-orders.

• 52 – Number of wine corks in one pair of footwear brand Sole’s new shoes. The company collaborated with cork recycler ReCORK to reuse over half a million wine corks in total.

• 59% – Share of Canadians’ disposable income that went to making interest payments on debt, the highest rate since 1992. Just two years ago, that rate was only 5.86%.