Bank of Canada Expected to Make No Changes on Interest Rates

It looks like the central bank is not going to announce changes in interest rates soon, as can be inferred by economists regarding the matter.

Senior deputy governor Carolyn Wilkins and governor Stephen Poloz of Bank of Canada will provide an update soon; but experts are not expecting them to give an update on the central bank’s outlook that may hint on a future interest hike. This is in view of the cooling Canadian economy in recent months.

Economists Concur

Economists agree that the Bank of Canada is not likely to announce a drastic change anytime soon, and that any changes will be very small. The key target for overnight rate is currently at 1%, already boosted twice this year by 0.25% in July and again in September.

Nomura global foreign exchange analyst Peter Dragicevich shared in a recent research note that they are expecting that the Bank of Canada will give gradually increasing interest rates based on the central bank’s outlook.

Impressive Economic Performance

The strong growth in the Canadian economy is the background by which the bank’s 2 rate increases took place. It was ended in July after 8 strong months of increasing gross domestic product. The latest update was released on October 31 by Statistics Canada.

Economist Benjamin Reitzes of BMO Capital Markets said that there are likely to be changes to the growth outlook in the bank’s monetary policy report because the GDP for the second quarter was way above what the bank expected.

Reitzes shared in a recent commentary that changes in the growth outlook may result to 2017 revised by as much as 3.1%, a figure that will match the best pace in the past 12 years. He added that the GDP for the third quarter is likely to hold steady at 2% and that the same is expected for the last 3 months of 2017.

No Patterns and No Scripts

Bank of Canada governor Stephen Poloz said in a recent speech that the central bank won’t follow a script when it comes to rate hikes, even in view of the Canadian economy’s standing this year. He further said that what the bank will do is just to pay close attention to data changes in the economy to determine possible future changes in interest rate policy. He added too that monetary policy will almost always be data dependent and can swing in either direction with the data.

It should be noted that the bank is equipped to ascertain how things will turn out. They can model how today’s stronger exchange rate and interest rate may impact those with large debts to slow down consumption and housing.

Other factors may affect economic growth. Ontario’s new minimum wage might have a significant impact on inflation rates and the new mortgage rules might switch things around.

Want to know if these recent turn of events can affect your eligibility for getting a home equity loan or a second mortgage? Contact us today so we can talk about this with you.

Need Alternative Financing for Investing? Read This!

No matter how established you are as an investor, there will be times when getting a bank to finance a new property or other investments can be a hassle. Changes are always at play when it comes to financing and getting your loan approved by banks.

The above is how and why asking for assistance from private mortgage lenders can come into play. Thankfully, there are ways to get around with the changing economic climate, as we will share in this article.

Financing Today

It is not a new thing that those who happen to have a lot of properties may still have a difficult time getting a bank to finance a new venture. Banks like security and they will always go for the most ‘secure’ loan. As a result, fewer and fewer financing options are available for investors. Add to this the changing rules on private lending and declining property values, borrowing is simply not as it used to be.

Try a Private Lender

Enter private lenders who provide private financing. They make money from mortgage investment corporations and investors, so they are likely to be more receptive than banks. The interest they charge is a bit higher because they take a higher risk lending to those who were turned down by banks, but they do provide a solid solution for those who are in need of investing funds.

Even investors who have bad credit are able to apply for and secure a loan from private lenders more so with the help of mortgage brokers.. They can then use the loan to fund renovations for existing properties or for financing new investments.

Risk Reduction is Possible

Private lenders can do what banks cannot do because they can opt for lower investor payouts therefore not incurring a huge risk such as those in loans of higher value. Another thing is that because they in an equity-based market, they can decrease loan-to-value ratio with no issues.

Are they always like this? The answer is no. They’ve even become a bit stricter when reviewing a borrower’s financial history lately. With this said, private lenders are still a lot more flexible than banks and do not just rely on someone’s beacon scores, current employment status, or income when considering the approval of a loan.  If you know how to work with private lenders, you’re one step ahead in securing financing for your investment.

Dealing with Private Lenders

There are a few tips that work great with private lenders. These tips are meant to help with securing a loan and paying it back. Read about them below!

  • Transparency and honesty – be honest about your financial situation and other pertinent details. Hiding your true financial status is the biggest mistake you can make.
  • Be ready – find out all the paperwork you need. Get the help of a mortgage broker to be sure about this.
  • Be patient – securing a loan can be a lengthy process with a substantial amount of paperwork needed. Losing your cool won’t make the process go faster.
  • Know what fees needs to be paid – lenders and mortgage brokers do not work for free. Ask about the fees upfront for smooth-sailing later on.
  • Plan an exit strategy – an exit strategy allows you to have a secure financing in place. This is another thing that a mortgage broker can assist you with.

Looking for a mortgage broker? Whether you’re looking for a home equity loan, second mortgage, private mortgage and more, we’re here to help! That’s what we do! Contact us and let us help you with financing your investment!


CIBC Report Warns About House Price Increase in Vancouver and Toronto

Economist Benjamin Tal of CIBC World Markets shared that unless housing preferences and policies change, then the Vancouver and Toronto housing markets will continue to rise as increasing demand and tight supply put more pressure in said markets.

Transition Period

The economist also said that the Canadian housing market is currently in an important transition period, with Vancouver and Toronto being in the midst of it. He also stated that the market is likely to stabilize with activity and perhaps even soften as it adjusts to upcoming and recent regulatory changes, which included stricter rules for those wanting to get a mortgage.

Tal further said that conditions will be a lot tougher in the future if the trajectories continue and that it is just a matter of time before this becomes clear to everyone. He added that main centres such as Vancouver and Toronto are more vulnerable to this more so that he thinks the demand for housing in these areas are routinely understated. Is this a real certainty? Tal believes so. At least until some significant changes are implemented in housing preferences and policies because those may change where things are headed as of now.

Government Tries to Cool Down Markets

Housing prices are still rising in dramatic percentages all over Vancouver and Toronto, prompting the government to try to cool down the markets by introducing measures such as Vancouver’s 15% foreign buyers’ tax implemented in August 2016. This action brought in a period of adjustment, with the Vancouver market looking like it has now entered a period of recovery.

Meanwhile in Toronto, the Ontario government introduced the Fair Housing Plan which resulted in signs of slow down and a rebound. Proof is that the number of homes sold in September according to the Toronto Real Estate Board’s numbers is 27% less than the figures for September 2016.

How Demand is Changing

Tal mentioned in his report that a demand is expected to slow down by just 5% to 7% in view of newly introduced stricter lending rules. He added that this may be due to exceptions to the rule, creative borrowers, and increased involvement of alternative lenders.

He also mentioned that the actual housing demand is stronger than official estimates more so that Canada’s immigration quota is meant to rise to 300,000 from 250,000 and will eventually go to 450,000. Imagine how this will play out with how tight the current situation is.

It is to be noted that GTA’s official estimates are actually 10,000 below the real numbers. This is because non-permanent residents and immigrants were not really considered largely due to their younger average age compared to the general adult population. There’s another 9,000 unaccounted for estimates from young adults who are likely to seek having their own place soon.

The good thing about this is that with the above projected higher demand in the near future, then homes will continue to have an increased value. Yes, there is no projected price decline in the next few years.

Interested to know about how this can affect your plans to get a home loan or a second mortgage? Contact us and we’ll discuss it with you!