Real Estate Blog

Further interest rate cuts required to increase purchasing power and improve consumer confidence

According to the Royal LePage House Price Survey released today, the aggregate price of a home in Canada increased 1.9 per cent year over year to $824,300 in the second quarter of 2024. On a quarter-over-quarter basis, the national aggregate home price increased 1.5 per cent, despite a slowdown in activity in the country’s most expensive markets.

“Canada’s housing market is struggling to find a consistent rhythm, as the last three months clearly demonstrated,” said Phil Soper, president and CEO, Royal LePage. “Nationally, home prices rose while the number of properties bought and sold sagged; an unusual dynamic. The silver lining: inventory levels in many regions have climbed materially. This is the closest we’ve been to a balanced market in several years.

“This trend dominates activity in two of the country’s largest and most expensive markets, the greater regions of Toronto and Vancouver, where sales are down yet prices remain sticky,” Soper continued. “There are exceptions. In the prairie provinces and Quebec, low supply and tight competition persist.”

Despite the Bank of Canada’s move to cut the overnight lending rate by 25 basis points on June 5th, from 5.0 per cent to 4.75 per cent, buyers did not immediately rush back to the market as initially expected.

“This spring, with bank rate cuts highly anticipated, we saw some buyers race to get a deal done ahead of an expected spike in demand. Yet, when that first cut finally occurred in early June, market response was tepid,” said Soper.

“A change in monetary policy drives consumer behaviour in two important ways. Lower rates mean lower monthly payments, opening the door to some families previously shut out of the market. Secondly is the psychological signal broadcast to sidelined buyers that the tide is turning, and that market activity is about to pick up again,” added Soper. “Not surprisingly, the quarter-point cut to the bank rate didn’t substantially improve the affordability picture. As for consumer sentiment, our early year research indicated that only one in ten potential homebuyers would be motivated by a tiny rate drop. The tale the market tells as rate cuts get to the point of a material reduction in the cost of borrowing should be a very different one.”

According to a Royal LePage survey, conducted by Leger earlier this year, 51 per cent of sidelined homebuyers said they would resume their search if interest rates reversed. Ten per cent said a 25-basis-point drop would prompt them to jump back into the market, 18 per cent said they are waiting for a cut of 50 to 100 basis points, and 23 per cent said they need to see a cut of more than 100 basis points before they will consider resuming their search.

The Royal LePage National House Price Composite is compiled from proprietary property data nationally and regionally in 64 of the nation’s largest real estate markets. When broken out by housing type, the national median price of a single-family detached home increased 2.2 per cent year over year to $860,600, while the median price of a condominium increased 1.6 per cent year over year to $596,500. On a quarter-over-quarter basis, the median price of a single-family detached home increased 1.8 per cent, while the median price of a condominium increased 0.8 per cent. Price data, which includes both resale and new build, is provided by RPS Real Property Solutions, a leading Canadian real estate valuation company.

The national aggregate home price remains well above pre-pandemic levels. In the second quarter of 2024, the aggregate price of a home in Canada recorded an increase of 30.8 per cent over the same period in 2019.

“2024 marks the fifth year since the pandemic and post-pandemic rebound began to wreak havoc on real estate prices. Yes, values remain well above 2019 levels, yet a thirty per cent rise in home values spread over five years, or six per cent annually, is approaching long-term norms for Canadian residential property appreciation. The market has a way of correcting mistakes.”

Inflation and interest rates

For the last two years, the national housing market has seen home prices fluctuate between modest declines and increases – with some regional exceptions – as a result of the impacts of higher interest rates. As the Bank of Canada cautiously navigates the delicate balance between lowering the key lending rate and keeping inflation in check, some segments of Canada’s housing market have stalled.

“Canada’s housing market faces pent-up demand after two stifling years of high borrowing costs. While inflation control is crucial, persistently high rates are increasing the risk of a surge in demand when buyers inevitably return. New household formation and immigration keep fueling the need for housing, and a sudden release could create much market instability. This highlights the need for a more nuanced approach that balances inflation control with economic vitality,” added Soper.

“It is worth noting that once you remove the impact of high mortgage rates themselves from Canada’s Consumer Price Index calculation, inflation today sits well below the two per cent target.”

According to Statistics Canada’s latest report, Canada’s inflation rate rose to 2.9 per cent in May, up from 2.7 per cent in April. When shelter costs are removed, that figure dips to 1.5 per cent.

Increased borrowing costs slow new home construction

Elevated borrowing rates are not only dampening housing market activity but also stifling the construction of new homes. Builders, who rely heavily on lending, are finding it increasingly difficult to finance new projects, exacerbating the country’s shortage of housing at a time when our population continues to grow.

“Gradual interest rate reductions could unlock a housing supply logjam,” said Soper. “Lower rates would not only empower buyers but also incentivize builders, who rely on borrowing for development. This is crucial to meet the diverse needs of our growing population. We need affordable options for first-time buyers, growing families, and downsizing retirees. Incremental rate adjustments are key to achieving a balanced and inclusive housing market. Without a significant supply boost, prices will continue to rise, impacting both those who seek home ownership and the one-third of Canadians in rental markets.”

The Canada Mortgage and Housing Corporation (CMHC) reported a month-over-month increase in national housing starts in May, following two months of decline. In Vancouver, where competition for housing remains extremely tight, housing starts declined, while Toronto and Montreal posted a lift in starts. Still, the rate of new construction remains well below what is required to satisfy demand.

“Canada’s housing market faces complex challenges. While raising interest rates was crucial to fighting inflation, it has unintentionally choked off the essential flow of new housing supply. Higher borrowing costs, coupled with labour shortages in the construction trades and rising material prices, have made it economically unsustainable for developers to launch new projects. This creates a perfect storm – our population is growing steadily, yet we’re building far fewer homes than what’s needed to meet that demand. This situation urgently needs innovative solutions to ensure Canadians have access to affordable housing options,” concluded Soper.

Here's How to Prepare for Your Mortgage Renewal

More than half of Canadian mortgages will renew before the end of 2026, and with the Bank of Canada lowering its key interest rate from 5.0% to 4.75% on June 5th, many homeowners are now wondering which mortgage type they should opt for upon renewal — a fixed or variable rate. Understanding the options available and anticipating changes is essential to successfully navigating today's evolving mortgage landscape.

With a significant cohort of homeowners needing to renegotiate their mortgages within the next three years, those who opted for variable-rate mortgages -– or who took out a loan in 2021 at the trough of historically low rates — will be particularly affected by the planned adjustments. For those who will soon have to deal with the current higher-rate mortgage environment, below are some considerations to help you make an informed decision about an upcoming mortgage renewal.

Current Situation

While variable rates were historically lower during the height of the pandemic real estate boom, the trend has recently reversed, with variable rates now higher than fixed rates. The average five- year variable interest rate offered by mortgage lenders currently hovers around 6.7%, while most fixed rates are typically 5.6%.

A variable mortgage rate depends on a number of economic factors, such as the key overnight lending rate, which is set by the Bank of Canada. Although Canada's central bank recently cut its key rate for the first time in four years, the institution could change course if inflation levels increase in the months ahead. However, economists widely expect further cuts to the lending rate by the end of 2024. The trend is set to continue into 2025, unless economic conditions change significantly. Regardless of declining interest rates, the historically-low rates Canadians have been accustomed to over the last two decades are now a thing of the past.

What You Need to Know About Variable Rates

When it comes to variable-rate mortgages, when the prime rate rises – which is influenced by the Bank of Canada's overnight lending rate – mortgage payments automatically increase.

However, with variable loan structures with fixed-payment options, monthly payments remain unchanged, even in the event of a rate increase. Instead, this type of variable-rate mortgage adjusts the mortgage amortization period (the time it takes to repay the mortgage in full). This is due to the fact that a smaller proportion of each payment is allocated to repaying the mortgage principal.

Understanding Your Needs

The choice between a fixed- and variable-rate mortgage largely depends on the borrower's risk tolerance and personal situation. Since variable rates are subject to fluctuations, is your lifestyle conducive to these changes? Even if interest rates begin to fall, there are many economic factors influencing their direction, which can occur at various times during your mortgage term.

The right mortgage product for you depends on your short- and medium-term situation. If you're currently in a period of transition (career change, separation, etc.), you may want to opt for a fixed-rate that offers you some stability.

Strategic Options for Borrowers

Fixed-Rate Mortgage with a Shorter Term

Amidst economic uncertainty, more borrowers are opting for fixed-rate mortgages with shorter terms (one, two or three years). This way, in an environment where rates are quickly changing, borrowers can lock in predictable monthly payments without the need to stay with the same rate long term.

Hybrid-Rate Mortgage

This option combines customized features of both a variable and a fixed rate — part of the mortgage has a fixed interest rate and the other has a variable interest rate. This way, the borrower can benefit from the best of both worlds.

Convertible Mortgage

This type of loan offers the possibility of converting a variable interest rate loan into a fixed-rate mortgage, or vice versa, before maturity, thus allowing borrowers to adapt their mortgage financial strategy to market conditions.

Consult a Professional

At a time when real estate prices remain high due to sustained demand, choosing the right mortgage product is crucial. It is advisable to consult a mortgage broker to explore scenarios best suited to each individual situation. Anticipating interest rate fluctuations and adjusting your financial strategy accordingly can make a big difference in managing your long-term mortgage.

Have you noticed an increase in your electricity bill?

In early 2022, the government announced an increase in prices, but the bill to cap Hydro-Québec's distribution rates at 3% was finally passed last February.

Whether it's to reduce your expenses or to benefit the planet, here are some tips and tricks that can help you save energy and lower your electricity bill.

Improve air circulation

Ensure that vents are not blocked. Obstructed air vents cause decreased air circulation and force your ventilation system to work harder to maintain adequate airflow, which could result in higher than necessary energy consumption. In fact, 25% more energy is required to circulate air if these openings aren't completely clear.

Change your light bulbs

Replace incandescent light bulbs with energy-saving LEDs. These light bulbs have a long life and produce the same amount of light as incandescent bulbs while consuming less energy. Also, LEDs don't contain mercury, a toxic element present in incandescent bulbs, making them easily recyclable and an environmentally friendly choice.

Install a programmable thermostat

A programmable thermostat allows you to regulate the temperature in your home according to your schedule and habits. Ideally, the ambient temperature should not exceed 21 or 22 degrees. Know that by reducing the temperature in your home by 1°C, you could save as much as 5% to 7% on your energy bill.

Insulate your home

Your home's thermal insulation reduces heat and cold loss, which can save you money on heating and cooling. In order to do so, you can add or replace insulation in your walls, attic, floors, windows, doors and pipes. The materials commonly used as insulants are mineral wool, expanded polystyrene, polyurethane and cork. By properly insulating your home, you would not only save money on your energy bill, but you would also reduce your carbon footprint by reducing your home's greenhouse gas emissions.

Use energy-efficient appliances

Look for ENERGY STAR certified appliances, which are the most efficient when it comes to energy use. By choosing these appliances (refrigerators, dish washers, air conditioners, washers and driers), you can considerably reduce your energy consumption. According to ENERGY STAR, energy-efficient appliances can reduce energy consumption by 10% to 50% compared to standard appliances.

Turn off electronics on standby

Electronics continue to use electricity when on standby, so be sure to turn them off completely when they're not in use. TVs, computers, printers and gaming consoles continue to consume energy, even when they're on standby. This type of energy consumption is known as standby or phantom power. You can also turn off multiple appliances at once by using power bars with on/off switches.

Use thermal curtains

Thermal curtains can help reduce the amount of heat and cold lost through windows, which can save you money on heating and cooling. Thermal curtains are made from insulating materials which prevent hot air from escaping in the winter and cool air from escaping in the summer. In addition to being an efficient solution for reducing energy loss, thermal curtains can also add a layer of insulation to your windows, which can improve your comfort. By using thermal curtains, you can save money on your electricity bill and contribute to sustainable energy consumption.

You now have some simple tips and tricks to put in place to reduce your energy consumption and electricity bill. If you often work remotely or are planning home improvement projects, ensure your home insurance policy is adapted to your needs. The money you save on your electricity bills could be spent enjoying some free time as the good weather returns.

After holding the overnight lending rate at a two-decade high of 5% for 11 months, the Bank of Canada has reduced its policy rate. In its pre-scheduled announcement for June, Canada's central bank reduced the target for the overnight rate by 25 basis points to 4.75%.

Though inflation remains slightly above the BoC's target rate of 2%, the total consumer price index has fallen over the past year, signaling that core inflation has slowed and will continue on a downward trajectory.

“Governing Council decided monetary policy no longer needs to be as restrictive and lowered the policy interest rate by 25 basis points to 4.75%,” said Tiff Macklem, Governor of the Bank of Canada, in a statement to reporters following the announcement. “We've come a long way in the fight against inflation. And our confidence that inflation will continue to move closer to the 2% target has increased over recent months. The considerable progress we've made to restore price stability is welcome news for Canadians.”

What does this mean for Canada's housing market?

With the highly-anticipated interest rate cut now here, many rate-sensitive homebuyers will take this as a sign to move off the sidelines and back into the housing market.

According to a recent Royal LePage survey, conducted by Leger, 51% of Canadians who put their home buying plans on hold the last two years said they would return to the market when the Bank of Canada reduced its key lending rate. Ten per cent of respondents said a mere 25-basis-point-drop will prompt them to jump back in, 18% said they would wait for a cut of 50 to 100 basis points, and 23% said they'd need to see a cut of more than 100 basis points before considering resuming their search.

“The long-awaited cut to the overnight lending rate has arrived. The Bank of Canada held its key lending rate at a two-decade high of 5% for the past 11 months, and more than four years have passed since the last time that the rate was reduced,” said Phil Soper, president and CEO of Royal LePage. “Our research indicates that half of sidelined homebuyers in Canada plan to resume their home search plans once the bank rate begins to drop. This will no doubt spark activity and put upward pressure on home prices in the second half of the year.”

The Bank of Canada will make its next announcement on Wednesday, July 24th.

Canadian Renters' Bill of Rights

More Canadians are renting for longer periods of time before they transition into home ownership. The 2024 budget announced several measures intended to more effectively protect tenants and strengthen their path to buying real estate.

Budget 2024 announced the creation of the Canadian Renters' Bill of Rights, which proposes a nationwide standard lease agreement, and would require landlords to disclose rental price history on properties. Through the Canadian Mortgage Charter, the Budget also calls on banks and lenders to allow tenants to report their rental payment history to credit bureaus in order to better their credit scores, thereby strengthening their future mortgage applications.

Funding for the construction of new homes

The federal government is promising billions of dollars in spending towards the construction of new housing.

The 2024 budget unveiled the Canada Builds initiative, which will enable the country's Apartment Construction Loan Program to partner with provincial governments in order to build more rental accommodation. Starting next year, the program will receive $15 billion in additional funding for the creation of 30,000 new homes, topping up the program's current funding allocation to over $55 billion for a total of 131,000 units, set to be built by 2031.

30-year mortgage amortizations for first-time buyers of new homes

Through the Canadian Mortgage Charter, the 2024 budget announced that starting on August 1st, first-time buyers purchasing a newly-constructed home can access 30-year mortgage amortizations, a product that has previously only been available to those with a down payment of at least 20%.

Amendments to the Home Buyers' Plan

Saving for a down payment is one of the largest hurdles new homebuyers face. To make it easier to access funds for a home purchase, Budget 2024 unveiled an amendment to the withdrawal limit on the Home Buyers' Plan, which has been increased from $35,000 to $60,000 as of April 16th.

Support for single-family home suites

To encourage the creation of secondary housing units, the 2024 budget announced $409.6 million over four years towards a Canada Secondary Suite Loan Program, run by the CMHC. This will enable homeowners to borrow up to $40,000 in low-interest loans towards the cost of adding a secondary suite to their homes, which can be used for multi-generational living purposes or as a source of rental income.

Adjustable-rate mortgages (ARMs) offer borrowers a unique opportunity to take advantage of fluctuating interest rates, providing flexibility and potential cost savings over the life of the loan. However, ARMs also come with inherent risks and uncertainties that borrowers should carefully consider before choosing this type of mortgage. In this article, we'll explore the pros and cons of adjustable-rate mortgages and help you determine whether an ARM is the right choice for your homeownership needs.

Understanding Adjustable-Rate Mortgages (ARMs)

An adjustable-rate mortgage (ARM) is a type of home loan where the interest rate is not fixed for the entire term of the loan. Instead, the interest rate fluctuates periodically based on changes in an index, such as the prime rate or the London Interbank Offered Rate (LIBOR). Typically, ARMs have an initial fixed-rate period, followed by adjustable-rate periods where the interest rate can adjust annually or at specified intervals.

The Pros of Adjustable-Rate Mortgages

Lower Initial Interest Rates: ARMs often start with lower initial interest rates compared to fixed-rate mortgages, making them attractive to borrowers seeking lower monthly payments and potential savings during the initial fixed-rate period.

Potential for Lower Payments: If interest rates decrease or remain stable over time, borrowers with ARMs may benefit from lower monthly payments during the adjustable-rate periods, resulting in increased affordability and cash flow flexibility.

Short-Term Ownership: ARMs can be advantageous for borrowers who plan to sell or refinance their home within a few years, as they can take advantage of the lower initial interest rates without being exposed to the risks associated with long-term interest rate fluctuations.

Rate Caps and Limits: Most ARMs include rate caps and limits that restrict how much the interest rate can increase or decrease during each adjustment period and over the life of the loan, providing borrowers with a level of protection against drastic rate changes.

The Cons of Adjustable-Rate Mortgages

Interest Rate Risk: One of the main drawbacks of ARMs is the uncertainty surrounding future interest rate movements. If interest rates rise significantly during the adjustable-rate periods, borrowers could face higher monthly payments and increased financial strain.

Payment Shock: Rapid increases in interest rates can lead to payment shock for ARM borrowers, causing a significant and sudden jump in monthly mortgage payments that may be difficult to afford, especially for borrowers on fixed incomes.

Budgeting Challenges: The fluctuating nature of ARM payments can make budgeting and financial planning more challenging for borrowers, as they may need to account for potential changes in their housing expenses over time.

Long-Term Costs: While ARMs may offer lower initial interest rates, borrowers who hold onto their mortgages for extended periods may end up paying more in interest over the life of the loan if interest rates rise significantly during the adjustable-rate periods.

Is an ARM Right forYou?

Deciding whether an adjustable-rate mortgage is the right choice for your homeownership needs depends on various factors, including your financial situation, risk tolerance, and future plans. Consider the following questions:

Are you comfortable with the potential for fluctuating interest rates and payments?

Do you plan to stay in your home for the long term or sell/refinance within a few years?

How do current interest rate trends and economic conditions impact your decision?

Have you thoroughly reviewed and understand the terms, features, and risks associated with the ARM product?

Ultimately, consulting with a qualified mortgage advisor or financial planner can provide valuable guidance and assistance in evaluating your options and determining whether an ARM aligns with your financial goals and preferences.

National median house price forecast to increase 5.0% in Canada's recreational market in 2024 as re-engaged buyers compete for limited supply

According to Royal LePage, the median price of a single-family home in Canada's recreational regions is forecast to increase 5.0 per cent in 2024 to $678,930, compared to 2023, as a boost in consumer confidence will bring sidelined buyers back to the market. All of Canada's provincial recreational markets are forecast to see an increase in single-family home prices in 2024. Ontario is forecasting the greatest price appreciation, at 8.0 per cent.

“Across the nation there was a sizable rise in demand for all types of housing during the pandemic, but nothing could match the 'gold rush fever' that occurred in recreational property markets,” said Phil Soper, president and CEO, Royal LePage. “With city offices closed and the wide availability of high-speed internet allowing people to take video meetings on lakefronts and mountain tops, excess demand pushed recreational property prices to unprecedented heights.

“Inflation reared its ugly head, interest rates soared and the economic downturn that followed pushed cottage, cabin and chalet prices off those pandemic peaks, yet the fundamental demand for recreational living has not abated. We believe that this market segment will see a resurgence of activity in 2024,” continued Soper.

In 2023, the weighted median price of a single-family home in Canada's recreational property regions decreased 1.0 per cent year over year to $646,600. This follows a year-over-year price decline of 11.7 per cent in 2022. When broken out by housing type, the weighted median price of a single-family waterfront property decreased 7.9 per cent year over year to $1,075,500 in 2023, and the weighted median price of a standard condominium decreased 1.5 per cent to $420,300 during the same period. Despite a modest decrease over the past year, the national weighted median single-family home price remains 59 per cent above 2019 levels.

“Demand has been building quietly on the sidelines,” said Soper. “Our regional experts tell us that buyer interest is steadily ramping up as the spring market approaches. With hybrid office and work-from-home business models being the norm now, many working people see the opportunity to make much better use of country properties.”

As homebuyers sought out more space, privacy and access to nature during the height of the COVID-19 pandemic, many recreational real estate markets experienced a deep cut to their available home supply as buying activity soared. Although demand has since leveled off from historical highs, markets continue to grapple with low inventory levels.

According to a survey of 150 Royal LePage recreational real estate market professionals across the country, 41 per cent of respondents reported less inventory compared to the same time last year; 33 per cent of respondents said that their region has similar levels of inventory. However, 64 per cent reported similar or more demand from buyers for recreational homes. This sustained and growing demand for a limited number of available properties is expected to put upward price pressure on Canada's recreational market. Interest rate cuts could trigger market revival

Royal LePage recreational property advisors predict that buying activity will intensify when the Bank of Canada begins to make cuts to the overnight lending rate. Sixty-two per cent of experts said they believe demand will increase slightly in their region when interest rate cuts are made, while 21 per cent expect demand will increase significantly.

“Cash plays a larger role in the purchase of recreational property than with urban homes, yet the vast majority of buyers finance at least part of their purchases,” noted Soper. According to the survey, 78 per cent of experts said that recreational property buyers in their region typically obtain financing, such as a loan or mortgage.

“Recreational property purchases are not as heavily impacted by mortgage rates as those in the residential market. That said, consumer confidence in general will get a boost when we see a cut to the Bank of Canada's key lending rate, expected later this year. This lift in activity will put upward pressure on prices. And, if this coincides with an influx of inventory, we should see a boost in sales as well.”

Recreational lifestyle remains attractive to Canadians Nationally, 59 per cent of recreational real estate experts surveyed said that homeowners in their region typically use their properties as a secondary residence or vacation home. A smaller cohort, 21 per cent, said that owners tend to use their recreational homes partly as a vacation home and partly as a rental property. The majority of buyer demand for recreational properties comes from those aged 50 to 64, according to 57 per cent of experts.

“Though recreational trends are specific to the individual regions, we can confidently say that most Canadians who own a cottage or cabin use it for their own life-enriching purposes,” added Soper. “It's a testament to our recreational communities and the lifestyle they afford Canadians that most of those who relocated to cottage country during the pandemic are staying put.”

While some homeowners relocated full-time to a recreational region during the pandemic, 55 per cent of recreational experts nationally said that it is not a common trend for those homeowners to return to urban or suburban communities as a result of changes to their remote work capabilities or preference in lifestyle. There are several recreational regions in Canada that are home to lively year-round communities.

“Whether it's for retirement or a summer vacation destination, we anticipate that more Canadians will look to embrace recreational living this year as lower borrowing costs bring their recreational home aspirations closer within their reach,” concluded Soper.

Purchasing a home is an exciting milestone, but it's important to understand the financial obligations involved. One such obligation in Ontario is the Land Transfer Tax (LTT). In this article, we will provide an overview of the LTT, including how it is calculated, potential refunds for first-time homebuyers, and important considerations for buyers.

What is Land Transfer Tax (LTT)?

Land Transfer Tax is a fee imposed by the Ontario government on the purchase or transfer of land or an interest in land. It is typically paid by the buyer and is based on the purchase price of the property.

Calculation of Land Transfer Tax

The amount of LTT payable depends on the purchase price of the property. The current LTT rates Provincial can be found below.

First-Time Home Buyer Refund

To assist first-time homebuyers, the Ontario government offers a refund of the LTT. Eligible first-time homebuyers can receive a refund of all or part of the LTT, helping to reduce the upfront costs of purchasing a home. It's important to note that as of January 1, 2017, the eligibility for the first-time homebuyer refund program is restricted to Canadian citizens and permanent residents.

Considerations for Home Buyers

When budgeting for your home purchase, it's crucial to consider the LTT. It is wise to consult with a mortgage broker or a knowledgeable real estate professional to estimate the LTT amount based on the purchase price of the property. This will help you plan and manage your finances effectively. Additionally, it's essential to factor in other costs associated with buying a home, such as legal fees, home inspections, appraisal fees, and moving expenses. These expenses can add up, so being prepared financially is key.

Next Steps

Understanding the Land Transfer Tax is essential for homebuyers in Ontario. By familiarizing yourself with the LTT rates, potential refunds, and other associated costs, you can make informed decisions when purchasing a home. Consult with a mortgage broker at Mortgage Brokers Ottawa for personalized guidance throughout the homebuying process and to explore available mortgage options. Remember, buying a home is a significant investment, and being well- informed about the financial aspects will help ensure a smooth and successful homebuying experience.

Ontario's Current LTT Rates:

In Ontario, you'll pay a land transfer tax based on your home's value.

• 0.5% of the first $55,000 of the home's value.

• 1.0% of any additional value between $55,000 and $250,000.

• 1.5% of any additional value between $250,000 and $400,000.

• 2.0% of any additional value between $400,000 and $2 million.

• 2.5% of any additional value that's more than $2,000,000 if the land contains no more than two single-family residences.

For most people, the hardest part about buying a home (especially the first one) is saving for the down payment. Many people will not have 20% of the purchase price saved for a down payment. With mortgage loan insurance you can put as little as 5% as a down payment.

Mortgage loan insurance protects the lender from default; most Canadian lending institutions are required by law to have it. If the borrower defaults (fails to pay) on the mortgage, the lender is reimbursed by the insurer. The cost for this coverage is in the form of an insurance premium which is often added to the mortgage, or you can choose to pay in a single lump sum at the time of closing. Canada Mortgage and Housing Corporation (CMHC), Sagen and Canada Guarantee are three major providers of this type of insurance in Canada.

CMHC premiums are as follows:

Minimum Down Payment: Homes Over $500,000

This applies to home buyers who have a down payment of less than 20% and thus require mortgage default insurance. The minimum down payment is 10% for the portion of a house price that exceeds $500,000.

Example:

To break this down, the minimum down payment for a $600,000 home would be $35,000. That's 5% on the first $500,000 ($25,000) and 10% on the next $100,000 ($10,000) in price. That would be a blended down payment of 5.8%.

51% of Canadians who put their home buying plans on hold the last two years say they will return to the market when Bank of Canada reduces key lending rate

The increased cost of borrowing over the last two years has forced millions of Canadians to reconsider or readjust their plans to purchase a home. Since the Bank of Canada began raising its key lending rate in March of 2022, more than a quarter of the country’s adult population (27%) has been active in the market, and more than half of them (56%) say they’ve been forced to postpone their property search as a result of rising interest rates, according to a recent Royal LePage survey, conducted by Leger.1

With the rate of inflation having come down over the past year, close to the desired 2% target, it is expected that the Bank of Canada will make its first cut to the overnight lending rate later this year – a welcome relief for variable-rate mortgage holders and those who have been forced to put off their home buying plans. Among those who have had to postpone their purchase, 51% say they will resume their search if interest rates reverse – 10% say a mere 25-basis-point-drop will prompt them to jump back in, 18% say they are waiting for a cut of 50 to 100 basis points, and 23% say they need to see a cut of more than 100 basis points before they will consider resuming their search.

“Following the first rate hold by the Bank of Canada in March of last year, we saw an immediate surge of activity in the market as consumer confidence strengthened. I expect a similar wave of buyer demand at the first indication that highly-anticipated cuts by the central bank are on the horizon,” said Phil Soper, president and CEO, Royal LePage. “Buyer behaviour is strongly linked to their confidence that the home they want to buy today will not be less expensive tomorrow. We expect the spring will mark that pivotal moment.”

One fifth (20%) of sidelined buyers say they no longer plan to purchase a home, while another 12% say they are prepared to jump back in if the BoC’s key lending rate remains unchanged.

Among those who plan to re-enter the market once rates come down, 44% intend to obtain a four-year or five-year fixed-rate mortgage, the most popular mortgage type and term in Canada. That’s double the number of respondents who say they will choose a variable-rate mortgage (22%). Another 12% say they will obtain a short-term fixed-rate mortgage.

“In the first few weeks of the year, we have seen activity pick up in markets large and small, right across the country. Appointment bookings, property showings and requests for mortgage pre-approval through our lending partners are all up sharply. Our people on the front lines report that today’s real estate consumers are well informed, watching trends and fully prepared to engage when they perceive conditions are improved,” added Soper.

Of those who have postponed their home buying plans due to rising interest rates, 65% remain engaged in the home buying process. This includes those who are casually browsing listings (39%), continuing to save for a down payment (19%), have applied for a mortgage pre-approval (12%) or have obtained a mortgage pre-approval (7%). However, some have disengaged from the home shopping process entirely – 26% of respondents say that they have abandoned their home buying plans for the time being. 

The Bank of Canada’s overnight lending rate currently sits at 5.0%. The next interest rate announcement is scheduled for March 6th.

In the complex landscape of real estate financing, selecting the right mortgage type is a pivotal decision that can significantly impact a homeowner's financial journey. As individuals start on the path to homeownership, they are confronted with a plethora of mortgage options, each with its unique features and considerations. This article aims to simplify the diverse array of mortgage types available, giving clarity on the distinctive characteristics of conventional mortgages, high ratio mortgages, open mortgages, fixed-rate mortgages, and variable rate/adjustable rate mortgages. By exploring the nuances of these financial instruments, prospective homebuyers can make informed choices tailored to their specific needs and financial goals.

Conventional Mortgage

A conventional mortgage is one where the down payment is equal to 20% or more of the property's value/purchase price. A low-ratio mortgage does not normally require mortgage loan insurance.

High Ratio Mortgage

A high ratio mortgage is one where the borrower is contributing less than 20% of the value/purchase price of the property as the down payment. High ratio mortgages must be insured through Canada Mortgage and Housing Corporation (CMHC), Sagen or Canada Guaranty, the three mortgage insurance companies in Canada.

Open Mortgage

An open mortgage allows the mortgagor to prepay all or part of the principal amount at any time without penalty. Open mortgages usually have shorter terms of six months or one year, but can include some variable rate/longer terms as well. Interest rates on open mortgages are typically higher than on closed mortgages with similar terms.

Fixed Rate Mortgage

A fixed rate mortgage is one where the interest rate is determined and locked in for the term of the mortgage. Lenders often offer different prepayment options allowing for quicker repayment of the mortgage and for partial or full repayment of the mortgage.

Variable Rate/Adjustable Rate Mortgage

A variable rate or adjustable rate mortgage is one where the interest rate can increase or decrease during the term. The interest rate varies with changes in prime lending rates. How changes in the interest rate affect your payments will depend on whether your payments are fixed or adjustable.

With there being many different types of mortgages, it really depends on your specific situation. Depending on things like: income, future income, house price, other debts, down payment etc... Different mortgages may be more suitable for you than others. The best way to find out which is right for you, is to talk to your mortgage broker or agent, however, it is good for you to know what the different types are and what they mean.

Pets provide a lot of benefits to their owners. But owning a pet comes with a lot of responsibility. In addition to the care and time you need to give to an animal, there’s also a civil liability that comes with adoption.

Is my dog covered under my home insurance?

When you adopt a dog or if you already own a dog and you sign up for a new home insurance policy, the first thing to do is to inform your insurer. That way, you’ll be protected if your pooch happens to cause some damage.

Nearly 50 percent of animals are not declared by owners, even though it’s mandatory. Not informing your insurance company that an animal is living under your roof could have serious consequences. You could be denied a claim and some insurers could even refuse to insure you.

Generally speaking, your pets are covered under your home insurance. Your insurer may be reluctant to insure certain breeds of dogs, though, so discuss it with your insurance agent. When you tell your insurance company that you own a pet, you’ll need to choose a home insurance policy that suits your needs, one that covers your home (to cover your property) and your liability (to cover damage to others, for example).

One thing animals have in common is that they’re unpredictable. Even if you’ve done your best to train your dog impeccably, you can never be sure that an accident or damage won’t happen. It’s a risk to you, to your property, to others and therefore to your insurer.

Am I responsible for damage caused by my dog?

You’re responsible for the animal you own. This responsibility includes property damage, but also injury to others. In addition, according to Éducaloi, a person who is looking after an animal may also be considered responsible for the animal. For example, if your friend looks after your dog while you’re on vacation and during that time your pet tears up your new sofa, your friend could also be responsible. Or, if you look after your neighbour’s dog and it attacks another dog while you’re out walking, you could also be held responsible since you were looking after it at the time the incident occurred.

What happens if your dog attacks someone?

As mentioned above, you’re responsible for your dog and its actions. So if your dog bites your visitor’s ankle or attacks the neighbour’s dog, they have the right to sue you. You may have to pay compensation to the person who was bitten or to the owner of the attacked dog. If you have reported your dog to your insurance company and they have agreed to cover it, your liability insurance should provide coverage for this type of claim.

If your dog causes damage, contact your insurance agent to file a claim.

Tips for preventing damage

Although your pet’s behaviour is unpredictable, it’s still possible to reduce the associated risks. If your dog requires special precautions, don’t hesitate to apply them.

First, keep your dog on a leash when you leave your home. It’s now mandatory to have dogs on a leash at all times when on public property. If your dog tends to be aggressive, put a muzzle on it and be sure to warn people who approach it.

It’s best to have a fenced yard, so your dog can expend energy and learn better behaviour. You’ll also prevent your dog from running away or making unannounced visits to a neighbour’s yard.

Indoors, avoid leaving things lying around. If your pet tends to chew and nibble, put away your shoes and spray chair legs and furniture corners with a repellent solution.

Keep your pet in a cage, at least initially. For the pet’s safety and for the sake of your furniture, this can prevent a lot of damage.

Think about training courses if your pet’s behaviour is hard to manage. Dogs can meet other dogs and humans to socialize there and learn to listen to you.

Lack of mental and physical stimulation is often what causes bad behaviour in dogs. Make time for daily exercise and regular mental stimulation. You’ll be surprised at how quickly your pet’s behaviour improves.

Pets require a lot of care, time and attention. We know how much your pets mean to you. Owning a dog is a long-term commitment, so it’s best to be fully aware of all the responsibility it entails.